US Base Oil Prices Demonstrate Strong Growth Amidst UAW Labor Strike
- 17-Oct-2023 2:41 PM
- Journalist: Francis Stokes
USA (Texas): Following the price rise in late September, the Base Oil market in the US continued to showcase a bullish trend during the first week of October 2023, predominantly attributed to a challenging availability of the product in the domestic market of the USA. Talking about the current scenario, the ongoing UAW (United Auto Workers) Labor strike in the US market significantly impacted the Base Oil prices, a prime ingredient in the downstream lubricant industry, essential for the operation of vehicles and machinery. As the strike continued, it potentially disrupted the production of Base Oil. It led to a shortage, eventually strengthening the US market's Group I and Group II grades pricing dynamics.
While the US Automobile Industry is experiencing a Labor strike initiated by UAW workers against the Detroit Three automakers, including General Motors, Ford, and Stellantis, a different story unfolded in the US Base Oil market, which has raised concerns about potential disruption to the supply chain values in the market. The ongoing auto strike in the US impacted the demand for factory-fill lubricants and other automotive fluids, leading some blenders to adopt a cautious Base Oil buying stance. Moreover, the UAW strike effortlessly affected the supply chain of Base Oils, as UAW members employed at many Base Oil refineries in the United States and Canada supported the current situation. As a ripple effect, disruption in the work environment and the uncertainty surrounding the strike led to higher Base Oil prices. Furthermore, the duration of the strike and the level of inventory stored at the refineries could potentially drive the US Base Oil market to the heights. Under the influence of prevailing market sentiments, the continuously surging global demand for Base Oil has some upward pressure to finally settle the prices at 1950 USD/tonne for Group I SN 500 and 1900 USD/tonne for Group II H 600, respectively on a FOB basis during the arrival of October 2023.
As per ChemAnalyst, the consistent demand and supply tightness amidst reduced production at some refineries affected the market outlook to remain higher. In the meantime, the looming automotive workers' strike could cause a shortage of new vehicles and impact demand for lubricants and other automotive fluids, which could drive the prices of Base Oil even higher than before. In addition to the potential impact on Base Oil prices, the UAW strike could also knock on other industries that rely on lubricants, such as the automotive, transportation, and manufacturing industries. If the strike disrupts the supply of lubricants, it could lead to delays in production and higher costs for businesses.