Russian engine oil prices soar as world supply dries up

Russian engine oil prices began to rise rapidly this year, by 25-35% a month

  

MOSCOW - Engine oil prices have doubled so far this year in Russia due to a supply shortage of its main component, base oil, as refiners worldwide cut their production runs, traders said on Thursday.

Engine oil is an important lubricant used widely in vehicles and machinery to smooth friction. Base oil is produced by a means of refining crude oil, then blended with additives for use as engine oil.

Russian engine oil prices began to rise rapidly this year, by 25-35% a month, according to traders and Refinitiv data.

Engine oil price rose to about 120,000 roubles ($1,583) per tonne in April compared to 55,000 roubles ($726) per tonne in December, according to Refinitiv data.

Seasonal refinery maintenance in Asia, refining disruptions in the United States due to a harsh winter as well as low refinery runs in Europe caused by pandemic lockdowns have all resulted in significant fall in base oils production this year, traders said.

Base oils shortages have been felt for several months around the world, Denis Varaksin, managing director of independent trading firm DYM Resources GmbH, involved in the Russian base oils market, told Reuters.

"Prices are still rising, we expect the trend to last at least until June," Varaksin said.

Base oils prices in Russia have risen along with world prices as producers try to balance profitability of domestic sales and exports, he added.

"In winter, when domestic demand was rather weak, Russian companies increased export of base oils. Now export supplies inch down," Varaksin said.

Russia has exported 120,000 tonnes of base oils a month on average this year, while world market volumes stand at roughly 5 million tonnes a month.

Seasonal refinery maintenance in Europe is supporting engine oil prices in Russia, a trader in Russian market said.

"Many refiners in Europe have cut runs this spring either for maintenance or due to low margins. It is easier for them to buy Russian," he added.

(Editing by Vladimir Soldatkin; editing by David Evans) ((Olga.Yagova@thomsonreuters.com;))

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