Although enterprising businesses have coped with restricted access and supply chain interruptions, the peace initiative will reopening of traditional routes into markets in the Eastern Mediterranean regions.

The plans for the reconstruction of Gaza are yet to be hammered out, but massive investment is expected to be made in and around the region by corporations and governments, who will look at the longer term prospects for the area and plan accordingly.

Previous contacts are being resurrected, and communications are improving by the day. Suppliers of base oils will be looking to start moving quantities of material as soon as possible into areas that were part of a war zone for the past 24 months. Israeli ports will open fully once again, accepting large quantities of necessary materials, including base oils for lubricant blending operations which have experienced great difficulty obtaining raw materials.

The main question in the minds of base oil traders and shippers is how the accord will be received by Houthi rebels in Yemen. Will they support the peace initiative and cease attacking merchant shipping in the Red Sea? The latest news is that the group issued a stern warning of “severe and decisive” retaliation if Israel violates the new ceasefire, vowing to target Israeli sites “deep inside the occupied territories” as well as Israel-linked shipping in the Red Sea.

However, a senior Houthi official advised Monday that all attacks would cease if Israel abides by the agreement.

The comment came as Trump visited the region, declaring “the war is over” and expressing optimism that the ceasefire will hold. If so, it will set the stage for Gaza’s reconstruction and regional normalization.

Otherwise, base oil markets in Europe, the Middle East and Africa are experiencing varying levels of activity, with some locations receiving large quantities. For example, in the Middle East Gulf regions all types of base oil are being imported from Asia-Pacific, the U.S. and occasionally Europe.

The European Group I market is showing revived interest in export sales since markets within the region are dull and show few signs of any recovering anytime soon. Europe’s major economies are not in good shape. In Germany, a set of dire statistics suggests that total manufacturing has slumped by some 27%, with vehicle production taking a massive hit. This would badly affect base oil demand for finished lubricant factory fills.

France is in the midst of political turmoil that may result in union backed strikes affecting refineries and distribution, and the U.K. remains close to recession with critical budgetary events on the horizon.

While European markets, including the Mediterranean countries, stall, economies are growing in Middle Eastern and African regions, spurring healthy demand for all types of base oils. West  Africa has shrugged off the effects of the rainy season, and a number of Group I cargoes are arriving or soon will in Guinea, Cote d’Ivoire, Ghana and Nigeria. The region is positively buzzing with vigor.

Southern and East Africa report buoyant base oil requirements, with cargoes moving from the Far East, Europe and the U.S. with a range of base oils to meet increasing demand. It is spring in the Southern Hemisphere, and this is promoting manufacturing and agricultural activity.

The Middle East region has been covered above, but sources in the United Arab Emirates reported a number of base oil cargoes arriving from the Red Sea, the U.S. and Asia-Pacific, contributing to a strong demand cycle for the beginning of the fourth quarter.

Crude and Gas Oil Prices

Crude prices are softer, having fallen by a couple dollars during the past few days to a new recent low. Forecasts call for further decreases as there are no signs of demand rebounds in demand from major consuming economies.

Russia continues selling crude into Chinese and Indian markets, providing revenue to help fund the war in Ukraine. There have been reports of increasing Ukrainian strikes on Russian refineries, which have affected base oil production from a number of locations.

Dated deliveries of Brent crude: $63.45 per barrel, December front month
West Texas Intermediate: $59.70/bbl, November front month
European low-sulfur gas oil: $661 per metric ton, November front month.
Source: London ICE late, Oct. 13

Europe

Prices for Group I sales within Europe continue to come under pressure. Stocks are building in refineries due to weak demand, and producers are increasingly looking at export markets to ease inventory levels. With a chance that the Suez and Red Sea transit route could return as an option for shipping, this could open the arbitrage from Europe to the Middle East Gulf and India.

European Group I base oil prices are facing downward pressure across all the grades. Bright stock remains relatively scarce and in demand and is maintaining a large premium over light and heavy solvent neutrals. But bright stock has “mellowed” a little in price terms, and buyers able to obtain discounts from the high levels seen during August and September.

