![\"ukr1.jpg\"](\"https:\/\/www.yukoil.com\/wp-content\/uploads\/2020\/04\/photo_2022-09-04_12-05-31.jpg\" "\\"Retail")
<\/p>\n\n On the Ukrainian market, wholesale diesel fuel prices are falling actively, lagging behind the decline in crude oil prices by several weeks. Retail prices have also gone down. The main consumers of fuels and lubricants, farmers and transport companies, are putting off buying diesel fuel and engine oils until the last moment, hoping that each subsequent purchase batch will be significantly cheaper.\u2026<\/p>\n
With diesel fuel, this is exactly how things have played out since December. There was a seasonal (winter) price decline that did not turn into a seasonal (spring) rise but continued instead. As a result, diesel prices have been falling for the fourth month in a row, and the rate of decline accelerated at the end of March. A great gift for the sowing season!<\/b><\/p>\n
<\/p>\n
Wholesale prices for engine oils behave differently. From autumn until early April, the cost of imported oils for agricultural machinery changed solely depending on the hryvnia exchange rate against the dollar (euro).<\/p>\n
Wholesale hryvnia prices for domestic engine oils were stable throughout the winter and rose by an average of 6-8% by the end of March, reflecting the sharp fall of the hryvnia. There is no price decrease yet.<\/p>\n
When will the fall in oil prices affect engine oil prices?
\n <\/b>
\n So, in order. The price of engine oils is made up of the cost of:<\/p>\n
a) base oils,<\/b>
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\nb) additives,<\/b>
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\nc) packaging,<\/b>
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\nd) production costs,<\/b>
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\ne) distribution and logistics costs.<\/b><\/p>\n
And now in more detail:<\/p>\n
a)<\/b> According to data from international price reporting agencies (ARGUS MEDIA and ICIS LONDON OIL REPORT) <\/b>prices for SN-150 and SN-500 base oils in the ports of Northern Europe and the Baltic Sea have remained unchanged (+\/- $10\/t) over the past 5 months, despite the continuous fall in crude oil prices.<\/p>\n
![\"ukr2.jpg\"](\"https:\/\/www.yukoil.com\/wp-content\/uploads\/2020\/04\/photo_2022-09-04_12-06-34.jpg\" "\\"Crude")
<\/p>\n
![\"ukr.jpg\"](\"https:\/\/www.yukoil.com\/wp-content\/uploads\/2020\/04\/photo_2022-09-04_12-05-56.jpg\" "\\"SN-150")
<\/p>\n
Given that base oils are not produced in Ukraine at all, analysts work with wholesale prices at the hub closest to us, the Baltic Sea ports. Base oil suppliers usually start from this price, setting the price for the Ukrainian market at a certain premium over the Baltic one, owing to the lack of domestic supply.<\/p>\n
The forecast from the end of March assumed a decrease of only $10\/t for oil delivered at the end of April to mid-May (taking into account the time needed for shipment from the plants and rail transit).<\/p>\n
The latest forecast, dated 07.04.20, gives a further $20\/t decrease, shifted by a week. Thus, the total reduction in the cost of bulk base oils arriving in Ukraine by the end of May may amount to $30\/t, or about 6% of the current dollar cost of base oil. Converted to the wholesale price of packaged engine oil, this decline would translate into no more than a 3-4% decrease.<\/p>\n
If we look at time-aligned charts of crude oil and base oil prices over a long period, we can see that the charts of base oil price rises and falls are gentler than the crude oil price chart, and sometimes move in the opposite direction. Why is this? Possibly because the yield of base oils is only 1.5-2% of the 100% weight of processed crude oil and has little effect on the overall economics of refining. The price of base oils depends rather on seasonal demand or a shortage of supply of particular base stock types in a particular part of the globe, or on the marketing policies of global producers.<\/p>\n
b)<\/b> Additive prices are fairly conservative. Additives <\/b>are chemical substances and compounds, and their prices are not directly or indirectly linked to the price of crude oil. Some large Chinese producers of both finished additives and the raw materials for their production stated in March that, because of the quarantine, they are unable to keep to their annual supply schedules. If global additive consumption does not fall because of the crisis, a shortage is possible. Prices are stable for now, but there is a real risk of increases.<\/p>\n
c)<\/b> The cost of packaging (drums, canisters, caps, corrugated boxes, pallets, labels, etc.) remains stable at present, but where imported raw materials are used it fluctuates depending on the exchange rate. A decrease in packaging costs is possible over the next few months owing to a possible drop in demand caused by the crisis.<\/p>\n
d)<\/b> and e)<\/b> Production, distribution and logistics costs for domestic producers are unlikely to fall or rise in the near future. For foreign goods, these components, as always, are tied to the hryvnia exchange rate.<\/p>\n
Conclusion:
\n <\/b>
\n The total foreign-currency cost of all components that affect engine oil prices will remain fairly stable over the next 2 months, with a slight downward trend, mainly due to a small decline in base oil prices. A further decrease in base oil prices (in June and beyond) will bring lower prices for finished oils as well, but the process of price reduction on the Ukrainian domestic market will definitely not be quick, because there are many other, contradictory factors affecting the cost of oil, especially currency risks.<\/p>","protected":false},"excerpt":{"rendered":"
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