Since middle March, international oil prices have continued to rebound. As of the close on April 13th, US WTI crude oil futures have risen to $83.09 per barrel, setting a record for the highest closing price this year. The fluctuation of crude oil prices directly affects the downstream industry chain, and the expectation of tight oil supply is bound to drive up the market of downstream petroleum products, including lubricants. In fact, lubricant companies have recently started a price adjustment model. Expert analysis suggests that due to multiple factors such as rising oil prices, rising costs, and continuous maintenance of refineries, there is still a demand for further increases in lubricant prices.
Major lubricant companies are raising prices one after another From February to early April this year, major domestic and foreign lubricant companies have completed a wave of price increases. Starting from April 1st, Sinopec Lubricants Company will raise the price of Great Wall Lubricant, with a price increase of over 8% for main sales of passenger car oil and an increase of 400 yuan/ton for main sales of commercial vehicle oil. Castrol Lubricants also decided to adjust the prices of passenger car channel lubricant products and OEM lubricant products from April 1 by 5% - 10%. In addition to these two top lubricant companies, most brands in the lubricant market, such as Shell, Kunlun, SK, Shengpai, etc., have completed price adjustments, with the highest increase of 20% for SK lubricant. The main reasons for forcing the decision to increase the price of lubricating oil are rising oil prices, rising costs, and continuous maintenance of refineries. The combination of multiple factors forces prices to rise As we all know, lubricating oil is like the "lubricant" of the economy and society, which penetrates into all aspects of social life and industrial production. After the end of the COVID-19 in China, the social mobility has fully recovered. From the field to the production workshop, the manufacturing industry has entered a rapid recovery track, and the consumer market has both supply and demand, supporting the huge demand space of the lubricating oil market. Behind the support of high demand, lubricating oil companies have to face the practical problems brought about by tight supply and rising production costs. Since March, the maintenance of the Base Oil unit has entered a peak period and will continue for a period of time. According to statistics, the maintenance capacity of the base oil unit in March reached 1.85 million tons, affecting the production of 76600 tons; In April, CNOOC Huizhou, Maoming Petrochemical, Xintai Petrochemical and other units were still undergoing maintenance, and the supply of domestic base oil, especially hydrogenated base oil resources, continued to be tight. This situation is expected to continue until May. In the absence of effective relief from the shortage of raw material supply, the production cost of base oil is much higher than in previous years. In the first quarter of this year, the base oil market as a whole was on the rise, showing a high starting point and frequent price adjustments. Recently, the year-on-year growth of base oil prices has been basically above 10%. To make matters worse, recently, several members of the Organization of the Petroleum Exporting Countries (OPEC) announced that they would cut oil supply from May. Saudi Arabia and other oil producing countries have added additional production cuts, combined with Russia's previous production cuts delayed until December, resulting in a cumulative additional production reduction of 165000 barrels per day. Affected by this, international oil prices have been experiencing dramatic increases and fluctuations, reaching a new high in over three years.
In this context, the prices of major base oil production enterprises have also increased one after another. Among them, ExxonMobil, the world's largest oil company, raised its base oil prices by about 7% in the second quarter; Meanwhile, domestic companies such as China Resources Petrochemical and Sinopec have recently announced price hikes, further sparking market expectations for an increase in lubricant prices. As evidence, on April 17th, domestic oil prices will experience their third rise since the beginning of this year. Multiple institutions predict that this adjustment will be the largest increase of the year, with an expected increase of over 500 yuan/ton. Based on the above analysis, it is widely believed in the industry that base oil prices will not only maintain a high level of operation during the year, but also have a high probability of still having high upward potential. The tight supply and high prices of base oil will undoubtedly push up the terminal price of lubricants. It is worth noting that the increase in base oil prices is not the only factor determining the increase in lubricant costs. Since last year, the prices and costs of other related auxiliary materials have also increased, such as exchange rates, labor, packaging, logistics and other production and operation costs. The continuous increase in production and operation costs has led to a continuous increase in the entire chain cost of lubricating oil. Top lubricant companies have expressed their efforts to reduce market impact by optimizing operations and improving efficiency, but they are not enough to absorb the rising costs. Therefore, in order to ensure product quality, supply, and service, it is necessary to increase the sales price of lubricating oil products. The combination of various factors prompted lubricant companies to complete a wave of price adjustments in April. Considering that crude oil prices will remain high in the future and that various factors of rising production and operating costs cannot be eliminated in the short term, the market generally believes that the price adjustment of lubricating oil companies in early April is only a prelude, and the "double strength" of market demand and product prices will continue for a considerable period of time.
