Weekly EMEA Base Oil Price Report

As far as this report can ascertain, the only possible sources for suspected products coming into the EU would be India and Turkey, where Russian crudes are currently being used in the production of petroleum products. There are no known imports of Indian base oils moving to EU, and while one refinery in Turkey produces base oils, Tupras at Izmir, it has been confirmed that this refinery ceased using Russian crudes some time back and now refines Arab Light crude from Saudi Arabia as an alternative. Likewise there have been no reports of Group I from Turkey entering the EU or U.K.

The products mostly affected by this sanctioned ban will be diesel and jet fuel, which are routinely exported from Reliance in India and from Socar and Tupras in Turkey. Tupras makes fuels at its refinery in Izmit, in addition to Izmir.

One exception to the above is the Mol refinery in Szazhalombatta, Hungary, which has permission to continue processing Russian Urals crude. The refinery, being landlocked, has no alternative source for crude other than the Druzhba pipeline.

Mol produces Group I base oils at this installation and sells them throughout Eastern Europe. Refiners in Slovakia also continue to use Russian crude but do not produce base oils.

It is not clear whether the EU or U.K. sanctions apply to finished lubricants made from base oils refined from Russian crude, some of which may have entered the supply chains coming into Europe. Will these lubricants be judged equivalent to fuels stemming from Russian crudes, and how will such a situation be controlled and policed?

On contacting EU sources in Brussels and U.K. government departments in London, no satisfactory answers to this question were available. The reaction was one of confusion and lack of understanding of the situation and the potential breach of sanctions. There is also vague awareness and a lack of understanding in official channels as to when this sanction will come into place. The EU appears ready to implement sooner rather than later, but the U.K. has given no guidelines as to dates, controls and penalties.

This report will continue to press for clarification on the various matters.

Around Europe, the Middle East and Africa, base oil prices are steady to stable with few sellers breaking the mold by offering low numbers just to move material out of storage. If anything, the markets for Group I and Group II are mainly balanced with occasional imports of both base oils arriving from U.S. and Red Sea sources.

Group III remains relatively tight in availability terms, but enough product is available to cover most requirements. Buyers are always on the lookout for any available quantities of 4 centiStoke grades, but suppliers have mostly allocated available products to regular or contracted buyers.

In the Middle East Gulf and some African locations, demand for Group III is increasing as blenders shift more to finished lubricant formulations requiring premium base oils.

The EU is scheduled on Jan. 28 to remove an import a 3.7% import duty on Group II base oils from nations without free trade agreements, but new clouds are appearing on the horizon in the form of new 10% tariffs that U.S. President Donald Trump has threatened to impose Feb 1 if EU member states oppose Trump’s effort to annex Greenland. Trump has said those rates will rise.

These tariffs would be imposed on all exports from nominated countries, which would include the major economies in Europe, and the danger is that counter tariffs could be put in place from the European side, which would presumably affect Group II importss and possibly Group III when U.S. capacity for that category increases in the future. If these tariffs were to come into being, a significant part of the European base oil supply chain could be altered, in addition to the devastating economic effects which would be inflicted on European trade.

Crude and Gas Oil Prices

Geopolitical events continue to weigh heavily on petroleum prices, with crude showing a modicum of strength in early week trading. Dated deliveries of Brent crude climbed to $64 per barrel, the highest level reported since last October. Gas oil prices jumped some $25 per metric ton, bucking the normal trend to head in the opposite direction because of falling diesel prices.

Dated deliveries of Brent: $64/bbl, March front month

West Texas Intermediate: $59.30/bbl, March front month
European low-sulfur gas oil: $652/t, January front month

Source: London ICE trading late Jan. 19

Europe

Base oil business has picked up over the past 10 days with contacts around Europe looking to buy quantities of Group I for formulations using that grade. Some sources have confirmed that they will continue using Group I for as long as possible, but they foresee a time when rising finished lube standards will force them to add or switch to Group II.

