APAC's Base Oil Prices Tumbled in August

In the first half of August, the Base Oil prices in the Asia Pacific region plummeted amidst the more moderate Crude Oil and feedstock prices on a month-on-month basis, and the overall supply increased against the weakened demand outlook. The pricing competitiveness on the international stage is running on a higher level, which undermines the producer's sentiments to raise the offers. Instead, the higher frequencies of producers offer hefty discounts, ultimately leading to a significant dip in the offered quotations. However, the high freight rates and logistical issues dampened some proposed transactions, and the ongoing summer holidays in the European region affected buying interest.

Softer spot Base Oil demand and increment in the supply were observed as most plants ran at optimum capacity and refiners were not suppressing the distillate outputs. Due to concerns about potential global recession, the fuel prices have retarded amidst the slowdown in consumption of Base Oil in prominent markets such as China and India. However, the recent decision of the OPEC+ alliance to increase Crude output by 100,000 barrels per day coupled with the optimistic Iran nuclear deal will increase the Crude Oil supplies significantly. Further coupled with the upcoming hurricane season in the US will increase the demand for the Asia Base Oil cargoes in the upcoming short term.

Although, the ongoing COVID-related shutdowns in China and global economic slowdown resulted in a lacklustre demand for Base Oil imports. The rising geopolitical conflict between China and Taiwan also presented several uncertainties to the Asia Base Oil market. Domestic products catered for a major portion of the Chinese base stock appetite, and the importer's price ideas were lower on a week-on-week basis, weakening the exporter's will to pursue transactions in China. In India, the Base Oil demand is passing through an off-seasonal period amidst the monsoon, although the demand has declined less than anticipated figures presented by the market participants.

As per the ChemAnalyst pricing intelligence, the movement of the Asia Base Oil market is highly volatile. Although the demand is anticipated to strengthen significantly in the upcoming month, especially from the US, the European participants were seeking the supplies of finished goods that restrict the gains in nearby markets. Therefore, Base Oil's prices will slightly increase in the forthcoming term.