Supply Shortage and Soaring Petrochemical Prices

Supply Shortage and Soaring Petrochemical Prices
July 8, 2021
2 minutes

The base oil market has undergone a complex situation in the Middle East, Europe, and Africa during the previous weeks.

In contrary to the former meetings of OPEC, the allies could not reach a consensus on the supply plans. Disagreements were imposed by Saudi Arabia and the UAE. Experts believe that oil prices may surge to new high levels. If this perdition comes true, it can cause major damages to the economies.

However, the oil price declined yesterday after declaring new Covid restrictions and the OPEC disagreement. Considering the current market factors, it is unlikely for lubricants, recycled oil, and paraffin price to decrease.

Supply shortages and unprecedented rising prices have been two dominant factors in recent days that created more complexity in the market. Demand for recycled oil and paraffin has risen in the market, and prices kept increasing. Traders, who were waiting for lower prices, are now in a rush to buy cargoes to enjoy better margin profits.

Due to the warmer weather and power consumption issues, the production process has become longer in refineries, and deliveries are delayed. The lubricant and paraffin market experienced similar conditions during the summer of 2020.

Calmer military situation in Myanmar, faster vaccinations, and improving covid condition in India have not resulted in lower prices. Uncertainty and the complexity of the political situation are other reasons that may affect the sharp rise of oil price shortly.

Iran’s market sentiment is not promising due to the Delta variant of coronavirus and lockdowns. Refineries are also struggling with power outages and export restrictions. Soaring freights and the GRI addition to shipping costs have unsettled traders and the final price.

Despite the lack of production, some companies have recently started to sell low-quality and non-Iranian recycled oils to take advantage of the increasing demand and high prices. These cargoes are usually the result of methods such as filtration.

It is the longest period that recycled oil has been traded in the market at prices above $700, and it is unlikely to decline soon.

This article was prepared by Tina Taghavi, sales and marketing expert of Infinity Galaxy. (www.InfinityGalaxy.org)

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