When the demand for oil declines, experienced specialty oil suppliers see more than a slowdown in business. These conditions can represent opportunities for buyers.
We’re seeing this trend all over the world as 2023 comes to a close. From base oils to finished lubricants and other types of refined oils, markets seem to be comfortably supplied.
Slow periods like this have happened before and will again. What can we do to help our customers take advantage of it when it does?
Slow Growth for South Korea Lubricants
Electric vehicles (EVs) are gaining in popularity in South Korea. Sales of EVs are helping to grow the country’s overall economy, but as cars that run solely on battery power do not use engine oil, lubricant demand is slowing.
“Korea’s lubricant market has been stagnant at 1 million kiloliters for the past twenty years … Although the number of car registrations will continue to increase, it will be difficult to expect an increase in the consumption of lubricants as the proportion of eco-friendly cars increases.” – Korean Lubricating Oil Industry Association
Japan Finished Lubricant Market Shrinks
A recent report showed that both production and domestic sales were down in September, by seven and four percent, respectively.
Also down:
- Export volume (28% decline)
- Grease production (8% decline)
- Grease imports (13% decline)
Only lubricant imports were up (19%), but that was the second-lowest monthly increase for the year to date.
Europe Well-Supplied
Though not long ago considered to be in the midst of an energy crisis, Europe’s oil supply now appears to be more than sufficient.
Sanctions on Russian exports throttled supply in 2021 and 2022, but with oil inventories comfortable in 2023, prices have normalized.
Saudia Arabia and its OPEC+ partners have cut back on production this year, indicating the pressure on them to address the crisis in Europe and parts of Asia has abated.
U.S. Oil Prices Slump
Here in the U.S., oil inventories are abundant while motor vehicle sales and retail spending have slowed, correlating with reduced demand for base oils, lubricants, and specialty oils.
The weakness in the market led to a five-percent drop in oil prices on November 16th, the lowest they had been in four months.
Signs are pointing to weak demand heading into the new year.
Opportunities Through Specialty Oil Suppliers
Simply put, a market slowdown is an opportunity to invest in the future.
Demand for products made using base and specialty oils will rise again as it always does. Now is the time to plan ahead for growth, and your specialty oil supply partners can help.
Here are three ways you can seize the opportunity a slow oil market presents:
- Establish or revisit your supply contracts. Spot orders at lower cost may work now, when protecting your margins outweighs supply concerns, but inventory can deplete quickly once the market turns around. Make sure you have a contract in place with flexible terms so that you’re poised for growth.
- Expand your supplier list. This is the time to take meetings with potential new partners, when specialty oil suppliers have the most latitude to offer special contractual arrangements and competitive pricing through their relationships with refiners. This is an excellent time to sign contracts with secondary suppliers.
- Invest in inventory when prices are low. If you’re able to free up the capital, it may make sense to increase your stock, provided you have the means to safely store specialty oils. The alternative is to work with a specialty oil supplier that has the facilities to securely store inventory on your behalf.
The core principle here is that a slow market isn’t a time when it makes sense to be idle, waiting for the rebound so you can get back to work.
This is a time for retrospective analysis, supply chain optimization, and strategic planning, to ensure that you maximize profits during the next high-demand period–and put yourself in the best possible position for the next downturn beyond that.
An experienced specialty oil supplier like Renkert Oil can help you stay ahead of the game.
Renkert Oil: Your Strategic Specialty Oil Supplier
After nearly four decades in this business, we’ve established valuable relationships with refiners, and we extend the benefits of those relationships with our customers.
We add value to the supply chain as we service our hundreds of customers in a way that refining suppliers simply can’t without our help.
Simply put: personal service.
- Deep inventories to hold more product for customers who lack their own facilities.
- SQF-certified procedures to ensure efficiency and quality control.
- Facilities throughout the U.S. and Europe for regional service.
- Flexible shipping by barge, rail, and/or truck to balance convenience with cost-effectiveness.
- Customized testing and certificates of analysis to fulfill virtually any niche requirement.
Here at Renkert Oil, our capabilities go beyond supply security during high-demand times. We are full-time problem solvers working to secure your future growth and success.
Ready to learn more? Schedule a consultation with us today.
