As Donald Trump introduces a blockade of Iranian ports and the Strait of Hormuz, events are shaping up for a continuation at least of the war, following negative results from peace talks in Islamabad between the United States and Iranian representatives.
Israel is preparing ground troops for a new offensive at the end of the two-week ceasefire. Targets remain in the sights of Israel with Hezbollah in southern Lebanon being routed and soon to be declared a spent Iranian proxy no longer posing a threat to Israel and it borders.
Late on Monday evening, news came out that the White House has received calls from the “right people” in Tehran, wanting to strike a deal with the U.S. The continuing conflict and the blockage of Hormuz increases tensions in the region and imposes restrictions on trade and commerce in the gulf. Whether the latest U.S. intervention will open the strait remains unclear as Iran makes threats against the U.S. and neighboring countries, declaring that no port within the gulf will be safe from Iranian attack.
This merely increases economic and financial pressures on businesses trying to operate in countries such as Qatar, the United Arab Emirates, Kuwait, Bahrain and Saudi Arabia. The situation has seen no base oil supplies arriving in the gulf since the start of the war on Feb. 28, and many lubricant companies in the UAE and neighbouring countries have ceased operations due to a lack of supplies of both base oils and additives, neither of which have been getting delivered in quantity to receivers looking to continue producing finished lubricants.
Supplies of lubes have been piling up in warehouses and in storage complexes next to ports, and without containers to pack these products the whole system is rapidly coming to a shuddering halt. Outside the conflict zone, base oil prices have rocketed due to crude and feedstock supplies being interrupted by the closure of Hormuz for more than a month.
The above are the obvious supply chain problems, but other materials such as liquefied natural gas, fertilizers and chemicals have not been exported from the region, and likewise imports of foodstuffs and everyday household products have not been able to reach markets, causing rationing and severe shortages.
Black markets have opened up for goods that would normally be freely available, with some dealers moving goods by land and air where possible, to allay shortages of required items.
Across the European, Middle Eastern and African regions there have been huge increases to energy prices, base oils being only one of the products affected. Prices for all types of base oils continue to rise exponentially in Europe, Africa, and of course, throughout the Middle East where availabilities exist.
Europe, along other international markets, is facing supply issues when it comes to Group III supplies. Middle East Gulf sources in Bahrain, Qatar and the UAE are principal suppliers to the European market, but with production ceasing at three Group III refineries in the region due to damage caused by Iranian drone and missile strikes, European distributors have advised this report that come June they will be devoid of any product, and with little chance of replenishment barrels arriving from Middle East Gulf, the future is looking bleak.
Some distributors have tried accessing API Group III base oils from alternative sources, but the economics do not currently stack up to make these purchases work. Suggestions are that demand may reverse this situation, but prices would be extremely high, even compared to current levels, which have risen sharply amid the strife and the developing picture for the future.
Crude and Gas Oil Prices
Crude oil prices are responding to news and reports from the U.S. and other sources that have direct influences on the situation in Iran. The strait remains the main focus of attention, and while it remains closed to seagoing traffic, supply issues remain paramount and are affecting a number of regions to a greater or lesser extent. For example, Asian countries that traditionally rely on crude sand product supplies from Middle East Gulf are being badly affected and experiencing rationing and shortages of fuels.
The African continent is being supplied from a number of indigenous crude sources such as Nigeria, Angola and Egypt, along with Saudi Arabia, but Europe is seeing growing problems with lower supplies of crude and petroleum products such as diesel and jet fuel, causing future plans for transportation of people and goods to be reassessed and contingencies to be adopted to prevent economies faltering in the months ahead.
West Texas Intermediate crude crude continues to trade higher than dated deliveries of Brent crude, a reversal of normal price patterns. The reversed crack has narrowed, however, and currently shows at around $0.50 per barrel.
Crude prices remain volatile and are responsive to U.S. government actions and announcements. This can be expected to be continue as long as the situation in Iran continues.
Dated deliveries of Brent: $101.25/bbl, June front month
West Texas Intermediate: $101.75/bbl, May front month
European Low-sulfur gas oil: $1,214/t, May front month
Source: London ICE late Monday, April 13
Europe
Group I base oil in Europe is short, with production being restricted as a number of producers try to maximize distillate output. Prices have moved in correlation with diesel prices, albeit more slowly. Group I base oil prices can realistically be expected to pitch around $150/t-$200/t higher than diesel levels, but prices established during the past couple of weeks have not fallen in line with distillates. There still remains almost an open auction for available barrels, and with buyers casting their net further afield, some blenders are facing large transportation costs for small quantities of Group I base stocks sourced from distant sellers.
For example, it was heard in the market that one purchase has been completed for a quantity of around 200 metric tons from a supplier in Greece by a buyer located in the United Kingdom It is imagined that the supply will be done in flexi-tanks and shipping containers.
Prices are still in wide ranges, with some sellers honoring commitments to contracted and regular buyers, whilst some sellers have hiked numbers to higher levels on the basis that buyers have little choice other than to charge going rates. Inquiries are rife in the market, with some sellers ignoring approaches from unknown buyers.
European price levels continue to firm as the past month creates a market in which both buyers and sellers are harboring bad feelings. There are no possibilities for any export deals since there is scarcely enough product to supply demand in local and regional markets.
