Weekly EMEA Base Oil Price Report

At the writing of this column, targeted attacks continue to be launched against specific Iranian locations, and Iran is retaliating with attacks in numerous Middle East Gulf states, which are deemed to be assisting the U.S. by hosting military bases. Targeted sites include airports and hotels, as well as bases, in the United Arab Emirates, Bahrain, Qatar, Kuwait and Saudi Arabia. The only state not being affected by Iranian retaliation is Oman, where the recent negotiations were interrupted by the outbreak of war.

The conflict is having dire consequences for trade and commerce in the Middle East Gulf region, with many players reeling from the suddenness and severity of events which are ongoing and developing by the minute as this report is being written.

One major situation is happening with the Strait of Hormuz, through which around 20% of global crude, gas and petroleum products flow, and with Iran threatening to block the Strait, many vessels are being advised by owners and operators to avoid making the transit through the channel, with the result that around 150-200 ships are now at anchorage outside and inside the Gulf, awaiting decisions as to when and if to make the transit.

Two tankers have been already been hit off the coast of Oman, although the exact circumstances of these events remains unclear.

The Iranian war will have major effects and impacts on supply chains and trade in and out of the Middle East Gulf regions, with all the problems which will follow this major interruption to not just oil and gas supplies, but also to food and basic requirements for each nation to exist and continue day-to-day activities.

There are repercussions for crude and petroleum product prices, and with news Monday that Qatar closed gas production and supplies, huge effects will be felt across global markets, along with prices escalating to new highs.

The Middle East situation is dynamic and fluid, and is changing constantly, with Middle East Gulf states reacting in various ways to a continuously moving scenario, which no persons or governments could have predicted or foreseen.

OPEC members have pledged to pump more crude oil into markets and will jack up output by 206,000 barrels per day, almost two thirds more than was previously announced. However, dated deliveries of Brent crude prices could continue to rise and have been called at $100 per barrel, but current prices are holding just below $80.

Commercial shipping companies have already started suspending vessel movements, not just through Hormuz, but also across the Middle East. Container giants such as Hapag Lloyd, Maersk and CMA CGM along with Japanese carriers have all suspended Suez transits and will sail around the Cape of Good Hope, but all schedules are being modified and changed to reflect the ongoing situation.

What does the war mean for base oil prices and supplies? First, supplies of base oils moving into Middle East Gulf receivers will be extremely limited, with Group I and Group II cargoes loading from Asia-Pacific, the U.S. and Europe being put on hold until the situation becomes clearer. Cargoes already on the water will have vessels make decisions in the days ahead, with those with divert options putting those plans into action.

Second, supply chains will be interrupted on a major scale, with supplies of Group III base oils that would normally load out of Bahrain, Qatar and the UAE being halted in the short term. There may be containment problems ahead for refineries as storage tanks fill, and refineries might have to curtail production. Vessels to lift cargoes will be missing or unavailable from the shipping market and will be reticent or unable to undertake the Hormuz transit.

Vessels currently positioned within the Middle East Gulf could be chartered to act as storage, allowing some flexibility to producers to continue production of API Group III barrels, but with so many unknown factors currently surrounding trade and product movement, it is early to surmise what will transpire with each and every operation.

Updates will be gathered from as many sources as possible and will be published weekly in this report.

Base oil prices will face upward pressure purely as a reflection of raw material cost increases. Feedstock levels have already moved higher by around $175 per metric ton from last Friday’s levels. There may be delays to price increases, but the usual base oil time lag may not happen in the current situation in Iran, as markets in various global locations could see numbers start to firm later this week.

Crude oil prices had jumped above $80 per barrel for dated deliveries of Brent crude prior to exchanges and formal opening on the markets this week, but levels have gravitated back down to just above $77, but the markets are volatile right now, with events in the Middle East swaying and lurching levels in an unpredictable manner.

