In addition, forecasts suggested crude oil and feedstock costs would weaken going into September due to an OPEC+ decision to increase crude production and slow growth in main crude-consuming economies such as China, India and Brazil.

Crude has remained relatively weak over the summer, with a only couple of mini price spikes triggered by events in conflict zones. Crudes have traded in narrow spreads since the beginning of April, with dated deliveries of Brent crude mostly remaining below the $70 per barrel mark.

Base oil prices have echoed the trend, remaining softer than they were inn spring. Buyers across the base oil sectors confirmed last week that they could receive small discounts to prices listed in this report, and some numbers are being trimmed to reflect this tone.

Buyers are expected to become active over the next four weeks, replenishing stocks that were depleted during the second quarter. Availabilities for all base oils remain positive. Large quantities of API Group I and Group II entered the Middle East Gulf markets during June and July, whilst Europe received large imports of Group II, mainly from the United States, during the pre-summer period.

European Group III supplies and availabilities are coming back into balance, with replenishment cargoes having arrived and more scheduled to arrive over the next few weeks. The base oils from these cargoes have been mostly pre-sold to regular or contracted buyers who have been relieved by the fresh supply.

In African markets there has been a marked downturn of base oil imports during the past few months, but sources comment that this is about to change as large cargoes arrive over the next month from Europe, the U.S. and Asia-Pacific. Demand is expected to return to southern hemisphere markets, and a real surge in supplies is being anticipated.

In sub-Saharan regions such as West Africa, the rainy season is coming to an end, spiking demand for Group I base oils moving into traditional markets.

Crude and Gasoil Prices

If oil producers open the taps as they’ve indicated, global markets seem likely to be flooded, and there can only be one direction for crude levels to travel. Recognizing the probability of that trend, base oil buyers will only purchase limited quantities and only as and when necessary.

Dated deliveries of Brent crude: $68.55 per barrel, October front month.
West Texas Intermediate: $64.60/bbl, October front month.
European low-sulfur gasoil: $691 per metric ton, September front month.
Source: London ICE trading late Aug. 25.

Europe

European Group I prices whilst remaining relatively steady are starting to show signs of downward pressure. Sources have confirmed that when inquiring to sellers last week, some were able to negotiate small discounts for relatively small purchases of Group I base oils.

Expectations are that September will bring lower numbers to the market, but there is uncertainty as to the extent of these weaker levels. Some players described the adjustments insignificant, maintaining they cannot be trumpeted as major markets moves. It is worth noting, though, base oil premiums to diesel and crude have been considered high for many months.

Alarm bells rang in Eastern Europe last week when Russian crude pipeline supplies to refineries in Slovakia and Hungary were interrupted after Ukrainian airstrikes into Russia. These refineries are landlocked and could not change crude supplies, so the European Union granted waivers to its ban on Russian oil imports after Russia’s 2022 invasion of Ukraine.

Only one refinery producing base oils was affected – Mol’s facility in Szazhalambatta, Hungary. Inquiries revealed that base oils supply from the site was not affected, and crude supply was restored toward the end of last week.

Group I Prices

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: €965/t-€980/t
SN500: €1,000/t-€1,025/t
Bright stock 150: €1,425/t-€1,470/t

Eastern Europe, FCA
SN150: €966/t
SN500/600: €1,021/t
Bright stock: €1,352/t

Note: Prices for September are higher than Pan-European levels, but are considered posted prices and may not reflect actual selling levels.

Pan-European, FOB/FCA basis
SN150: €775/t-€820/t
SN500/600: €845/t-€875/t
Bright stock: €1,225/t-€1,300/t

Pan-European prices are assessed based on levels from France, Germany, Benelux, Iberia, Italy, Greece and the United Kingdom

The euro’s exchange rate against the U.S. dollar edged higher to $1.17034 Monday.

European Group II prices may come under downward pressure from September as buyers are calling out both the differential between Group I and Group II and the high premiums Group II grades hold against diesel and crude prices. This situation incentivizes producers and importers to maintain quantities in storage but must also closely monitor the strength of demand.

September marks a new month when prices tend to be adjusted, and also the time when many buyers and sellers will return from vacation. That said, sellers sometimes try to hold on a couple weeks before responding to buyer counters and bids.

European Group II prices remain stubbornly higher than other regions, providing more ammunition for buyers to negotiate lower numbers.

These values refer to a wide range of Group II base oils from Europe, the U.S., the Red Sea and Asia-Pacific. For imports the ranges refer to bulk shipments, though smaller quantities are also transported in flexi-tanks.

European Group III demand remains firm with suppliers and distributors playing catch up with deliveries to customers, many of whom have been patiently waiting for replenishment barrels to arrive. Distributors are still selling out 4 centiStoke grade to regular buyers, putting pressure on availabilities of 6 cSt.