The adverse weather of a couple of weeks ago has subsided, allowing movement of trucks and barges, albeit with limited loading due to low water levels in the major waterways around Europe. However, there is a sting in the tail, since with snow now melting, canal water levels are rising fast, and there are reports of high water levels that may restrict barge movements due to lack of air draft under bridges. From one extreme to the other in a matter of two to three weeks.

Group I prices remain steady on reasonable demand. There are no crazy offers from sellers and no apparent upward or downward pressure on values. Feestock cost have risen a little.

Bright stock supply remains tight, but prices have levelled out and are described as steady. Bright stock still has a large premium over solvent neutral prices.

Group I

Exports, FOB (levels that would be necessary)
SN150: $625/t-$660/t
SN500: $695/t-$720/t
Bright stock 150: $1,100/t-$1,125/t

Northwestern Europe, FCA, Antwerp-Rotterdam-Amsterdam
SN150: $775/t-$800/t
SN500: $855/t-$890/t
Bright stock 150: $1,225/t-$1,255/t

Eastern Europe, FCA
SN150: €764/t
SN500: €820/t
Bright stock: €1,126/t

Mediterranean, FCA (from one Spanish source)
SN150: $815/t
SN600: $925/t
Bright stock: $1,310/t

Pan-European, FOB/FCA
SN150: €620/t-€665/t
SN500/600: €695/t-€740/t
Bright stock 150: €1,050/t-€1,075/t

Pan-European prices are assessed on an aggregate basis from prices obtained from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the United Kingdom, and Baltic States.

The euro exchange rate with the U.S. dollar was $1.16464 on Monday.

European Group II base oil prices have settled around the levels set prior to the year-end holidays. The levels became accepted by buyers following a lowering of prices from a major supplier. Levels are being held at around $1,025/t for 150 neutral and $1,200/t for 600N.

The EU duty element of 3.7% for imports from countries without free trade agreements with the bloc will be removed Jan. 28, but as mentioned above, Mr. Trump is threatening new tariffs should he not get his own way with Greenland. Seven nations, including the U.K., are opposing his actions and stand to incur tariffs of 10% on exports of all goods to the U.S.

Some of these countries are suggesting reciprocal action by imposing counter tariffs on American imports arriving into Europe. This action could impinge on imports of Group II and Group III base oils, should this process take effect.

New Group II production will be forthcoming from PK Orlen at Gdansk refinery with a timetable yet to be formally announced. The nameplate production will be 400,000 tons per annum, but it is thought that initial output will be lower than that figure.

Demand is good as the market moves towards the end of January, with February expected to be equally buoyant as buyers replenish stocks ahead of the spring automotive oil change season. Industrial activity may start to build, but much depends on the Greenland situation and Mr. Trump.

Group II prices are unchanged this week.

Group II, FCA basis
110N: €800/t-€820/t
150N: €810- €825/t
220N: €835/t-€845/t
600N: €965/t-€1,020/t

Prices refer to a wide range of Group II base oils that may be sourced from within Europe, the U.S., the Red Sea and Asia-Pacific. Ranges refer to bulk shipments.

Group III base oils show excellent demand, particularly for the 4 cSt grade. New cargoes continue to arrive from the Middle East Gulf and Asia-Pacific, and in-tank stocks are being made available to regular customers.

The cargo of Group III grades that was supposed to have loaded from Indonesia coming into Antwerp-Rotterdam-Amsterdam has not been confirmed, with shipping reports not showing any vessels making this voyage. Further efforts to identify the cargo will be made this week.

European Group III prices are unchanged this week, but there are indications of upward pressure. Buyers may be on the back foot because of supplies being relatively tight.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €1,165/t-€1,190/t
6 cSt: €1,135/t/t-€1,155/t
8 cSt: €1,125/t-€1,145/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 cSt: €1,610/t-€1,625/t
6 cSt: €1,595/t-€1,620/t
8 cSt: €1,585/t-€1,610/t

All the above products sold on a delivered basis are subject to transportation charges, added to the prices above.

