US base oil, wax market still volatile - players

13 November 2008 17:03  [Source: ICIS news]

Base oils producers face issuesHOUSTON (ICIS news)--As nearly 300 base oil and wax executives gather in Houston on Thursday for their annual International Lubricants and Waxes meeting, industry leaders say they are still coping with a raft of challenges ranging from market volatility to a continued shift in demand and quality requirements.

Sponsored by the National Petrochemical and Refiners Association (NPRA), the event comes at a time when the global base oils market has seen a period of unparalleled volatility and tightness, rivalling that seen in the aftermath of the hurricanes in 2005.

“Base oil players are finding they have to learn things much quicker now,” said a supplier who has been selling base oils for more than 20 years. "Nothing we learned in the past seems to matter anymore at the rate things are changing.”

In 2008, prices sky-rocketed against the backdrop of volatility in upstream markets, while supply issues compounded these price drivers.

The price of feedstock crude oil skyrocketed to a high of $147.27/bbl in July, elevating the posted price for ExxonMobil’s Group I, 250-grade base oil by 68% to $5.19/gal in July, according to global chemical market intelligence service ICIS pricing

Scheduled and unscheduled outages and a diversion of feedstock as a result of better economics in the fuels market saw Group I availability globally squeezed with many consumers scrambling for product.

US Group I suppliers CITGO and Marathon announced they would permanently shut down base oils production in 2008, taking more than 16,000 bbl/day of Group I oil out of the global marketplace.

Meanwhile, a raft of new Group III capacity is entering the market at a time when uncertainties over the economic outlook have cast a shadow over the demand outlook for high quality base stocks.

Alongside these issues, the industry continues to face challenges imposed as a result of tighter controls on emissions, higher demands on fuel economy and new fuels uses.

Recently, financial volatility has added to the pressures facing the industry.

The conference takes place on Thursday and Friday. Jamie Brunk of Solomon Associates, Morted Nystad of Odfjell Tankers and Greg Scott of NPRA are among the speakers.

To discuss issues facing the chemical industry go to ICIS connect

By: Heather McGuire Doyle
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