Base Oil Pricing Report

Base Oil Report

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The new year had barely started when markets were hit by news that the United States had killed top Iranian general Qasem Soleimani in the Iraqi capital of Baghdad, escalating tensions in the Middle East.

The oil market responded immediately, withWest Texas Intermediate futures jumping almost four percentbefore retreating slightly in the days that followed.

Base oil producers kept an anxious eye on crude oil and feedstock prices, as the rising numbers exerted upward pressure on base stock values and further compressed already squeezed margins.

However, there was no immediate reaction to the crude spikes, as suppliers were still contending with ample domestic inventories, insipid demand and strong competition on the export front.

Base oil prices remained surprisingly stable over the last several months of 2019 and were still largely unchanged as January rolled around.

Market players remarked that there had not been any posted price changes for more than half a year. With the exception of a couple of price initiatives by two producers last July and September-which were later rescinded-paraffinic producers kept their postings intact since May and naphthenic suppliers since June.

As activity started to wind down following the busy spring and summer seasons, discounts and temporary voluntary allowances were granted to select accounts in an effort to promote sales. But these movements appeared to have dissipated by late December given that a number of suppliers had been able to achieve relatively balanced inventory positions, particularly in the API Groups I and II segments.

Against turbulent times, the steady conditions observed in the base oil pricing sector offered some solace and allowed business to continue undeterred. Although some may disagree, most buyers and sellers believed the stability was good for the market.

By the time this magazine goes to press, the international geopolitical situation may have changed radically. Prices in the base oil segment may be on the move, but having a key part of the business on a steady course for a prolonged period has certainly been reassuring to many players.

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