Turbulent Market for Base Oil and Lubricants

After months of severe supply shortages and constant upward price adjustments, the situation of production and supply of base oils has developed.

However, with the rising corona infection and the expansion of restrictions, transportation and travel have declined. There are fewer raw materials for the production of recycled base oil. Demand has not fully recovered, and the market appears to be calm at the moment.

The reports indicate that the price of fuel and bitumen will rise in August 2021, due to the return of demand to the market.

In general, the base oils and lubricants market is confusing, which can be attributed to the following:

1. Refineries produce more feedstock for base oil since they have increased their fuel run rates. More products seem to be available to export. However, refineries across Europe, the Middle East, and Africa are still worried about returning to full operation. They are concerned about the possibility of changes with the expansion of the Coronavirus pandemic.
2. Many refineries were operating at lower rates in Asia after a sharp drop in fuel demand from the pandemic last year. Some refineries have boosted prices by increasing the price of refined products as well as the margins of base oils. This has led to various pricing trends. Some grades have increased and several grades have stabilized and adjusted.
3. Despite the fall of Brent to $68 in recent weeks, the price rose again to $ 75 after OPEC agreed to increase production. But China's efforts to control crude oil prices and reduce them to about $73 have confused buyers further.

In India, demand is growing as corona declines and restrictions are lifted in many regions. Buyers seem to be more interested in buying from domestic markets, and less likely to import base oil, recycled oil, and lubricant products. Meanwhile, they expect prices to fall as product availability has increased.

The volume of recycled oil requests from various countries, especially East Asia and Africa, is increasing steadily.

The delivery contracts of slack wax and paraffin wax of Pars and Sepahan oil companies have reached the stage of execution and delivery of goods. The requests do not seem to decrease due to the high volume of demands for paraffin wax.

During the last week, similar to the previous few weeks, the problems of exporters of recycled oil have continued. Moreover, the price of recycled oil has not decreased much due to the lack of raw materials. The recycled oil price of Flexi FOB Bandar Abbas has remained around $700.

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