How embargo impacts the base oils market

19.01.2023 News
How embargo impacts the base oils market

Russian refiners are bracing for the effects of the European embargo for their petroleum products including base oils and lubricants – the first such restriction in the modern history of Western relations with the country. 

Our Managing Director Denis Varaksin commented the current market situation to the magazine Lubes`N`Greases.

“The embargo on these shipments will have a serious impact on the activities of Russian base oil refiners, having in mind that Europe is one of the main markets for base oils coming from the country,” told Denis. “Even this year [Russian API] Group I and Group III base oils were heading to the EU mostly via Latvia or vessels shipments from the ports of Vyborg and Svetly in Kaliningrad,” he said.

Varaksin does not believe that the same export volume can be realized in 2022, and expects Russian base oil shipments this year to be 20-30% lower than before the war. 

“Russia will have to reduce export and redirect flows to the Black Sea, where the main buyer now may be Turkey,” he said. Some buyers in Turkey are expected to resell the material to third countries.

“Russian base oil marketers are also redirecting sales to other friendly countries such as India, the United Arab Emirates and Brazil,” Varaksin added. “These are big importers, and they can [potentially] absorb the Russian product, bit it has to be sold at a discount,” he said, adding that the discount will depend on market conditions and freight costs.

“Having in mind that the market currently is relatively well supplied, I assume the discount will be around 10%,” Varaksin said. “Also, freight costs to India and Brazil are much higher compared to deliveries to Europe,” which will reduce profits for Russian producers by another 5-10%.

DYM Resources complies with all European restrictions, sanctions and diversifies its supplier base.

Apart from base oils, our product portfolio consists also of petcoke, bitumen, biofuel feedstock, viscosity modifiers and others.

To find out more about our products and get specifications please contact our sales department: info@dymresources.com or fill in the form on our website.

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