Export sales are back in vogue, with Motor Oil Hellas in Greece sending a cargo of 5,000 tons of solvent neutral 500 to receivers on the West Coast of India. Another 5,000 tons still remains available for another export cargo. A stable destination is hard to predict, since it more difficult to place a single Group I grade.

Possible destinations include Turkey, the United Kingdom and North Africa. Were there to be a quantity of bright stock available, the 5,000 tons of SN500 could be considered for Nigeria, but without a higher vis blend stock available in the Mediterranean to produce SN900, this would be a difficult sell.

Sellers appear to have dropped their principles against looking at export markets, where FOB price levels have to be considerably discounted from intra-regional levels, and the market may see more availabilities appearing to clear ever increasing stocks in storage.

European FCA levels are adjusted lower.

Group I prices

Exports, FOB basis
SN150: $700/t-$725/t
SN500 : $745/t-$770/t
Bright stock 150: $1,175/t-$1,200/t

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150 : $825/t-$875/t
SN500 : $910/t-$980/t
Bright stock 150: $1,180/t-$1,285/t (depending on location)

Eastern Europe,  FCA, subject to local discounting
SN150: €934/t
SN500:  €1,008/t
Bright stock 150: €1,298/t

Pan-European, FOB/FCA basis
SN150: €700/t-€730/t
SN500/600: €775/t-€800/t
Bright stock 150: €1,120/t-€1,155/t

Pan-European prices are assessed on an aggregate basis from levels in Poland, Hungary, France, Germany, Benelux, Iberia, Italy, Greece and the U.K.

The euro’s exchange rate with the U.S. dollar has dropped the past few weeks and was $1.157 Monday.

European Group II prices are also on the wane. The differential between these grades and Group I prices has been growing, so it may only have been a question of time before buyers brought pressure to bear on sellers. European prices however, still remain higher than other regions such as the Far East and the U.S.

Sellers have started to offer lower numbers in response to buyers looking to purchase larger quantities of Group II. Buyers are still cautious about building inventory, however, since availabilities are excellent and buyers are able to purchase quantities on a regular basis rather than increase stocks at a time when demand for finished lubricants is not a ta peak. The market is now in the fourth quarter, when base oil trading tends to slow.

Reports from Brussels indicate that the European Union will cancel import duties on all Group II base oils sourced from countries that do not hold free trade agreements with the EU. A date for the transition has not been announced, but is is heard that the change will officially take place from Jan. 1.

This should lead to more Group II imports from U.S. being targeted at Europe, where the Group II market is predicted to grow, even against a backdrop of poor economic conditions.

Group II prices are taken lower, although the main protagonists on the supply side have not announced reductions.

Group II prices, FCA basis
110N/150N: €890/t-€925/t
220N: €930/t-€955/t
600N: €1,065/t-€1,095/t

Prices refer to a wide range of Group II base oils which can be sourced from within Europe, the U.S., the Red Sea and Asia-Pacific. Ranges refer to bulk shipments. Smaller quantities can be imported in flexi-tanks.

Group III demand in Europe remains strong, but this may be as a result of limited availabilities of 4 centiStoke grades. There are reported shortfalls in availabilities from a number of distributors. This may be down to shipping delays or problems from some of the producers. Four cSt is in demand from blenders around Europe, and 6 cSt also popular with European blenders.

One distributor has reported an increase in the number of inquiries for spot purchases but is unable to cover these requests due to tight availability of stocks. This may indicate temporary supply disruptions, although the producer in Malaysia has no problems with production as was checked out during last week.

One supplier in the Middle East Gulf may be experiencing delays in loading as comments were received that suitable vessels to load cargoes were being held up by traffic at one major United Arab Emirates hub. Ships are being held back due to preference for general cargo rather than tankers discharging, causing a shortage in available vessels tooled back out of Middle East Gulf ports.

Group III cargoes from a supplier in South Korea are still experiencing shipping delays as described previously.

European Group III prices are unchanged for regular customers and previously contracted sales. Cargoes now en route may see higher numbers being offered, due to steady demand and tight availability. However, if Houthis stop attacking ships in the Red Sea, the route through Suez could reopen for Group III shipments to Europe from Asia-Pacific and the Middle East Gulf. This would be to everyone’s benefit.

