It is not the role of this report to cover this political fracas, but there is no question a fracture between the U.S. and Europe could affect markets in Europe and beyond. If the European Union and the U.K. are forced to greatly ramp up spending to increase their own defense capabilities while also continuing to finance aid to Ukraine, it will great impact economies in the region – a region where large economies are already teetering on the brink of recession.

As a result, base oil demand has been lacking in major European markets. The Middle East is braced for negativity as the ceasefire between Israel and Hamas staggers, and the possibility of attacks on its nuclear program loom over Iran. Africa, in contrast, has a number of regional markets in relatively good shape.

Strangely, crude prices have stalled over the past few days, dipping by significant percentages. One could have expected the current tensions to send them in the opposite direction, but the downward movement may have reduced or eliminated upward pressure on base oil prices.

Dated deliveries of Brent crude is fell around $2 the past week to $72.50 per barrel, now for May front month settlement. West Texas Intermediate crude dipped to $69.30/bbl, for April front month.

Low-sulfur gasoil prices fell around $30 to $684 per metric ton, still for March front month. All of these prices obtained from London ICE trading late March 3.

Europe

The European API Group I export market has become the European Group I import market, as there are reports of a number of cargoes from various sources starting to flow into Europe. Group I grades from the U.S. East Coast, the Red Sea and Egypt are moving into storage mainly in Antwerp-Rotterdam-Amsterdam and the U.K. where resellers will supply them to markets tight on some grades. The heavier neutrals are in demand, along with bright stock, which has been particularly tight across Europe. This has had the effect of keeping prices relatively high.

Group I markets around Europe are showing slightly tighter, but what is actually taking place is worthy of consideration. A number of major refineries producing Group I base oils have temporary maintenance shutdowns scheduled to start in the next few months, and this may shorten up availabilities. If all goes well with maintenance, there should be little impact, but if problems occur, as they sometimes do, then the market could experience regional shortfalls needing to be covered from elsewhere.

Group I base oils remain at acceptable differentials to distillates with erosion slowing as availabilities tighten.

The export market from Europe is exceptionally limited, with only one major regularly moving large quantities of all types of base oils to South Africa. The same major is also sending Group I barrels from the U.K. to West Africa, where receivers in Guinea, Cote d’Ivoire and Ghana take supplies on a regular basis.

Prices for Group I sales in Europe appear to have held steady going into March, although this columnist will contact more sources this week. Prices are assessed at €840/t-€880/t for solvent neutral 150, €885/t-€925/t for SN500 and €1,295/t-€1,400/t for bright stock, depending on quantity.

The euro’s exchange rate with the U.S. dollar remains relatively static, having posted at $1.04850 Monday. The average price differential across all grades between Group I sales within Europe and hypothetical exports from the region is narrowed to €5/t-€15.

European Group II prices also appear steady, again with no reported price moves for March. It was thought that some upward pressure existed because of hikes to FOB prices in the U.S., but that has not resulted in markups across the Atlantic.

Demand is less than it could and should be at this time of year. Sellers are ruing the absence a number of finished lubricant factory fill orders which traditionally come out to tender at this time of year.

European Group II prices remain at €1,035/t-€1,065/t for 110 neutral and 150N, at €1,050/t-€1,080/t for 220N and €1,125/t-€1,175/t for 600N. These values apply to a wide range of Group II oils from Europe, the U.S., the Red Sea and Asia-Pacific. For imports the prices pertain to supplies shipped in bulk, although some smaller quantities are transported directly to blenders in flexi-tanks.

Group III prices in Europe appear to be stabilizing, although there are still flurries of extremely low rates from a number of traders accessing supplies through tender sales. It had been reported that another tender would be issued by a Middle East Gulf source, but apparently this will not take place at this time because the refinery in question will undergo a 45-day maintenance turnaround beginning this month.

Problems with the vacuum distillation unit at a Group III refinery on Onsan, South Korea, led to a lack of availability of 8 centiStoke oils. This in turn caused availability of 6 cSt oils to tighten, since this viscosity grade is a blend of 8 and 4 cSt grades. Delays to cargoes have occurred for this seller, but it is now believed that stocks are back to replenishment levels.

Open market numbers heard offered for 4 cSt oils remain around $1,040/t (€1,010/t), but confirmation has been received of offers of €965/t for the same grade. There has been a deal done at a lower price, but in that case the buyer had to take over a storage commitment on the material sold, so the real cost included tankage costs that added significantly to the quoted rate of $935/t.

