Freights and Political Changes Triggering Market Outlook

Following the sustained demand, base oil production which has been evolving in recent months has improved the supply of more grades. Suppliers seem to be targeting the export market. The seasonal decrease and rise in the number of coronavirus Delta variant cases act as a barrier to the consumption of base oils and lubricants in Asia. This has put downward pressure on the price of several grades of base oil, especially those that have already begun to increase production.

In general, the base oil market conditions are more favorable than a year ago. At a time when the market was experiencing a shortage of base oils and the Reduction of coronavirus restrictions, economic activities were reviving. Refineries were still operating at lower rates which led to severe supply shortages and rising base oil prices.

In India, demand for base oils and lubricants also increased in July and August 2020 as the worst pandemic was expected to end. As a result, buyers entered the market quickly. The rising demand pushed up prices. In contrast, in August 2021, the expansion of the delta variant reduced demand as buyers became cautious and tried to meet their needs through the available local inventories.

On August 15, 2021, Indian refineries rose the price of Furnace Oil and fuel-related products by $3.2, which was a sign of demand in India.

In the recycled base oil market, despite corona expansion, demand has not declined in many countries. Base oil prices are expected to come into an upward trend in the fourth quarter due to higher crude oil futures prices. The oil prices have fallen over the past two weeks, but the prices have been fluctuating in the $ 68-70 channel this week, largely due to the spread of the Delta variant Coronavirus. This has alarmed buyers to be more cautious about buying recycled base oil in large volumes.

During the last week, shipping companies sought to increase freight charges, which eventually led to higher shipping costs between $150 and $250. Eventually, it pushed up the cost of import-export to higher levels.

The condition of Corona restrictions has not changed significantly in many countries, but demand looks set to increase next month as the fall season begins.

The market for lubricants, slack wax, and paraffin is still a shut market. Demand for these products is high and supply is still challenging. Even suppliers, who committed to supplying, still have a delay in deliveries.

The raw material shortages remain a major problem, however, the Middle East conflicts, including the power shift in Afghanistan and political crises, do not currently appear to have had a significant impact on the recycled oil, lubricant, and paraffin market conditions. Market participants expect a change in price and market shape. Currently, spot purchases are recommended instead of making large investments in these products.