Base Oil and Lubricant Markets Affected by Various Changes

Last week, major changes happened in the market of base oil and lubricants, including the following:

• Oil prices continued to break records of past seven years. OPEC decisions will be decisive at the meeting on November 4. Some sources predict that the decision won’t increase supply by OPEC and will keep prices stable in 83-84$ trend.
• The demand for Lubricants such as paraffin and base oils are expected to increase. Price increase also is obvious to everyone and customers are looking to boost their inventory as much as possible before prices rise further.
• The onset of the cold season in the Northern Hemisphere is one of the reasons for the increase in demand for fuel and oil products, which will also affect the rising prices of these products.
• Diwali is celebrated on November 1 in India, Malaysia, Pakistan and other countries. This means that a large portion of the population travels to their hometowns and the demand for lubricants has increased due to the increase in pre-holiday oil changes.
• An imbalance between supply and demand remains. Manufacturers have struggled with transportation and shortage of raw materials, as well as rising production costs. They have faced increasing demand. Refineries’ new productions are meeting their previous commitments and unable to meet existing high market demand.
• The price of recycled base oil has risen by about $50 this week, as we predicted in the last weekly report. FOB Bandar Abbas is between $ 675-685. The price is expected to rise above $700 again.
• In the paraffin market, semi-refined and fully-refined Dalian or Shanghai have reached about 1300-1400$. FOB Bandar Abbas, in Iran, is about 1300$.
• Shipping costs will increase by $200-250 again from November 8, which will increase the cost of the products by about $10-12.
• Rising costs of transportation, labor, insurance and other costs will increase product inflation.
• The price of caustic soda, in Iran, has reached about FOB $900-950. Due to the fact that the Chinese market has not yet flourished, the production of caustic soda in China is limited and is mostly used to meet domestic needs. Caustic soda prices are likely to rise further despite not returning to the Chinese market. It seems that the current situation will continue until mid-January 2022.

Possibly, the upward trend of the market will continue, and in a situation where prices seem strange and unworkable for some people, smart traders have acted quickly in the current market. They have coordinated their trades with the new shape of the market. Market prices in the current situation are not far from the mind and it seems that the market will soon get used to the new conditions.