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The New Normal: Market gets used to Geopolitical Uncertainties, Oil and Lubricant Base Oil prices remain stable with upward pressure

The New Normal: Market gets used to Geopolitical Uncertainties, Oil and Lubricant Base Oil prices remain stable with upward pressure

The oil market has experienced a remarkable rebound, despite a slight contraction from its peak 60 days ago. Both WTI and Brent have maintained stable demand, outperforming their 50-day and 200-day price averages. However, expectations of a decline in global demand and increased crude oil production by non-OPEC+ countries have tempered the price outlook at the beginning of March. Notably, Russia has recently announced a reduction in the production capacity of its refineries by 471,000 barrels per day in response to suicide drone attacks by the Ukrainian military.

The increase in oil prices in recent weeks has been attributed to upward pressure and a combination of global factors, including the expectation of a revival in global demand, the possible reduction in interest rates by the Federal Reserve in the third or fourth quarter of 2024, and global geopolitical tensions. It is surprising to see a decrease in market volatility, indicating that market participants are increasingly adapting to geopolitical instability.


In the maritime transportation sector, prices continue to rise due to the severe droughts in the Panama Canal caused by the El Niño phenomenon. These conditions have added new upward pressures on maritime logistics costs and have significantly impacted transit times through the canal. In addition, there has been an increase in the toll rate to cross the canal. The El Niño phenomenon is expected to persist until the second quarter of 2024.

In the lubricant base market, we observed a stabilization in global prices with positive pressures on spot prices for GI and GII bases. In the Americas, American base stocks prices have decreased slightly due to high production and stable demand. Globally, there is a stable price trend and a shift in arbitrage opportunities favoring U.S. producers.

Demand for GI and GII bases and certain feedstocks in the United States has motivated several refiners to improve their export prices and release their existing inventory. Another factor that has stabilized base prices from the Gulf of Mexico is the preference of refiners to produce vacuum gasoil (V60) due to the low demand for bases and the need to produce gasoil for the local market. Exports remain stable. 

In Asia Pacific, we observed an increase in the GI basis price due to a decrease in production. GII basis prices remain stable with upward pressure due to refinery price expectations. Demand for light grades remains weak with stable production, while the decline in production of heavy grades puts upward pressure on their price. In North Asia, we observe an upward trend for GI and GII bases. The low productivity of Chinese refineries has created an arbitrage opportunity for imported GII base.

In India, we also observe an increase in the price of imported and domestic GI and GII base stocks. Demand for finished lubricants is also on the rise. The increase in prices is due to the rise in crude oil, putting upward pressure on raw material prices. GIII base oil prices remain stable due to ample supply in the global market.

In Europe, we are seeing an increase in GI basis prices, increasing uncertainty and volatility. Alternatively, some refiners have stopped bidding spot prices and are being more cautious with their medium and long-term contracts. Base SN150 supply is decreasing and refiners are expecting higher prices. Locally, the price of the GII base has downward pressures, but it is still considerably high compared to other producing regions. Other factors that have affected base prices in Europe are low productivity, the geopolitical situation in the Red Sea and increases in shipping costs.

Demand for finished lubricants in Europe remains low, with stable demand for certified GIII bases. In Russia, prices are increasing due to higher demand in the Middle East and India. Russia continues to offer very attractive prices, which has generated increased demand and upward pressure on its base stocks.


In Latin America, there is an increase in demand for lubricant bases, with a notable presence of imported product offerings. Buyers continue to explore arbitrage opportunities in international markets and perceive a recovery in demand for finished products in local markets. Prices continue to experience upward pressure, influenced in part by the challenges faced in the Panama Canal.

The Venezuelan market shows signs of reactivation, with an increase in consumption since the Christmas vacations. An economic recovery is projected in Venezuela, with a positive expectation of consumption of finished bases and lubricants of approximately 2 million gallons per month. The new tariffs applied to imported finished lubricants have generated a significant change, with a 15-20% increase favoring locally manufactured lubricants.

In Colombia, Ecopetrol maintains stable prices, with a slight downward trend due to a surplus in its production. Other local suppliers offer competitive prices of U.S. origin, which have begun to register increases in recent days. Compared to 2022, a monthly increase of more than 20% has been observed.

Autores: Sebastian Redondo & Andres Moreno

Royal Petroleum Analistas de Mercado

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