Supply Growth and Demand Ambiguity in Base Oils and Lubricants

Considering the progress of the Iran-US negotiations and the expectation of a new wave of oil supply from Iran, it seemed that the prices would remain in a stable range after a 5% decrease mentioned in Monday's oil report. However, oil experienced a 2% increase on Monday. The reason could be the optimism of increasing global demand due to the expansion of vaccination and the gaps in the Iran-US negotiations. In recent weeks, the supply of base oil in all regions, including the Middle East, has faced many challenges. Easing the coronavirus restrictions, increasing transportation, and subsequent fuel demand, encourage manufacturers to improve production leading to increasing the rates. India has been struggling with many concerns in recent weeks. Vaccination in India is not progressing fast enough. The previous cyclone storm caused extensive damages and casualties off the west coast and the prediction of severe Cyclone Yaas has led to the evacuation of millions of people from West Bengal and Odisha, in addition to postponing the vaccination process. Another major issue in India is the new outbreak of the deadly disease "Black Fungus" which makes the situation even more critical. These events in India, which is the main market player, have led to an impact on demand for base oils and lubricants. The Indian buyers and Importers were distracted from the trading and the demand also has reduced accordingly. The demand for virgin base oil has increased, but it has been sold out for the next three months and has been traded with high prices and uncertain delivery time. The high costs of producing base oils and recycled oils, as well as the steep price slope, have pushed producers to boost prices. Shipping costs have risen in recent weeks, and there is a problem with providing space on vessels. There is some local news in the Iranian market about the establishment of new export laws for recycled oil which is likely to affect the export prices of this product. While the unpredictable changes in the USD rates are still one of the main points in the petroleum products fluctuations, the price of slack wax which was announced by Sepahan has also improved a lot. The prices of slack wax and lubcut based products, such as fully and semi-Refined paraffin wax, have also increased significantly following this jump in raw material prices. It is expected that with the lifting of sanctions and increasing the supply of oil from Iran, oil prices will decrease and stabilize in the next weeks. Therefore, the reduction of oil prices won't have a severe impact on lower lubricant and base oil prices.