Rerefined, FCA Germany
4 cSt:  €990/t
5 cSt : €990/t
6 cSt: €1,050/t

Baltic Sea

No Information or confirmation has been received regarding previously mentioned information of a cargo loading out of St. Petersburg. It must be assumed that this rumor was false, although why and to what end this was invented remains unknown.

Available supplies of Russian base oils appear be only directed towards the domestic market, following significant damage to production and storage facilities at a number of refineries and terminals around Russia. This seems especially likely given assumptions that base oil prices in Russia have risen. Notional prices for base oil exports are unchanged.

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

Black Sea & Turkey

Reports confirm that no Russian base oil cargoes have been delivered into Turkey. Traders involved with Russian base oils in the past have no availabilities to offer.

Prices within Turkey for Tupras base oils have been altered a little, with values for solvent neutral grades increasing while those for spindle oil and bright stock remain as previous.

Group I

Tupras, ex rack Izmir refinery
Spindle oil: Tl 32,090.00/t plus VAT Tl 8,315.44/t
SN150: Tl 278,620.00/t plus VAT Tl 7,621.44/t
SN500: Tl 35,299.00/t plus VAT Tl 8957.24/t
Bright stock: Tl 51,258.00/t plus VAT Tl 12,149.04/t

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

Group II, ex-works through Turkish traders
110N and 220N: no current availabilities
350N: no offers
150N, ex Taiwan or Saudi Arabia: $955/t
500N/600N, ex Taiwan or Saudi Arabia: $1,155/t

Group III

Partly approved
Tatneft 4 cSt, FCA: €933/t (last heard; not available)

Fully approved from Spain, CIF Gemlik: €1,655/t-€1,680/t.

Middle East

Following the maintenance turnaround discussed last week, cargoes of Group I and Group II base oils have been loaded at Luberef’s refinery in Yanbu, Saudi Arabia, for receivers in Mumbai and the United Arab Emirates. Group I solvent neutral grades, SN150 and SN500 have also been loaded out of Jeddah, Saudi Arabia, for buyers in India, Jordan, and Port Sudan, Sudan.

Other Group II cargoes are being arranged for receivers in Durban, South Africa, and 3,000 tons of bright stock will load, or may have already loaded during January, for Alexandria under the EGPC contract.

Most of the Group I and Group II base oil cargoes have now arrived in the UAE from the U.S., South Korea, Thailand and Indonesia, discharging in Fujairah, Hamriyah and Jebel Ali. There may be more cargoes still to arrive, but availabilities along the U.S. Gulf of Mexico coast have tightened after large parcels were assembled for Nigerian buyers.

Iranian Group I base oil news is not available amidst the current protests and government crackdown. Refineries have been targeted by protesters, but the outcome of this action is unknown.

No Russian cargoes have been reported arriving into the UAE and no vessels seen sailing from Limas terminal in Turkey or from the Baltic. Turkish reports are that Limas terminal has been closed, which would make sense if no base oils are being exported from Russian refineries.

Prices for base oils imported base oil prices into UAE are taken slightly lower based on reports from two independent sources.

Group I, CIF/CFR UAE ports
SN150: $860/t-$885/t
SN500: $910/t-$925/t
Bright stock 150: $1,195/t-$1,220/t

Group I cargoes are being sold by traders based in the U.S. and through traders based in Geneva, Switzerland, and directly from producers in Rayong, Thailand.

UAE prices for Group II oils are unchanged.

Group II, FCA or RTW UAE and Oman
110N, 150N and 220N: $1,255/t-$1,300/t
600N: $1,365/t-$1,395/t

Group II base oils are being imported into U.A.E. and other Middle East Gulf ports in Qatr and Bahrain from a number of sources, such as the Red Sea, the U.S., South Korea and Singapore, and are being resold on an FCA basis in the UAE or RTS on a truck-delivered basis. The high ends of the ranges refer to material being delivered by RTW in UAE and into Oman, north of Khorfakkan and Fujairah.

Prices for imported Group III are unchanged following small increases reported last week.