One distributor is offering 4 cSt oils at €1055/t, whilst others are charging €1,075/t-€1,100/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

European and U.K. values for Group III oils with partial slates of finished lubricant approvals remain in a wide range of €965/t-€1,100/t for 4 and 6 cSt and €1,065/t-€1,115/t for 8 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades dropped to €935/t-€970/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Prices for Group III oils with full slates of finished lubricant approvals are unchanged at €1,675/t-€1,725/t for 4 and 6 cSt and €1,735/t-€1,755/t for 8 cSt, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

The search continues for reliable information about FOB prices for Russian base oils loading out of Baltic ports such as St. Petersburg and, on the odd occasion, Vyborg, Russia. Traders who were around when Russian exports went to the EU and the U.K. are no longer around. Direct suppliers such as Lukoil, Gazprom and Rosneft do not communicate with Western sources and will not divulge FOB or refinery gate prices.

Shipping inquiries and fixtures are also non-existent as most companies are trying to keep such trade as dark and confidential as possible. Sources that can be contacted refuse to disclose pricing information apart from offers for material moving into markets such as Nigeria.

The only method of estimating FOB price levels is on a netback basis, working backward from landed prices into Nigeria and Turkey using best estimates on freight rates and margins.

Using prices for Russian barrels imported into Gebze, Turkey, and assuming a very low freight rate from the Baltic Sea, costs of storage and handling and a margin for traders yields an FOB price ex St. Petersburg of around $585/t. This is hard to believe since this price is well below feedstock values on the European market, but Russian feedstock prices may be calculated differently, meaning that selling base oils at very low numbers could still makes economic sense.

Therefore, on the above basis, FOB prices ex St. Petersburg are estimated to be around $580/t-$595/t for SN150, $585/t-$600/t for SN500 and $625/t for SN900 blended specifically for Nigerian receivers. These values are published as indication prices only.

Russian base oils continue to be sold to Ukrainian buyers looking for low-priced Group I. Confirmation has been received that there are no sanctions against importing and using Russian base oils to blend finished lubricants in Ukraine. Blending operations in Ukraine typically used Russian base oils prior to the invasion.

Russian base oils are also being bridged from Azov Sea ports such as Taganrog and Rostov, Russia, with material being shipped down the River Don. This material goes into Turkey and Egypt, and is often re-exported to markets such as Nigeria, and even the U.K.

A Turkish blender/trader still offers blended Russian and Uzbek base oils at $770/t for SN150 and $785/t for SN500, ex works in Gebze. An SN900 grade is priced much higher at $1,045/t, perhaps containing bright stock from the EU or the Red Sea.

Tupras announced it will cease using Russian Urals crude in its refinery at Izmir, Turkey. Options for replacements include Arab Light from Saudi Aramco and a blend of Egyptian crudes. The effect on Group I production there is unclear.

Local sources say there currently are no availabilities of base oils produced at the refinery, but the company lists prices as follows: 33,553 lira/t for spindle oil; Tl 27,405/t for SN150; Tl 32,716/t for SN500; and Tl 42,953/t for bright stock. Prices are ex rack and incur a loading charge of Tl 8,199.20/t.

Group II ex works prices from a Turkish base oil trader and lubricant blender are still offered at $880/t for 110N and 220N and $1,100/t for 350N.

Base oils imported from Formosa Petrochemical in Taiwan are offered at $1,500/t for 500N and $1,150/t for 150N. Group II base oils in Turkey are also imported from the Red Sea, the U.S., South Korea and Russia.

The Group III market in Turkey includes oils with partial approvals from Tatneft in Russia, priced around €955/t for 4 cSt. Other partly-approved grades are higher at €1,095/t-€1,155/t for 4 and 6 cSt. Some of these grades have been bridged into Turkey from cargoes discharged into Antwerp-Rotterdam-Amsterdam and surplus material reloaded on low-freight Turkish flagged vessels ballasting back to the Black Sea or Eastern Mediterranean. Flexies have also been used to take material from Antwerp-Rotterdam-Amsterdam to Turkey.

Group III oils from Cartagena, Spain, with full slates of approvals are being delivered into Gemlik, Turkey, and prices are estimated at €1,825/t-€1,855/t, on an FCA basis.

Middle East

Shipping movement’s from Luberef’s Yanbu, Saudi Arabia, refinery are increasing, but not all cargoes are the large 18,000-ton types that mostly go to Mumbai anchorage. Those contain mainly Group II base oils since India is now producing a surplus of Group I. Other destinations for smaller cargoes are Port Sudan; Aqaba, Jordan; and also Dar-es-Salaam, Tanzania. Group I and Group II cargoes are delivered to receivers in the United Arab Emirates and Pakistan.

Ramadan began Feb. 28, but loadings of base oil cargoes seem to be continuing unabated.

Maintenance is planned at Yanbu for around mid-year, and this is reckoned to be a major turnaround, with base oils being only one stream affected.

