Spot base oil prices seemed to have stabilized for the time being, despite demand picking up in a few countries and declining in others. Recent efforts by suppliers to trim production rates and find a home for surplus barrels have been fairly successful, relieving some of the inventory pressure. In China, most COVID-related restrictions have been lifted, but there has been a spike in the number of infections and people preferred to stay home, resulting in reduced economic activity and fuel consumption.
The Chinese government’s sudden drop of its zero-COVID policies amidst widespread protests was somewhat perplexing, and instead of encouraging increased economic activity, it seemed to have done the opposite. People chose to stay at home because they were afraid of infection and not being able to get treatment as the healthcare system showed signs of being overwhelmed. The abrupt policy changes have resulted in reduced mobility of the population and a slowdown in industrial activity. This has affected fuel and lubricants demand, feeding concerns about base oil consumption in the next few weeks. Buyers have adopted a wait-and-see position and were expected to return to the market at a later date, perhaps before the Lunar New Year holidays in late January.