Some analysts have predicted that crude prices could reach $100 per barrel, but with OPEC members stepping up production, this swing to a higher level may be avoided. However, vessel movements through Hormuz could be critical in determining the extent of potential crude supplies tightening.

Crude and Gas Oil Prices

Crude prices are moving faster and at a greater rate in reopens to events in the Middle East, and require monitoring on almost an hourly basis at the moment. Low-sulfur gas oil breached $900 per metric ton before retreating a bit.

Dated deliveries of Brent crude: $77.15/bbl, May front month
West Texas Intermediate: $71.60/bbl, April front month
European low-sulfur gas oil: $871/t, March front month

Source: London ICE trading late Monday, March 2

Europe

With events taking place in Middle East Gulf and surrounding regions, it is too early to call prices in Europe higher, but producers will have immediately started to review feedstock costs and the potential for changes in base oil levels.

There was been a mini-rise in demand Monday as a number of buyers were keen to ensure that supplies of Group I grades are available and are able to be procured on a prompt basis. A number of Group I refiners are dependent on crude oil supplies from Middle east sources such as Saudi Arabia, so could ultimately be affected should supply issues be exacerbated over the coming days and weeks. Some may look for alternative sources as options, but it is too early to start formulating game changing plans for altering crude slates.

The Iranian situation may lift European base oil price pressures, or at least delay further erosion on numbers. Higher feedstock prices may cushion any moves to lower prices, so this week will be a period of monitoring markets to judge reactions to events.

Bright stock remains tight, with good demand since there are no viable alternatives to finding a high viscosity base oil to take the place of this grade.

It is too early to start adjusting prices on the basis of expectations, and rather than attempt to read into a situation, this report has decided to maintain prices in line with numbers valid in the market towards the end of last week.

The next few days will decide whether producers will react with higher price levels, which may be expected for other petroleum products.

Group I

European exports, FOB (unlikely in current conditions)
SN150: $625/t-$650/t
SN500: $675/t-$695/t
Bright stock 150: $1,055/t-$1,075/t

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $755/t-$775/t
SN500: $810/t-$840/t
Bright stock 150: $1,225/t-$1,255/t

Eastern Europe, FCA
Supplier A
SN150: $995/t-$1,000/t
SN500: $1,020/t-$1,070/t
Bright stock: $1,475/t

Supplier B
SN150: €680/t
SN500: €770/t
Bright stock: €1,255/t

Mediterranean, FCA Spain
SN150: $815/t
SN600: $925/t
Bright stock: $1,310/t

Pan-European, FOB/FCA
SN150: €600/t-€645/t
SN500/600: €675/t-€710/t
Bright stock 150: €1,020/t-€1,045/t

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

The euro’s exchange rate with the U.S. dollar was $1.17035 Monday.

European Group II base oil prices are maintained last levels confirmed late last week, and are steady with healthy demand. Current levels continue at levels around $1,010/t for 150 neutral and $1,175/t for 600N. Pressure may build with raw material costs increasing, with vacuum gas oil prices moving upwards by some $150/t Monday.

Exports from Asia-Pacific sources coming into Europe will be unaffected by events in the Middle East, but with markets in that region becoming more difficult to supply, Far Eastern sources may be inclined to look at Europe as an alternative market.

Group II, FCA
110N: €825/t-€860/t
150N: €825/t-€865/t
220N: €820/t-€850/t
600N: €890/t-€960/t

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

As explained earlier in the report, Group III base oil cargoes from the Middle East Gulf are now under pressure due to a potential shortage of vessels becoming available to lift cargoes from sources there.

A cargo loaded from Sitra, Bahrain, during January is believed to have arrived in Rotterdam and may be discharging this week. Hopefully the cargo out of Al Ruwais, UAE, will have escaped the Gulf prior to this weekend’s events, but checks will be made with the distributor to establish an arrival date and also further activities for the supplies of Group III base oils from this source. The cargo has hopefully sailed  and will be en route around the Cape arriving into Dordrecht early April.