Group III

With partial slates of approvals, FCA Antwerp-Rotterdam-Amsterdam and Northwestern Europe
4 and 6 cSt: €1,070/t-€1,100/t
8 cSt: €1,125/t-€1,145/t

Fully-approved, FCA from hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain
4 and 6 cSt: €1,675/t-€1,715/t
8 cSt: €1,725/t/t-€1,740/t

Where product is sold on a delivered basis, a charge covering transport costs will be added to the above prices.

Rerefined Group III, basis FCA Germany
4 and 6 cSt: $1,025/t-$1,065/t

Baltic Sea

Bulk cargoes of Group I base oil are appearing in vessel reports, with material loaded from Northwestern Europe discharging in Riga and Liepaja, Latvia. Group II and Group III supplies are mainly being brought into the Baltic by road from Antwerp-Rotterdam-Amsterdam and German storage facilities. Buyers in the Baltic States are contacting traders, resellers and producers to access quantities of premium base oils that are now being used to blend finished lubes – a move away from a previous reliance on Group I grades.

Russian base oils are still available in the Baltic regions, coming in by road from Russia and Belarus. This traffic is in breach of EU sanctions, and deliveries are mostly conducted under the cover of darkness, avoiding main roads by using minor forest roads and tracks.

Cargoes of Lukoil barrels from the company’s Perm refinery continue to load from St. Petersburg, but the frequency is less than in past years. Cargoes from the Baltic can go into Turkey, with vessels calling at Gebze to discharge SN150 and SN500, but frequency has decreased.

There have been a number of reported drone strikes on Russian refineries by Ukraine, and some of these refineries produce base oils. An attack at Rosneft’s refinery in Novokuybyshevsk caused a fire that left Rosneft short of Group I grades and caused damage to a lube blending facility. Rosneft have been moving material from Angarsk refinery to replace barrels required for the domestic markets. There has been a temporary halt to Rosneft base oils going into Turkey.

Baltic prices in respect of Russian export cargoes of Group I base oils cannot be established from local sources. Cargoes that discharge in Turkey or Nigeria will provide notional CIF/CFR prices that can be released by buyers or shipping agents. Adding freight rates indicated from brokers, approximate FOB prices can be established.

Notional prices for Russian exports, FOB St. Petersburg/Vyborg
SN150: $625/t-$655/t
SN500: $660/t-$685/t

Black Sea & Turkey

There appear to be less Russian cargoes arriving into Turkey at the moment, perhaps because of disruptions from Ukrainian attacks. Rosneft paused base oil shipments to Turkey. Bashneft, a majority-owned subsidiary of Rosneft, seems to be still delivering, but its refinery in Ufa was attacked by a drone Saturday. (See article in this week’s Lube Report Global.) Lukoil has not had any recent cargoes moving into Gebze, so apparently Russia’s domestic market takes precedence over selling into foreign markets.

Last week there was a news bulletin that Ukrainian blenders were shying away from Russian base oils and finished lubricants, and that one of the largest suppliers was a well known Turkish trader/blender who had supplied around 9,000 tons of finished lubricants to Ukraine.

Because of the amount of Russian base oils that have been exported to Turkey, these lubes may have been blended using Russian base oils and Russian additives, although the trader/blender also imports base oils from Taiwan and Saudi Arabia.

Turkish buyers are considering purchasing a quantity of SN500 from Greek suppliers, but the price will have to meet their low-cost expectations, which may not be easy.

CIF/CFR prices in Turkey for Rosneft base oils were last heard at $590/t for SN150 and $655/t for SN500. Western economics would put these levels below feedstock cost. Barrel economics in Russia remain a total mystery. Lukoil prices from the Baltic were around $100/t-$150/t higher, due to higher freight rates from the Baltic.

Turkish base oil prices remain unchanged, though no new Rosneft cargoes have arrived recently. Prices shown below may be for previously delivered stocks.

Group I

Lukoil, CIF/CFR Gebze
SN150: around $835/t
SN500: around $850/t

Rosneft and Bashneft CIF/CFR Gebze
SN150: $590/t

SN500: $655/t

Tupras has raised its domestic price for SN500 produced at its refinery in Izmir, but cut values for all other grades.

