Many suppliers agree that domestic consumption of base oil has been disappointingly low in 2003. Demand increases that many had anticipated, or at least hoped for, never materialized as the economy recovered more slowly than expected.

I think its fair to say that volumes have been a disappointment this year, one marketer said.

Others, however, contended that margins have more than made up for the number of barrels. Gross refining margins – calculatedfrom the lowest posted price for base oil on the Gulf Coast – were 80 cents per gallon yesterday. Some suppliers noted that the margin has been that high for much of the year – and as high as 85 cents – compared to margins of 50 to 70 cents that have been more typical in recent years.

If youre a base oil producer and youre disappointed about this year, youve got very high expectations, a marketer said. In terms of profitability, this is going to go down as a banner year for base oils.

Posted prices for base oils were unchanged this week, with buyers and sellers saying they sense little pressure up or down. The price of crude oil on the New York Mercantile Exchange closed at $29.12 per barrel yesterday, $1.47 higher than a week earlier.