A cargo already arrived from Al Ruwais some weeks back, but regular shipments will now have to be re-assessed in light of current events.

Two large cargoes of Group III base oils have loaded from Cartagena, Spain, for a reselling hub in Northwestern Europe. Substantial quantities of stocks will now be in storage, with perhaps 40,000-45,000 tons of material being available. This quantity could cause downward pressure on prices.

Availabilities of Nexbase Group III grades from Porvoo, Finland, are in doubt after the distributor announced problems with supplies of these grades. These Group III base oils no longer carry full-approvals  and are sold at discounted price levels.

European Group III prices are unchanged this week.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam and Northwestern Europe
4 cSt: €1,195/t-€1,225/t
6 cSt: €1,185/t-€1,210/t
8 cSt: €1,165/t-€1,190/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 cSt: €1,595/t-€1,620/t
6 cSt: €1,585/t-€1,610/t
8 cSt: €1,565/t-€1,590/t

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

Rerefined Group III, FCA Germany
4 cSt: €1,050/t
5 cSt: €1,035/t
6 cSt: €1,055/t

Baltic Sea

With no exports of Russian base oils leaving the Baltic supply points of St. Petersburg or Vyborg, Russia, there are reports that Russian domestic prices for SN500 have dropped by $35/t equivalent in rubles.

Lukoil and Rosneft are under sanctions, and with no export sales reported in any regions which were identified previously, it has become apparent that all production is being released into the domestic markets. Another publication reported a large Russian base oil cargo had been delivered into Indian receivers, but no records have been found to corroborate.

Notional levels are still reported here for the sake of good order and interest.

Group I, FOB St. Petersburg, Vyborg (notional)
SN150: $595/t-$610/t
SN500: $625/t-$640/t

Black Sea & Turkey

Turkish blenders have purchased Group I base stocks from Sonatrach out of Augusta, Sicily, and from AMOC and APC in Alexandria. Luberef has also been involved in supplying quantities of both Group I and Group II base stocks to receivers in Gebze, Turkey, and now it has been confirmed that a Turkish blender will receive a cargo of Group II grades from Taiwan. This cargo may transit the Bab-al-Mandeb Strait in the Red Sea, avoiding the Houthi threat of renewing attacks on vessels with ties to the U.S., the U.K. or allies against the Iranian regime. Houthis are a proxy operation funded by Iran, with weaponry supplied from that source either by sea or through Oman.

Motor Oil Hellas has also been approached, and the Greeks have offered prices for heavy neutrals, with suggestions that this supply would discharge in Derince.

Prices in Turkey for base oils produced by Tupras at its refinery in Izmir are updated as follows:

Group I, ex rack Izmir
Spindle oil: Tl 32,978.00/t plus, KDV Tl 8,624.90/t
SN150: Tl 29,501.00/t plus, KDV Tl 7,929.50/t
SN500: Tl 35,741.00/t plus, KDV Tl 9,177.50/t
Bright stock: Tl 52,139.00/t, plus KDV Tl 12,457.10/t

Sales also incur the standard loading charge of Tl 10,146.50/t which should be added to the prices above

Group II, ex-works
110N and 220N: awaiting arrival from Taiwan
350N : also awaiting arrival
150N, ex Taiwan or Saudi Arabia: $1,045/t
500N/600N, ex Taiwan or Saudi Arabia: $1,220/t

Group III

Partly approved
Tatneft 4 cSt FCA: €933/t (last known price, currently no availabilities)

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

Middle East

It is difficult to assess what overall effects the conflict in Middle East Gulf will have on deliveries of Group I and Group II to receivers in the Middle East Gulf, but given restrictions on Hormuz, it must for the moment be assumed that no cargoes will load for United Arab Emirates other than for Fujairah, which of course lies outside the Gulf and can be accessed from the Indian Ocean.