Tupras, ex rack Izmir refinery
Spindle oil: Tl 34,622.00/t plus VAT Tl 8,821.84/t
SN150: Tl 28,185.00/t plus VAT Tl 7,534.44/t
SN500: Tl 34,220.00/t plus VAT Tl 8,741.44/t
Bright stock: Tl 51,681.00/t plus VAT Tl 12,233.64/t

Sales incur a standard loading charge of Tl 9,487.20/t.

Group II, ex-works

110N and 220N, Russian origin: $975/t
350N, blended or from alternative source: $1,135/t
150N, from Taiwan or Saudi Arabia: $1,020/t
500N/600N, from Taiwan or Saudi Arabia: $1,240/t

Group III

Partly-approved, FCA
4 cSt from Tatneft: €842/t

Fully-approved Group III from Spain, CIF Gemlik
€1,825/t/t-€1,855/t.

Middle East

With the news of a ceasefire and peace in Gaza, many suppliers will be gearing up to deliver base oils into traditional ports in the Eastern Mediterranean and Israel. Base oils will be sourced from Spain, Greece and Egypt with a resurgence of finished lubricants being sent into Gaza. The quantities may be small to start but may eventually get back to the significant quantities that were previously delivered into the strip.

With the cessation of hostilities in Gaza, presumably the Houthis will stop attacking ships in the Bab-al-Mandeb Strait in the Red Sea and in the Gulf of Aden, allowing all sea-going traffic to transit safely from Indian Ocean to Suez. Until now, ships moving under the flags of Iran, Pakistan, China, India and Russia are permitted safe passage. Control and decisions over which vessels are selected for attack remains with the Islamic Revolutionary Guard Corps in Tehran.

The recent strike that set fire to a Netherlands-flagged vessel has resulted in the death of one crew member and the ship being abandoned.

As Luberef proceeds to start a turnaround at its refinery in Yanbu, Saudi Arabia, it will be interesting to see the effect on cargoes loading out of Yanbu and Jeddah. The refinery will have buffered stocks to cover contracted sales to the West Coast of India and the UAE. It is understood that the turnaround is scheduled for around four weeks. A 3,000-ton parcel of bright stock is loading now out of Yanbu for EGPC in Alexandria.

A number of cargoes of Group I and II base oils are on the high seas for receivers in the UAE from sources in the U.S. Vessels carrying the cargoes will call at Fujairah, Hamriyah, and Jebel Ali. European traders are now looking to load from Europe, since there appears to have been a change of heart about exporting by some European suppliers.

U.S.-sourced cargoes remain the preferred option, though, for Group I and II moving into the UAE and India. European cargoes would still have to route around South Africa, at least until the Houthis provide clearer communication about their intentions.

There are reported delays to vessels awaiting berthing at Hamriyah port in Sharjah, with general cargo being given preference over oil cargoes. This is causing demurrage and detention costs at the anchorage. Vessels are also being delayed and are missing key dates for loading more cargoes out of the Middle East Gulf.

Base oil demand is running high in the UAE, with traders looking to load Group I and Group II. Cargoes can be negotiated directly between receivers and producers when sourcing from South Korea and Singapore. U.S.-sourced cargoes tend to be arranged via traders based in the U.S., Europe and the Middle East.

UAE sources have told this report that Iranian sellers have not been active in the export market for the past few months. More information is being sought to find where Iranian base oils are moving, with some stating that large quantities are moving into Pakistan, Iraq and Syria.

Meanwhile, traders in the UAE and India are importing Group II and III base oils into Iran.

There are reports of a large parcel of rubber process oil loading out of Ras al Khaimah, UAE, for receivers in India. The quantity is reported at around 5,000 tons, which is larger than normal. This material is gathered in small lots from Iran and stored in the UAE until a larger quantity can be shipped.

