Rising Demand Amid Pricing Turmoil in the Base Oils and Lubricants

Iranian refineries and producers officially returned to work, but market fluctuations have left companies reluctant to announce prices.

Manufacturers have difficulty in predicting their future costs while facing high demand for base oils and lubricants.

The trend of domestic and export markets has altered due to the lack of export transactions and the rapid rise in domestic market prices.

Expenditures on crude oil and raw materials have risen about 50% since the Russian invasion of Ukraine. Therefore, the cost of production has increased compared to the last month. Traders try to avoid negotiations and financial operations with Russian suppliers.

While the market expected a price reduction after the US announcement to release 180 million barrels from its oil reserves, the oil price reacted to this decision by less than 8%. Today’s oil price was volatile at around $107.

The high difference in fuel and bitumen prices has led refineries to decide to prioritize fuel production. This high demand for fuel in the world has increased the price of recycled base oil.

In Iran, the price of USD against IRR strengthened by around 4% after the Iranian holidays, but the price of recycled base oil and oil products does not seem to decrease.

Logistical problems and high shipping rates have reduced transactions related to Middle Eastern products for delivery to more distant destinations.

In China, demand for base oils has declined due to recent government efforts to stop the spread of new Coronavirus, including severe quarantine in several major cities such as Shanghai. This situation raises concerns about the potential reduction in the range of lubricant demand because the mobility rate declined.

Fundamental components such as 7% inflation in the United States, which is unprecedented in the last 30 years, and 5% inflation in Europe indicate a general increase in prices.

In India, demand for recycled base oil, paraffin wax and all petroleum products remains high and there is no sign of price decrease. However, we have to wait for the decision of the Indian refineries on April 15.

Paraffin 3-5% was reported at more than $ 1,300 FOB Bandar Abbas last week. The caustic soda flakes price is still at more than $700 FOB Bandar Abbas.

In general, it seems that with a slight increase in the current level of prices, the prices will remain stable for this week.

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