Large cargoes will continue to load for Mumbai anchorage, where receivers are looking to take large quantities of both types of base oils during the busy period of spring and early summer prior to the monsoon season, which will probably start in June.

Yanbu and Jeddah are sufficiently distant for Iran to ignore the refineries as targets, although drones have attacked Ras Tanura refinery on the gulf coast of Saudi Arabia and caused a fire without too much damage or loss of life or injury. Smaller cargoes are to be loaded out of Yanbu and Jeddah for receivers in Aqaba, Jordan, Durban, South Africa, and Alexandria.

Talking to sources in the UAE Monday, it became apparent that most players had no concept of what was coming next, but the major issue became the focus of most. A number of contacts expressed real concerns regarding the future of their businesses, with the real possibility of not being able to receive quantities of materials required for blending and packaging finished lubricants. They also expressed concern about possibly finding no means to transport these products out of the Middle East Gulf should a blockade of Hormuz continue or be extended by the Iranian navy. With container vessels not accepting any business in the Middle East Gulf or the broader Middle East, the future looks grim.

According to news reports, U.S. naval forces sank nine Iranian navy ships, but that the strait was still being targeted by Iran, with the latest news coming out late afternoon that Iran agencies were informing vessels by radio that they should not enter the channel, and if any vessels did try to transit then they would be attacked.

Protection and Indemnity clubs were being consulted for advice regarding insurance risks, and owners and operators were informing vessels to adhere to instructions from Iran coastguard and navy. Obviously most of the references were being related to tankers, with some receivers having cargoes swinging on the hook at anchorage, at the mouth of the strait.

There were also fears that Iran would send drones and missiles into industrial sites where blending plants and storage tanks were located, and many workers were present from Saturday through Monday. Office blocks appeared to be treated as legitimate targets for Iranian drones, with sources in Sharjah and Dubai concerned for personnel and staff travelling between home and office.

With Ramadan half over, many companies are quieter than normal, and some staff were taking the opportunity to leave the UAE for vacation, particularly non-Muslims. The problems now are travelling back to the UAE from India and Europe, with most airspace closed to civil aviation. 

Fears and concerns were raised with this report regarding the safety of family members and children who attending schools. Overall the impression received was one of the unknown and what was coming next, and with supply chain issues being now being the greatest concern, those contacted today really did not know what options to take, some expressing desperation and despondency.

Blenders and traders have purchased a number of cargoes of Group I and II base oils as insurance against the conflict, but many cargoes are either not yet loaded or are on the high seas with few options for delaying without substantial financial penalties involved in demurrage.

U.S. President Donald Trump warned the war could last four to five weeks, which could spell financial troubles for many in the Middle East Gulf. Apart from actual damage caused by Iranian fire, the restricted movement of people and goods is seen as a real threat to commerce and trade in the region.

UAE-bound cargoes have been arriving from the U.S., South Korea, Thailand and Indonesia, discharging in Fujairah, Hamriyah and Jebel Ali. Vessels now stuck in Middle East Gulf waters could soon run short on victuals, water and bunkers.

UAE base oil prices were unchanged as this column was being published.

Group I, CIF/CFR UAE ports
SN150: $890/t-$925/t
SN500: $955/t-$980/t
Bright stock 150: $1,245/t-$1,275/t

Group II, FCA or RTW UAE and Oman
110N, 150N and 220N: $1,275/t-$1,325/t
600N: $1,385/t-$1,420/t

Group II base oils imported into the UAE and other Middle East Gulf ports in Qatar, Bahrain and Kuwait are supplied from a number of  sources in the Red Sea, the U.S., South Korea, Singapore and Europe. Cargoes are often discharged into storage in the UAE, and then smaller parcels are transhipped to various ports around Middle East Gulf. The high ends of the ranges refer to material being delivered by RTW in the UAE and into the Omani exclave, north of Khorfakkan and Fujairah.

