Base Oil and Lubricants Looking Forward to a Price Modification

The base oil market is getting more balanced than recycled and paraffin oils. The upward trend in prices stopped in June. Finally, the prices of base oil, recycled oil, and lubricant settled at their highest level ever.

The situation of Covid-19 in some main markets has led refineries to be more cautious about increasing their run rates for the production of fuels. This will diminish the supply of raw materials for the production of base oils compared to last week. Despite weak demand, it plunges the market into its quietest state. One of the main reasons for the drop in the market demand is the constant threat Covid-19 resurge for key sectors, as well as the predictable seasonal slowdowns.

The disquieting spread of the delta variant slowed down prominent markets such as China. Travel restrictions have also been imposed in several Asian countries, which may once again affect people's mobility, along with fuel demand and lubricants. Manufacturers have faced new challenges not only with the epidemic but also with higher raw material prices and extreme weather conditions.

The general scenario represents that base oil is increasingly available in key markets; therefore, prices will decrease relatively.

While suppliers are trying to keep the numbers at higher levels, there seems to be a deadlock right now, as buyers are looking for lower bids and sellers do not intend to offer high-discount deals.

The recycled and paraffin oil market has undergone some changes over the past week. Paraffin production decreased significantly in Iran. While slack factories have decided to sell the raw material, paraffin factories hardly have access to slack wax. The shortage of raw materials remains a major obstacle to exports.

Although the market is still waiting for the price to fall, the recycled oil price has no reason to decrease. According to the new rules for the export of recycled oil, exporters simply cannot obtain the necessary licenses to export this product.

Crude oil levels fell to about $68 last week due to rising US stocks and uncertainties for demand in major markets such as China, India, and Europe. The decline was temporary and didn't have any effect on prices, and it quickly returned back to About $70. Tensions in the Middle East has not been solved yet.

Evidence from recent weeks suggests that prices may return to normal levels and move towards stability.

In the past few days, shipping companies have announced several increases in shipping costs and the addition of the GRI. An unreasonable increase in shipping costs due to congestion in Jabal Ali, in addition to the lack of raw materials and fluctuations in oil prices, has caused another concern for exporters and market participants of base oils and lubricants.

Considering the global risk of the oil and lubricants market, Infinity Galaxy suggests that traders wait for a more stable market and better conditions for large-scale operations.