The Contest of Market New Factors
New conditions of the market have changed the fundamentals of the Middle East base oil markets. It seems that new arbitrage opportunities are available in several regions.
Supply seems to be growing and demand is weakening during the holiday season. Therefore, product availability has increased in Europe, the Middle East, and Africa.
Refinery rates didn’t get back to pre-covid levels, as main markets are still affected by the Coronavirus. The outbreak of the virus and the spread of its new variant prevent the fuel demand to return to pre-pandemic levels. This situation restrained the full allocation of raw materials for the production of stock of base oil.
While traders still need to be cautious, some refineries are expected to raise run rates in September.
Crude oil prices have fallen by 3-5% over the past two weeks due to Corona concerns, which have pushed the price of petroleum products in Iran down by 3.5% to 7%. Earlier this week, the value of trades almost improved to the same level as two weeks ago.
In the game between declining and rising prices, it seems that the factors that drive the market to fall (such as lower oil prices, the spread of the Coronavirus, and reduced fuel consumption) and the factors that push the market to increase (such as rising costs of transportation, shortage of raw materials, increase in production costs) are even. Therefore, no serious change in the market is expected.
However, it is still unclear whether the events in Afghanistan will affect the market.
Along with regional developments and the new rise of oil prices, China’s reports on a zero corona rate have left market conditions in a state of ambiguity. Analysts are unable to predict the market’s next move.
While some factors point to a drop in oil prices until early September, the coincidence of the decline with the end of the monsoon and an increase in demand will push prices up until September 15. Of course, this scenario is likely in a situation where oil prices are rising.
The situation of Lockdown in East Asian countries, especially China’s neighbors such as Vietnam and Thailand, is critical, it seems that the market does not have enough traction to imports recycled base oil. Emerging new markets in East Africa, Eastern Europe, and India are increasing the recycled oil demand.
Accordingly, it is clear that current prices are fragile and the next move of the market is not vivid.
In the current situation, customers should evaluate their purchases based on their requests. Large investments in the recycling industry are not recommended at the moment.
This article was prepared by Tina Taghavi, account manager of Infinity Galaxy. (www.InfinityGalaxy.org)