Production Deficits of Base Oil and Lubricant Exacerbates

Low global inventories and limited surplus production capacity have pushed up crude oil prices in the short term. The world's total crude oil reserves are at a very low level. Forecasts show that oil prices increase to above USD 100 seems inevitable.

Activities in Asian countries have intensified and everyone has returned to the market. Some have begun to focus on contractual commitments before the Lubrication high season. However, logistics problems persist to affect the trade market. As political conflicts intensify in the region, fewer vessels cover certain routes. Market participants were waiting for stabilization of shipping prices in the new year, but the upward trend seems to remain stable for a few more months.

The shortage of raw materials for the production of virgin base oil continues. Less crude oil production implies less production of raw materials, which has limited the capacity of base oil production. The base oil and recycled base oil refineries suffer from the COVID-19 outbreak. The difference is that recycled base oils have a cost advantage over virgin base oils because refineries use burnt oils as raw materials.

Material shortages are spreading around the world and intensifying in the new year as inventories dwindled and demand improves for recycled and lubricating oils.

The caustic soda market also has been affected by price growth. The FOB price of this product in Bandar Abbas has reached over USD 900. While the demand increasing for this product, especially from African countries, its production is still facing a depletion.

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