Group I, CIF/CFR UAE ports
SN150: $885/t-$920/t
SN500: $940/t-$965/t
Bright stock: $1,220/t-$1,245/t

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

Group II, FCA or on an RTW basis UAE and Oman
110N, 150N and 220N: $1,375/t-$1,410/t
600N: $1,455/t-$1,500/t

The high ends of the ranges refer to material being delivered by RTW around U.A.E. and into northern Oman.

Group II base oils are imported into U.A.E. from many sources in the Red Sea, the U.S., South Korea, Europe and Singapore. Deliveries are made by distributors who purchase base oils directly from Luberef in Saudi Arabia and from U.S. and European majors and traders.

Group III, FCA Hamriyah or RTW delivery in UAE and Oman
4 cSt: $1,275/t
6 cSt: $1,285/t
8 cSt: $1,310/t

The ranges of Group III prices above include a reseller margin of around $75/t to cover storage, handling and margin. RTW deliveries from the distributor incur an additional charge of $20/t-$55/t, depending on delivery location.

Middle East Gulf Group III base oils are sourced from Al Ruwais, UAE, and Sitra, Bahrain, and are delivered by sea into Hamriyah and Jebel Ali in U.A.E.. These base oils are offered for resale through appointed distributors.

Group III base stocks from Bahrain, the UAE and Qatar are also shipped to markets around the world. Netbacks for those ex Sitra and Al Ruwais are assessed between $1,030/t-$1,055/t for 4, 6 and 8 cSt grades. Netback levels may indicate FOB prices. Netbacks could increase if vessels return to sailing through the Red Sea, thus saving on freight and contributing to the distributor and producer economics.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are assessed between $1,085/t-$1,100/t. These levels are indications only as the joint venture producer does not release information regarding these cargoes.

Group III netbacks are calculated using selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Africa

A large base oil cargo mentioned previously as being arranged from Rotterdam and Fawley, U.K., is now scheduled to load later this month, and from shipping information it would appear that a vessel has been fixed or may be on subs. Charterers will use the usual owners/operators for this voyage. The cargo will comprise of around 18,500-20,000 tons of various base oils.

A European major will load a cargo of around 10,000 tons of three Group I grades for receivers in Guinea, Cote d’Ivoire and Ghana. Around 5,000 tons will be delivered into Tema, Ghana, under the supply contract. Other receivers in Abidjan, Cote d’Ivoire, and Conakry, Guinea, will accept the balance of the cargo, which will load out of Fawley.

With the rainy season finally over, Nigerian buyers are looking to replenish Group I base oil stocks at extremely low prices. SN900 is becoming scarce, because buyers are hesitant to purchase this grade at going values. When sourced from the U.S. or Europe, bright stock is used in the blending of this grade, making the blended grade too expensive for receivers to resell to blenders in Nigeria.

When SN900 comes in from Russian sources, that grade can be blended with either Russian bright stock or using a high-vis grade such as SN1200. Both of these alternatives are much lower in price but can compromise the quality of the SN900.

Buyers are currently bidding at around $880/t for SN150, $930/t for SN500 and $1,060/t-$1,095/t for SN900, while traders are counter offering at around $1,120/t.

The lower numbers are consistent with Russian base oils, which are unliked by many in the Nigerian market due to financing and quality problems, but the market is still receiving large quantities of Russian origin base oils.

Two cargoes of Russian base oils and a third with around 8,000 tons from U.S. East Coast have arrived into Apapa port in Lagos. The first Russian cargo was small at 3,500 tons and discharged a few weeks ago. The second Russian cargo would normally be around 10,000 tons of three grades, SN150, SN500 and SN900, possibly loaded out of an Egyptian port. The U.S. cargo is being sold by the parent company of a trader who retired from the Nigerian market some years ago.

Prices requested are $900/t-$930/t for SN500 and $1,000/t-$1,025/t for SN900, on the basis of CFR Apapa.

The black market exchange rate for the Nigerian naira was NGN 1,480 to the dollar Monday.

Nigeria Group I prices, CFR Apapa

Russian origin
SN150: $860/t-$875/t
SN500: $885/t-$900/t
SN900: $1,060/t-$1,075/t

U.S. Origin
SN150: $965/t-$980/t
SN500: $1,020/t-$1,040/t
SN900: $1,095/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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