Middle East Gulf sources are now operating at optimum capacity, and demand for cargoes continues. Appointed distributors are purchasing additional quantities and chartering vessels to bring them to the European market.

Vessels are still being routed around the Cape of Good Hope due to potential for Houthi attacks on shipping. Voyage times are longer than when vessels transited the Red Sea and Suez canal. The vessel deviation is also more expensive because the extra bunkers and increase crew costs drive up freight rates. The cargo also has to be financed for a longer period, driving up costs.

Group III Prices

Partly-approved grades, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 and 6 cSt: €1,085/t/t-€1,120/t
8 cSt: €1,125/t/t-€1,145/t

Fully-approved grades, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 and 6 cSt: €1,695/t/t-€1,725/t
8 cSt: €1,745/t/t-€1,760/t

Prices for fully-approved grades are for FCA sales ex hubs in Antwerp-Rotterdam-Amsterdam and Northwestern Europe. Where product is sold on a delivered basis, a premium covering transport costs will be added to the above prices.

Rerefined Group III, FCA Germany
4 and 6 cSt: $1,035/t/t-$1,075/t.

Note: Base oils are also purchased on a delivered basis, CIF the east coast of the U.K.

Baltic Sea

European Group I and II base oils are being delivered into Baltic states mainly by road tanker, but some small cargoes have been moved by sea into ports such as Riga and Liepaja, Estonia.

As far as your columnist can establish, only base oils from Lukoil’s Perm refinery are being loaded out of the Baltic. In the past, traders also loaded oils produced by Gazprom and by Naftan in Belarus. Where these products now end up is far from clear. Even if shipping information were available, the origin of base oils would not be revealed.

Establishing Baltic prices for Russian Group I export cargoes is impossible, but when cargoes are discharged in a Turkish or Nigerian port, CIF/CFR prices are disclosed by importers, customs offices or shipping agents. Using estimated freight rates, ballpark FOB prices can be established.

Notional prices for Russian exports, FOB St. Petersburg
SN150: $750/t-$775/t
SN500: $780/t-$795/t.

Black Sea & Turkey

Turkish buyers appear to have given up on procuring U.S. barrels of Group I and Group II through traders who have contacts on the U.S. Gulf and East coasts.

Russian imports appear to be back at the fore of Turkish base oil supplies, and some of the prices reported are not to be believed. Last week there were reports of a price of $560/t for Rosneft SN500, which would have been shipped from a Sea of Azov port. This level would be below cost at refinery gate, which draws its accuracy into question.

The Turkish base oil market is currently very slow, with many of the blenders and traders still on holiday. One blending operation reportedly will not re-open until mid-September.

Turkish Base Oil Prices

Russian Group I from Lukoil, CIF/CFR Gebze
SN150: around $910/t
SN500: around $925/t

Rosneft and Bashneft, CIF/CFR Gebze
SN150: $795/t
SN500: $825/t

Tupras Group I, ex rack Izmir refinery
Spindle oil: Tl 35,447/t plus value added tax of Tl 8,986.84/t
SN150: Tl 30,261/t plus VAT Tl 7,949.64//t
SN500: Tl 34,204/t plus VAT Tl 8,738.24/t
Bright stock: Tl 52,506/t plus VAT Tl 12,398.64/t

Group II, ex-works

110N and 220N, Russian origin: $1,100/t
350N, blended or from alternative source: $1,225/t
150N, from Taiwan or Saudi Arabia: $1,275/t
500N/600N, from Taiwan or Saudi Arabia: $1,595/t

Partly approved Group III
4 cSt from Tatneft, FCA: €1,175/t
Fully-approved Group III from Spain, CIF Gemlik
€1,825/t/t-€1,855/t.

Middle East

Cargoes have resumed loading out of Yanbu and Jeddah, Saudi Arabia, moving large quantities of Group I, but with more emphasis on Group II grades for the West Coast of India and the United Arab Emirates. Parcels are also organized for Karachi, Pakistan, and for other receivers in ports such as Aqaba, Jordan, and Port Sudan, Sudan.

A Group II cargo of around 7,000 tons will load from Yanbu and sail for Durban, South Africa, discharge during September.

UAE receivers are already accepting cargoes of Group I and Group II base oils from Yanbu and Jeddah. Arrivals have started, with directors of one large UAE blending operation, who are currently in the U.K., confirming to this report that they will be taking large quantities of Group II base oils from Yanbu.

There are again no reports of base oil cargoes moving out of Iranian ports, but quantities of rubber process oil are still being exported from Iran, RPO is reportedly also coming out of Iraq. Your columnist is not aware of any production of RPO in Iraq, and it may be that Iranian material is being moved to an Iraqi port for shipment. Why this would happen is not known.

