Weekly Lubricant Report: The Effect of Stagflation on Lubricant Market

June 2022 started with crude oil price reaching above $120 and the reason for this increase was two fundamental factors. The intensification of European sanctions against Russia, which has been applied since June 1, as well as the start of the US and European countries’ demand due to the increase in travel, will enhance the price of Fuel in these countries.

Infinity Galaxy’s forecast for crude oil prices in May was around $105 to $115, which in the last days of May, due to the conflict in the Persian Gulf over the arrest of two Greek tankers by Iran, the price rose to about $119.

In Iran, in the current situation of shortage of raw materials and rising production prices, the price of recycled base oil FOB Bandar Abbas has risen between $830 to $840, which is unprecedented and contrary to previous reports of Infinity Galaxy that the price should be reduced. It did not decrease, and it seems to be even higher. Also, the price of recycled base oil delivery to India has risen above $900.

The fragile position of the US dollar against the Rial, while the Rial is depreciating every day, has caused the price of export commodities to fall. Besides, due to the crude oil, the price of export goods tends to rise. Altogether, market conditions are completely chaotic.

On 1^st June, India reduced its bitumen price by about $37 and its fuel oil price by $61. The price difference between the supply and demand makes the market condition more fragile.

To know the latest Bitumen Price in India, click here.

The situation of the COVID-19 in China does not follow clear and definite conditions. Lockdown is declining in some cities, such as Shanghai. However, some other cities are experiencing a rise in lockdowns. Generally, the condition of the COVID-19 is not clear.

Shipping companies implemented the BAF on June 1, which was also announced in the previous report.

However, due to the decrease in the volume of exports, in addition to the announcement of the new BAF, the freight is decreasing and it is not clear whether the freights will increase or remain constant with the application of the BAF.

The price of caustic soda flakes FOB Bandar Abbas is about $800 per ton and paraffin wax FOB Bandar Abbas price is about $1350 to $1400 per ton.

On the other hand, due to the recession and stagflation in some countries, it seems that purchasing power has decreased and although there are potential demands, there is not any power to purchase at current level of the rates or higher than them in many of the countries.

This puts suppliers under pressure to adjust their export prices. On the other hand, the cost of these commodities is such that it is not possible to adjust the price too much.

The Infinity Galaxy forecast for the technical and fundamental trend of oil prices is something between $110 to $125, all forecasts are based on current knowledge of the market. It may happen that the price goes up or down beyond what is being said.

This article was prepared by Mozhdeh Darbandizadeh, the account manager of Infinity Galaxy (www.infinitygalaxy.org).