Unable to Gain Momentum Global Base Oil Market End Q4 With a Pessimistic Undertone
- 03-Jan-2023 5:51 PM
- Journalist: Timothy Greene
Texas (USA): Continuing its previous trend, global Base Oil prices end the fourth quarter on a sluggish note. Europe, Asia, the Middle East, and the USA Base Oil prices have showcased a constant fall during this timeframe. There were several factors that have been affecting the pricing trend for Base Oil for the past couple of weeks, while low demand remained the most underlying factor impacting the pricing sentiments in all regions.
The data shows a minor decline in Base Oil prices of around 0.5% for the USA market during the second half of December 2022, bolstered by the recent announcement of a price cut by a major manufacturer. This price revision came as a response to prolonged dullness in demand from the downstream sectors exacerbated by freezing storm Elliot, which has affected the operations of several refineries across the affected areas. However, holidays during the final week of the month also dampened the demand for Base Oil, as traders had filled their inventories enough to satisfy their needs. Therefore, USA-based traders were sure that the demand would rise during the first week of January 2023. On the other side, traders were also offered small Temporary Voluntary Allowance (TVA) for Base Oil to cash their inventories, supporting this price trend in the country.
In Europe, demand for Base Oil remained under pressure as no significant purchases were observed due to the holiday season, and no sign of rebound is expected in the coming months. The overall demand-supply fundamentals were different for different grades, where the demand for some grades was unchanged, and others were projecting a weak demand outlook. As per the data, a strong price fall of around 5% to 6% was noted for Base Oil Group II, while Group I stayed with a 3% decline during the last two weeks of December.
On the other side, China, which has been struggling to recover from pandemic devastations, showcased a muted demand from the domestic downstream market, while the optimism regarding expected recovery during January disappeared due to consistent disruption by COVID. The country’s economy was battling with the zero COVID policy earlier, and the government took a U-turn to remove most of the restrictions, but the situation remained the same, as labor shortage became another pain for China.
As per the ChemAnalyst, Base Oil prices may not rebound in the first half of January 2023 in China; however, there are little possibilities that the lunar holidays may inject some boost to the economic activities of the country. Further, the USA and Europe Base Oil prices may show some rebound during the coming months; nevertheless, the European GDP growth rate is anticipated to remain negative for Q1 2023.