RPO is delivered into Ras al Khaimah, UAE, in relatively small quantities, and when a suitable quantity of around 3,000 tons is amassed the material is then loaded for receivers in Haldia, India, or Ulsan, South Korea.

UAE Prices

Group I, CIF/CFR UAE ports
SN150: $955/t-$980/t
SN500: $985/t-$1,045/t
Bright stock: $1,325/t-$1,355/t

Group II base oils imported into the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore are resold ex tank in the UAE or on a truck-delivered basis throughout the UAE and parts of Oman. Deliveries are made by distributors who purchase the base oils directly from Luberef but also from U.S. and European traders.

Group II, FCA or on an RTW basis in the UAE and Oman
110N, 150N and 220N: $1,425/t-$1,475/t
600N: $1,510/t-$1,555/t

Middle East Gulf Group III base oils sourced from Al Ruwais and Sitra are delivered into Sharjah, UAE. These base oils are then offered for resale through an appointed distributor rather than on a direct basis from Bapco or Adnoc.

Group III, FCA Hamriyah or RTW in the UAE and Oman
4 centiStoke: $1,365/t
6 cSt: $1,375/t
8 cSt: $1,395/t

Group I cargoes are purchased from traders based in the U.S. and Europe, some of whom have representation in the UAE.

The highs of the Group II ranges refer to RTW deliveries to buyers in the UAE and northern Oman. Sales are in U.S. dollars or UAE dirhams, the latter being pegged to the dollar at AED 3.67.

Group III prices include a reseller margin of around $75/t to cover storage, handling and operating margin. RTW deliveries incur a charge of $20/t-$55/t.

Group III cargoes loading from Al Ruwais, UAE, and Sitra, Bahrain, are moving to the U.S., Europe, India and China. Receivers in Thailand have also taken a cargo from Al Ruwais.

Group III netbacks from Al Ruwais and Sitra are reckoned to be very similar since the plants are designed with same design technology. Netbacks from both are maintained between $1,270/t-$1,300/t for 4, 6 and 8 cSt Group III grades. These netback levels may indicate FOB prices from producers to distributors.

Netbacks for Shell gas-to-liquids Group III+ base oils loading ex Ras Laffan, Qatar, are re-assessed to be at $1,195/t-$1,240/t. These numbers are given as indications only, since with no distributors are involved in this trade, and Shell does not disclose information regarding the cargoes.

Netbacks are calculated using distributor selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Africa

Another cargo of 6,000 tons will be delivered into storage in Alexandria. The cargo of bright stock was loaded out of Yanbu, to supply contracted volumes in Egypt under the EGPC tender.

The large base oil cargo for Durban is heard to have loaded from Rotterdam and Fawley, U.K. The parcel will comprise of around 18,000-19,000 tons of base oils in total.

Nigeria is home to the newly operational, world-class Dangote Refinery, a massive 650,000 barrels-per-day facility. From initial enquiries, this refinery will eventually produce premium base oils, assumed to be Group II and Group III, although the actual grades and quantities are yet unknown.

Some comments have suggested that the refinery should start by producing Group I base oils, but technological innovation has decreed that it is time to move forward and embrace higher specification base stocks that can be used across Nigeria and in other West African locations.

There are also plans to build 500,000-bbl/day refinery in Ondo state, a $15 billion project that would also include a base oil plant.

Since the closure years ago of Nigerian National Petroleum Co.’s refinery in Kaduna, Nigeria has imported all of its base oil, along with other petroleum products such as mogas, jet fuel and diesel. The new refineries are part of Nigeria’s strategy to achieve energy self-sufficiency and become a major regional exporter of refined petroleum products. Government is also working to rebuild the Kaduna refinery and to restore a pipeline to it.

Base oil prices continue to be discounted in order to move material out of tank. Nigerian buyers are raising hopes and are expecting to purchase cargoes from sources in the U.S. through traders based in Switzerland. This may happen in the next month or so, but the sides are still significantly apart on price. Levels being requested are $900/t-$920/t for SN500 and $1,000/t-$1,025/t for SN900, on a CFR basis Apapa port in Lagos.

Other receivers are approaching Russian traders to negotiate cargoes from the Baltic or from the Black Sea via transhipments through Egypt or Turkey.

The Nigerian naira’s black market exchange rate is NGN 1,540 to the dollar, as of Aug. 25.

Nigeria Group I prices, CFR Apapa

U.S. quality base oils
SN150: $890/t-$910/t
SN500: $920/t-$940/t
SN900: $1,040/t-$1070/t

Russian base oils
SN150: $885/t
SN500: $929/t
SN900: $995/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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