With the ceasefire in Gaza between Israel and Hamas suspended, Houthi rebel attacks on shipping in the Red Sea may resume – if they ever stopped. Most tonnage is not using the Red Sea transit anyway, as almost 80% of vessels continue going around Africa’s southern tip.

Prices for base oil exports from Iran are reported stable on few movements during the past month. January and December saw prices rising almost weekly, but levels were difficult to pin down. It is hard to analyze the reasons behind developments, but values are now heard at around $890/t for premium quality SN500, on an FOB basis, loading out of Bandar-e Emam Khomeyni. Most cargoes are going into the UAE or Pakistan.

Prices for imported Group I material arriving into the UAE from Western and Eastern sources have been re-confirmed at $895/t-$925 for SN150, $940/t-$955/t for SN500 and $1,225/t-$1,260/t for bright stock, all on a CIF or CFR basis ex UAE ports. These levels are competitive and are comparable to prices in Europe and Asia-Pacific.

Russian base oil cargoes continue to discharge in Hamriyah port, although all has gone quiet on a further STS operation to move a large cargo from Hamriyah anchorage to Lagos. There were reports from Lagos that a trader had offered extremely low prices to receivers in Nigeria – levels achievable only for Russian barrels.

Russian base oil prices on a CFR basis ex Hamriyah port or from ship-to-ship anchorage are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges would refer to material actually discharged into storage in Hamriyah.

Group III cargoes are loading out of Al Ruwais, UAE, and Ras Laffan, Qatar, bound for India, Europe and the U.S., but activity seems to have slowed out of Sitra, Bahrain, perhaps due to the maintenance turnaround starting within two weeks and scheduled to last up to 45 days.

Netback levels for Group III base oils moving out of the Middle East Gulf are taken lower, with Indications presently at $1,075/t-$1,115/t for 4, 6 cSt and 8 cSt grades. These figures offer a guide to FOB levels being levied from producers.

Netbacks for gas-to-liquids Group III+ base oils loading ex Ras Laffan are at $1,155/t-$1,220/t, though the supplier’s cargo economics and cost allocations are not known. FOB netback levels are assessed from distributor selling prices minus estimated rates for marketing, margins, handling and freight.

Group II base oils are imported from the Red Sea, the U.S., South Korea and Singapore and resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman. FCA prices are unchanged at $1,455/t-$1,500/t for 110N, 150N and 220N and at $1,535/t-$1,575/t for 600N. These grades are priced and sold in UAE dirhams, which currently trades at AED 3.66 per dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in the UAE and northern Oman.

Africa

The previously mentioned cargo of Group I grades from the U.S. being worked through a trader is moving into receivers in North Africa, probably into Casablanca for Moroccon oil company Samir.

Luberef/Saudi Aramco have supplied a bright stock cargo of 3,000 tons from Yanbu into EGPC in Alexandria, Egypt.

News of a large base oil shipment of some 15,000 tons discharging into Mombasa, Kenya, seems less than feasible. A reader suggested that that size is too large for Mombasa. It would appear that most of the cargo is to be discharged first in Durban, South Africa, and the remaining 4,000-6,000 tons then going into Mombasa. More details are being sought from ships’ agents in Durban and Mombasa. This delivery may pertain to the cargo that recently discharged in Durban.

In West Africa news, traders have sold an 18,000-ton cargo from the U.S. Gulf of Mexico coast for delivery into Lagos. The cargo has arrived and is presumed to be discharging, consisting of SN150, SN500 and SN900. Another cargo of around 10,000 tons has presumedly loaded and will sail in the next few days.

Apparently Nigerian buyers do not want to pay the higher prices for SN900, commenting that the price is becoming too high for sale out of tank. Instead, they will only take SN150 and SN500.

Without either bright stock or SN900, the higher-viscosity blends produced in Nigeria are going to perform very differently. Formulations and additive packs will have to be adapted, which may raise blender costs at the end of the day. However, up until now SN900 has formed a major part of all gulf cargoes being sold into Nigeria.

Russian base oils from the Baltic, Egypt and possibly the UAE continue to be offered from a number of traders, all with extremely low prices. The Nigerian naira’s exchange rate to U.S. dollars fell NGN 20 the past week to NGN 1492.

Prices for Group I oils from the U.S. are confirmed at $965/t-$980/t for SN150, $990/t-$1,010/t for SN500 and $1,050/t-$1,080/t for SN900, all on a CFR basis ex Apapa port in Lagos. Traders are offering oils from other sources at $910/t for SN500, on a CFR basis ex Apapa.

Prices for Russian base oils from Russia, Egypt and the UAE are unchanged at $905/t for SN150, $910/t for SN500 and $1,030/t for SN900, all on a CFR basis ex Apapa. SN500 from other traders is offered for around $965/t.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at pumacrown@email.com.

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

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