1. Base oil market analysis

　　Longzhong data shows that the total production of base oil in April was 726,450 tons, an increase of 18% from the previous month. In April, the total output of paraffin base oil was 310,500 tons, naphthenic base oil was 133,600 tons, and the second-class base oil accounted for 83% of the total output. The operating rate in April was 45.4%, an increase of 8.87% from the previous month.

figure 1 April domestic base oil production statistics

Source: Longzhong Information

　　In mid-to-late April, after the news of the start of construction of three new production capacity units was released, the market price declined, and downstream users were obviously bearish about the market outlook. With the reduction of refining costs in May, the market price of base oil is expected to sink further. In addition, due to the impact of newly released production in May, the contradiction between market supply and demand has intensified. It is expected that the base oil market will still have 200-300 yuan in May. Yuan / ton downside.

　　Figure 2 Trend chart analysis of mainstream transaction prices in various regions in China this week

Source: Longzhong Information

　　2. Lubricant market analysis

　　After the epidemic in the domestic lubricant market, the demand gradually recovered. In April, the demand for automotive lubricants and industrial lubricants increased significantly. The inventories of large and medium-sized lubricant factories were gradually digested and entered the replenishment cycle, which caused the market price of base oil to rise in April. It has risen sharply, and the cumulative increase has been around 300-400 yuan / ton. According to the production situation of the 109 downstream lubricating oil factories surveyed by Longzhong by telephone, the lubricating oil factories fully resumed work in April, and the oil consumption reached 94,170 tons, an increase of 18.53% compared with March. Among them, 81 companies have completed the purchase, with a total purchase of 9,255 tons. East China and North China have the largest purchase volume, accounting for 51.43% and 28.96% respectively.

　　Figure 3 Analysis of oil consumption in lubricating oil factories in April

Source: Longzhong Information

　　Table 1. Base oil purchases in April 2020

　　Unit: tons

Source: Longzhong Information

　　The downstream lubricating oil factories used more high-viscosity base oils in April, so the growth rate of high-viscosity base oils was significantly faster than that of low-viscosity base oils.

　　Figure 4 Proportion of base oil purchase types

Source: Longzhong Information

　　Enterprise inventory: After the full resumption of production, the oil consumption of factories has increased. In early April, enterprise inventory gradually depleted from high to low, and inventory accounted for 26.45%. Starting from the third week, due to the increase in orders from end users and positive shipments, the factory began to replenish the inventory of raw materials. As of the end of April, the proportion of factory inventory rose to 47.92%.

　　Figure 5. Inventory of downstream enterprises in April

　　Unit: tons

Source: Longzhong Information

　　The lubricating oil factories are more motivated to pick up the goods than in March, but the epidemic still inhibits economic activities. Small and medium-sized lubricating oil factories purchase raw materials according to the terminal demand and sales volume. The oil production cycle has been extended compared with previous years, and some large factories have resumed the original procurement cycle. , stable purchases on a weekly or monthly basis.

　　3. Analysis of bidding information for terminal lubricating oil users

　　Longzhong data shows that in April, the number of lubricating oil bidding companies was 316, an increase of 10 from the previous month and a month-on-month increase of 3.3%. However, the number of orders in the bidding announcement decreased. The total inquiries for lubricating oil were 977.51 tons, a decrease of 44.8 tons from the previous month and a decrease of 4.4% from the previous month. The order volume in April was 267.8 tons in East China, 208.2 tons in South China, 168.1 tons in Northwest China, 141.1 tons in Southwest China, 135.2 tons in North China, and 57.2 tons in Northeast China.

　　Figure 6 Orders of lubricants by region in April

Source: Longzhong Information

　　In April, orders for gear oil were 308.6 tons, grease orders were 218.1 tons, other industrial lubricants 212.6 tons, hydraulic oil 155.9 tons, other automotive lubricants 61.6 tons, and antifreeze 18.8 tons.

　　Figure 7 Orders of various types of lubricants in April

Source: Longzhong Information

　　1. The significant increase in the resumption rate of domestic enterprises has increased the number of end users of lubricating oil;

　　2. The fluctuation of international crude oil has increased market uncertainties, and end users of lubricating oil mostly take a wait-and-see attitude, and most of the purchases are based on small orders.

　　Longzhong analysis: Compared with March, the purchase volume of lubricating oil by end users in April decreased slightly, but the decline was small and remained basically stable. Entering May, with the further recovery of the terminal market demand, it is expected that the lubricating oil in May will increase. Oil demand will continue to increase steadily.