Soaring Freights Shocked the Market

Last week, natural disasters disrupted the export and import schedules. Hurricane Ida caused severe power outages that disrupted the normal operation of ports and terminals. It delayed the shipping procedures. Many plants faced shortages of raw materials for the production of synthetic lubricants, which were exacerbated by shortages of additives and other chemicals.

Energy companies successfully brought back quickly, however, repairing the damage caused by Hurricane Ida continues. Fluctuations in crude oil prices have added to uncertainty over base oil price expectations. Over the past week, as the storm threat was eased over the US production, futures prices have stalled at their highest level in recent weeks, in the range of 74-75.

Improved supply levels and prudent buying trends continue to put downward pressure on prices, although several grades are relatively stable due to the greater availability. The demand for recycled fuel and oil has not increased significantly.

In the key Indian market, there was a steady demand for essential oils. While consumption was expected to decline amid concerns about large gatherings and the possible spread of the coronavirus, lubricant manufacturers are getting ready for the latest production pressure ahead of quarter-festivals and religious holidays. It also seems that the monsoon has lasted longer in some parts of India than in previous years. One of the reasons for the lack of demand might be the monsoon condition in India.

The world economy seems to be recovering as vaccinations increase and the number of covid cased decreases. We might face the growth of recycling and lubricant demand by the end of 2021.

The current major problem in the world is logistics. The Chinese government ordered the ports to be closed and avoid loading/unloading ships to control the spread of the delta last month. This led to congestion in the port and a shortage of containers and space. This disrupted not only the region but also other markets around the world. While shipping prices have skyrocketed in recent weeks, this instability and lack of planning in shipping programs have left market conditions in disarray.

In Iran, due to production and export restrictions, prices have not changed. However, the shipping problems affected the cost price for the customer.

Based on the market events, it seems that India will increase the prices of its petroleum products on October 1, 2021, which will be a stimulus in the market.

The market instability due to the uncertainty of economic growth and the restraint of the covid has caused the market to have relatively calm conditions, which seems a bit unreasonable for this month of the year.

Expectations about rising demand and rising prices are also widening. Considering the cold season in the Northern Hemisphere, we should expect new changes in the market for base oils, recyclers, and lubricants.

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