US base oil supply strained ahead of busy season in strong market

24 February 2011 14:54  [Source: ICIS news]

LONDON (ICIS)--The US base oils market has picked up strongly in 2011 after hitting a 25-year low in 2009 and supply concerns for the busy season are mounting, a supplier said on Thursday.

“Inventories are already challenged because of firm demand and also a spate of production issues during the first quarter,” a US supplier said on the sidelines of the 15th ICIS World Base Oils & Lubricants Conference.

“If demand spikes beyond forecasts during the busy season, it would make for an uncomfortable situation.”

Demand for base oils often increases in mid-to-late March as buyers prepare finished goods ahead of the US driving season, which begins with the 31 May Memorial Day holiday.

Supply conditions in the US and Asia are expected to be tight in the early part of 2011 as a result of a heavy maintenance shutdown schedule.

A tight market for Group I base oils in Europe at the end of 2010 looks set to continue into early 2011, partly due to strong exports to markets such as Asia and the Middle East.

Base oil demand in 2009 was “the lowest in more than 25 years, maybe even 40”, said Stephen Ames, managing director of SBA Consulting.

“2010 demand should regain two-thirds of the 2008/2009 loss mainly due to large inventory restocking and robust demand from China and India,” he said.

The meeting began on Thursday and runs through Friday.

($1 = €0.73)

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By: Heather McGuire Doyle
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