Group III, FCA Hamriyah/Sharjah or RTW in UAE and Oman
4 cSt: $1,240/t
6 cSt: $1,250/t
8 cSt: $1,265/t

Middle East Gulf Group III base oils produced in Al Ruwais, UAE, and Sitra, Bahrain, are delivered in relatively small parcels of 3,000 tons-4,000 tons by sea into Hamriyah and Jebel Ali, UAE. The ranges of Group III prices above include a reseller margin of around $95/t to cover storage, handling, insurance and a margin. RTW deliveries from distributors can incur a further charge of between $20/t-$55/t, depending on delivery location and quantity.

Netbacks for Group III base oils exported from Sitra and Al Ruwais for distributor sales in Europe, the U.S., India and China are unchanged at $1,065/t-$1,085/t for 4, 6 and 8 cSt grades. Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are unchanged at $1,110/t-$1,135/t. The latter levels are given as indications only since no distributors are involved in these cargoes as the product is mainly retained by Shell affiliates for in-house blending.

Large cargoes of around 20,000 tons-25,000 tons continue to load out of Ras Laffan for receivers in the U.S., Europe and Singapore. The receivers are Shell affiliates.

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

Africa

A Spanish seller continues to offer relatively high indication prices for three Group I grades, but the exact quantities of each grades is unknown. The offeror reputedly has little or no SN600, so why a prices is being indicated remains a mystery.

The initial thought was that the potential cargo could have been sold to buyers in Morocco, but this does not appear to be happening. The prices were perhaps for buyers in Morocco to open negotiations to purchase a cargo that may be required for Mohammedia. An alternative supply point for such a cargo may be out of Augusta in Sicily.

The large base oil cargo previously mentioned as loaded out of Rotterdam and ,Fawley, U.K., for Durban, South Africa, remains on the high seas. The cargo is around 19,000 tons of all types of base oil.

A cargo from the Red Sea will be delivered to receivers in Dar-es-Salaam, Tanzania. The size of the cargo is not known as yet but will be considered to be around 8,000 tons-10,000 tons of SN150, SN500 and bright stock.

A European major will load around 10,000 tons out of Fawley for the common West African run to Conakry, Guinea; Abidjan, Cote d’Ivoire; and Tema, Ghana.

In Nigeria the base oil market is moving quickly at a busy time of the year, when blenders across the country take large and smalll quantities of base oils delivered by truck. Receivers and buyers do not appear overly concerned about their ability to procure additional supplies, and given the difficulty finding FOB prices that meet buyers’ buying ideas, the prospect for further cargoes going ahead seems remote.

Some traders have been bidding FOB numbers to potential suppliers in the U.S., and also in Europe, but so far reports are that suppliers are not rushing to offer at the levels proposed. The numbers are based on what would be necessary to achieve the bid prices from Nigeria.

Prices being proposed by buyers reflect the last Russian cargo to arrive in Lagos, some months ago, against which levels for any new business are expected to be met. Traders are commenting that it will be impossible to offer at the levels requested, on the basis that that Group I FOB prices remain where they are today. With no signs that markets are weakening to the extent required, it may be a long period without any cargoes arriving in Apapa.

Bid levels are at:
SN150 : $840/t
SN500 : $900/t
SN900 : $1,060/t-$1,080/t

One trader who has delivered a 10,000-ton parcel has been canvassing the market with low prices without having the back up of a physical cargo.

There could be an impending potential shortage of SN900, which has a noticeable price differential over SN500, and at the higher prices, some receivers and a number of buyers and blenders are unwilling to purchase at those levels.

Bid numbers from buyers are heard at exceptionally low levels of $825/t for SN150, $900/t for SN500 and $1,030/t for SN900, on the basis CFR Apapa.

The black market exchange rate for the Nigerian naira was NGN 1,420 to the dollar as of Monday.

Group I, CFR Apapa

Russian origin (dated but cited in negotiations)
SN150: $825/t
SN500: $895/t
SN900: $985/t

U.S. origin
SN150: $840/t
SN500: $900/t
SN900: $1,060/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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