Dark clouds appeared on the base oil horizon as new coronavirus-related lockdowns and travel bans were reimposed in several countries. Despite these prospects, base oil supply was anticipated to remain tight on lingering refinery rate reductions and steady demand from a number of downstream segments.
The fresh lockdowns and travel restrictions in China ahead of the Lunar New Year celebration were linked to a surge in infections in a Northeastern province. About 22 million people were told to remain home in several cities, and travel during the busy holiday was strongly discouraged in the whole country, which could lead to significant drops in transportation fuel and lubricants consumption. This comes at a time when Chinese buyers typically scour the market in search of cargoes to build inventories ahead of the busy spring lubricant production season. However, a reduction in mobility and possibly manufacturing operations, coupled with a lack of availability, may result in lower than expected buying activity.