Market Confusion and Upward Slope of Prices

The war in Ukraine continues to dominate the news around the world. International sanctions and a ban on Russian exports have pushed up energy prices which had a major impact on a wide range of industries, including the base oil and lubricant markets.

It is very difficult to predict the crude oil prices in the current situation. Prices don’t show any reduction to pre-invasion levels.

There are two main reasons for the price increase in the base oils and lubricants:

1- The increasing cost of crude oil and raw materials.

2- Decreased availability worldwide

The unfavorable market condition and stronger intention for fuel production due to its higher profit margin caused a sharp plunge in base oil production. The production gap is becoming a serious concern in the market.

There is no interest in exporting base oils from the Iran market. It is possible that most of Iran’s base oil production stays in domestic markets as export stops for now. 

Recycled base oil FOB BND was reported at around USD780 in the last week. This was almost exceptional in the export history of this product.

The currency exchange rate against the USD was another issue that has disrupted the trade balance in markets in some countries.

The severe lockdowns imposed by the Chinese government in Shanghai and other areas continue. Demand for fuels and lubricants was expected to decline as mobility was limited. According to reports, the restrictions appear to be slowly easing.

Logistics and shipping charges still put upward pressure on prices. Aside from the high fuel value, a sharp rise in local and customs charges has led to higher shipping rates than earlier this year. Moreover, the shortage of containers has led to trading issues.

The price of paraffin wax continues to rise. FOB BND was reported at USD 1,400 in the past week.

The price of caustic soda has also increased to about FOB USD 850. Demand for lubricants and chemical products such as caustic soda is increasing in the world, but production issues remain.

In the current situation, buyers and sellers are waiting for the situation to be more stable. We suggest that traders only consider spot purchases at the moment.

This article was prepared by Tina Taghavi, the account manager of Infinity galaxy. (www.Infinitygalaxy.org)