Demand in focus at US base oil annual meeting

11 October 2010 02:25  [Source: ICIS news]

PALM SPRINGS (ICIS)--Unclear fourth-quarter base oil demand indications will likely be a key topic for discussion at this year’s US independent lubricant meeting, market participants said on Sunday.

Paraffinic base oil demand has been disappointingly steady following the US Labor Day Holiday, suppliers say, a time when demand typically surges ahead of the peak oil change season.

“We really did not see a strong September, but business was steady,” a US base oil seller said on the sidelines of the Independent Lubricant Manufacturers Association (ILMA) annual meeting. 

“Several smaller volume buyers had maintained low inventories and have given indications October could be a strong month however,” the seller added.

Larger volume buyers bought extra material ahead of the US hurricane season, but the US Gulf has yet to see any disruption from any storms. The US Gulf hurricane season lasts through 30 November.

Base oil demand typically drops in July/August during summer vacations, and then strengthens again in late September/early October as blenders and compounders begin manufacturing for the fall peak oil change season.

While some buyers and sellers expect the post Labor Day demand surge could be delayed until mid October, others expect the September demand levels could point to a weak fourth quarter.

Following the busy season, base oils demand generally slides in the US around November as players destock to avoid end-of-year inventory tax.

Although market participants are expecting a slight downturn during the fourth quarter, many say it will not be as pronounced as last year’s demand drop off because inventories have remained low for much of the second and third quarter.

Even those buyers who were able to purchase for hurricane contingency plans were not able to secure the seasonal volume they typically do due to outages and allocations during the second quarter.

“We are really not expecting any major changes in demand either upwards or downwards,” a base oil buyer said. “Inventories have been too low all year to just stop buying anytime soon.”

This year’s ILMA meeting runs from 9-12 October.

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By: Heather McGuire Doyle
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