Large cargoes were reported loading out of Al Ruwais for distributors in the U.S. A vessel loaded 11.8,000 tons of three Group III base oil grades and recently sailed for U.S. Gulf Coast.

A cargo that loaded in early January out of Sitra will arrive into receivers in the U.S. Gulf of Mexico Coast later this week.

There are worries now are that vessels will not be available to load cargoes of Group III base oils from any of the sources in Middle East Gulf, and that even if vessels were available, then they would have to run the gauntlet of the Strait of Hormuz. It is too early to assess actual available tonnage and loading programs for the next few days and weeks. More detailed information will be sought during the course of this week, calling on shipbrokers and agents to establish what the picture actually looks like for now, and for the longer term.

Group III, FCA Hamriyah or Sharjah port or RTW UAE and Oman
4 cSt: $1,225/t
6 cSt: $1,235/t
8 cSt: $1,255/t

Prices for Group III prices above include a reseller’s margin of around $105/t to cover storage, handling, insurance and margins. RTW deliveries from distributors can incur a further charge of between $20/t-$65/t, depending on delivery location and quantity. Middle East Gulf Group III base oils out of Al Ruwais and Sitra are delivered in smaller parcels of around 3,000-5,000 tons by local Middle East Gulf flagged vessels discharging in Hamriyah and Jebel Ali in the UAE.

Netbacks for Group III base oils ex Sitra and Al Ruwais continue to be related in this report, since material is being delivered and is also currently on the high seas in respect of distributor sales into Europe, the U.S., India, China and Thailand. Netbacks are unchanged at $1,075/t-$1,095/t for 4, 6 and 8 cSt grades.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are raised to between $1,145/t-$1,175/t. With cessation of gas loading from Qatar, it will be difficult to load more base oil cargoes from this source.

GTL levels are indications only since distributors and third parties are not involved in these cargoes, the product being mainly retained by Shell affiliates for in-house blending. Middle East Gulf Group III netbacks are assessed using selling prices in known markets, less estimated marketing costs, margins, handling, storage and freight.

Africa

Turkish buyers are taking Egyptian Group I base oils as the busy time of year starts in the Turkish market. EGPC in Alexandria will receive cargo of around 3,000-3,500 tons of bright stock from Luberef in Yanbu.

Given the hostilities in Middle East spilling over into Lebanon, where Hezbollah have been targeted by Israeli forces, many shipping companies have deserted Suez as a route to the Middle East and Far East, reverting to detouring around South Africa.

Another large base oil cargo will load out of Rotterdam and Fawley for Durban, this cargo will load probably in March or April, but no vessel fixture has been seen or reported in shipping lists.

Contact has been established with receivers in Guinea and Cote d’Ivoire, and information regarding landed prices is still being sought. A source in Ghana said the government publishes landed prices, but apparently with a delay of two to three months, rendering the information not useful here.

Information is being sought regarding the cargo from GS-Caltex in South Korea. The cargo is believed to have been loaded and to contain around 10,000 tons of 600N. The schedule for arrival is difficult to work out, but average sailing rates suggest the vessel should arrive in Lagos around the end of April.

Another trader has loaded a 18,000-ton cargo out of the U.S. A total of 38,000 tons of material will discharge in Apapa port in Lagos during March and April.

Having checked the market in Nigeria, no reports of Russian offers are heard. Prices heard were extremely low for Group II base oils. Bid levels remain at $800/t for SN150, $870/t for SN500 and $990/t for SN900. These numbers are incredibly low, and adding freight, margin and other expenses to cover items such as demurrage would require FOB levels around $630/t for SN150, $700/t for SN500 and $820/t for SN900. Those levels seem impossible.

The black market exchange rate for the Nigerian naira was NGN 1,354 to the dollar Monday.

Group I, CFR Apapa

U.S. origin
SN150: $885/t
SN500: $925/t
SN900: $1035/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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.