Downtrend Continues for Base Oil Prices in Europe and the USA Amidst Negative Demand Outlook

According to the recent price assessment, the US Base Oil market has experienced dull market fundamentals for another week of June 2023 as it has witnessed a price downtrend amidst slower economic growth. However, European consumers face steady demands, prompting the prices to rebound in June 2023.

Over the last nine months, the downfall of Base Oil prices in the US has been observed, which upholds the major share in exporting market. However, the higher interest rates accounted for by the US Federal banks to minimize the inflation rate has negatively affected economic growth to be sluggish. Eventually, this has impacted the demands of the downstream lubricants. Excessive inventories and escalating inflation also led to a lack of demand in the oil industry. Moreover, the declining trend of feedstock prices, i.e., crude oil, has also affected the cost of Base Oil.

Due to falling prices in the US, importers would likely uphold the products of Group I and II at the bottommost rates, and delaying the purchases could allow them to have cargoes at lower prices as well. This has affected the trading activity due to the unconscious decision of traders in the market, and it was observed that Group II prices negatively revised by 1.15% to settle at 1710 USD/tonne during the second week of June.

As per the sources, manufacturers are planning to hold the inventories to raise the prices of Base Oil. Also, all the current plant shutdowns are expected to be restarted in the last week of June, introducing additional volumes into the supply chain. Assuming the Chinese economy is powered, there could be an exponential rise in oil demands, which could boost crude oil prices and affect Base Oil prices as well.

Germany is one of the largest exporters of Base Oil, showing a significant increase in Base Oil prices since March due to the hyped demands in the automotive industry. However, the current pricing is estimated to be around 1065 USD/ tonne light SN FD Hamburg Germany which has been stable for the last four weeks. The steady demand in the market covered by the alternative supply sources and extended inflation limits the downbeat of Base Oil prices in Q3 of 2023.

As per the ChemAnalyst, US Base Oil prices are expected to sustain a downtrend till the end of June 2023, as the product’s availability is ample enough to cater to the current global demand. However, by the end of June 2023, Europe Base Oil prices are expected to shoot up as demands revive with the opening of Russian refineries.