Group I
European exports, FOB basis
Prices unavailable
Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $1,685/t-$1,735/t
SN500: $1,760/t-$1,800/t
Bright stock 150: $2,225/t-$2.300/t
Eastern Europe, FCA
No prices available either from PKN Orlen or Mol
Mediterranean, FCA Spain
SN150: $1,645/t
SN600/500: $1,690/t
Bright stock: $2,210/t
Pan-European, FOB/FCA
SN150: €1,655/t-€1,700/t
SN500/600: €1,765/t-€1,795/t
Bright stock 150: €2,010/t-€2,075/t
Pan-European prices are assessed on an aggregate basis taking prices from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the U.K., and Baltic States.
The euro exchange rate with the U.S. dollar was $1.16980 Monday.
European Group II base oil prices continue to track higher as suppliers apply large additional increases in the past 10 days. Increases of $250/t-$300/t have been applied by all suppliers of these grades.
Levels are subject to change as there is short validity on offered prices. There are few signs that prices will start to fall, with pressure building on producers to justify Group II base oils versus producing optimum quantities of distillates which are in demand. Levels are now around $1,880/t-$1,925/t in respect of the 150N grade with 600N between $1,945/t-$1,985/t.
Group II, FCA basis
110N: €1,875/t-€1,935/t
150N: €1,880- €1,940/t
220N: €1,825/t-€1,860/t
600N: €1,950/t-€1,990/t
These prices apply 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.
European Group III markets are facing real problems for the supply of replenishment barrels due to closure of three Middle East Gulf sources. There are a couple of Middle East Gulf cargoes on the high seas, but these are mainly being aimed at the U.S. markets. One distributor has commented that they will be dry in June, with the only prospects to purchase barrels being traders in places such as India, where cargoes are still arriving from Korean sources.
The problem is fundamental: Asking prices on an FOB basis would be around $2,250/t, and when shipping, storage and margins are added, selling prices would have to be pitched around $2,750/t-$2,800/t !!!. At this time, this would not be acceptable to buyers, but what will happen in a couple of months time is anyone’s guess. The purchase price may increase even further, and if buyers require supplies, the price may become irrelevant.
News from Middle East Gulf sources now suggests that the Pearl gas-to-liquids project in Qatar may take more than two years to resume base oil production, and new reports regarding the Bapco refinery in Sitra, Bahrain, indicate a year before production can be restarted.
Still no reports have been received or heard from Adnoc about its refinery in Al Ruwais, UAE, but a fire there was significant and damage assessment may take some time. On the assumption that there are no further Iranian drone or missile strikes, it may take around a year before base oils become available from Adnoc.
Group III base oil supplies from Cartagena, Spain, may be affected by a temporary maintenance shutdown scheduled to start presently and to run for about six weeks. The producer has taken steps to cover the turnaround period and has fully restocked the Northwestern European hub with up to 45,000 tons of grades with full slates of finished lubricant approvals, which are being sold only to contracted customers.
European Group III prices are again moved higher due to future shortages forecast for the European market.
Group III
Partly approved material, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €1,925/t-€1,965/t
6 cSt : €1,920/t-€1,960/t
8 cSt: €1,895/t-€1,915/t
Fully approved, FCA Northwestern Europe
4 cSt: €2,325/t-€2,375/t
6 cSt: €2,335/t-€2,380/t
8 cSt: €2,355/t-€2,390/t
All the above products sold on a delivered basis will be subject to transportation charges, added to the prices above.
Rerefined Group III prices are raised. These availabilities could become crucial for the European Group III market. Sellers are resisting offering large quantities of these grades, with buyers being rationed, with allocated quantities based on historical purchases.
Rerefined Group III, FCA Germany
4 cSt: €1,845/t
5 cSt: €1,845/t
6 cSt: €1,855/t
Baltic Sea
Russian domestic markets appear to be absorbing most if not all base oil being produced. Domestic values continue to rise, but more detailed information is almost impossible to obtain.
Although not specifically aimed at base oils, the U.K. government has announced that it will intercept Russian shadow fleet vessels passing through U.K. waters. A number of tankers were escorted through the English Channel by a frigate last week, as U.K forces did nothing to stop or prevent passage. Following the transit of one large product carrier, another three tankers made the voyage through the channel with only a support ship from the U.K. navy taking a position to the rear of the convoy.
No bulk exports of Russian base oils have been reported leaving Baltic supply points St. Petersburg, Vyborg or Primorsk.
Black Sea & Turkey
High crude prices are having negative effects on the Turkish economy, though exports of refined products are aimed at European markets, where potential shortages of diesel and jet fuel will start to have effects in the coming months, should Hormuz remain closed.
One interesting inquiry is for a base oil cargo to load out of a Turkish port, sailing to Spain. The base oil can only be Tupras Group I, since there are no Russian base oils being imported into Turkey at the moment, and sellers would not be permitted to sell Russian base oils to an EU country. The size of this cargo is not yet announced and whether this is a sale tender or a direct purchase is also vague. More information should be forthcoming during this week, following conversations with Turkish traders.
Turkish blenders had previously been purchasing Group I base stocks from AMOC and APC in Alexandria, and Luberef was also supplying Group I and Group II base stocks into Gebze, Turkey. These supplies will have been paused because rising prices are taking tolls on Turkish blenders and traders. Combined with the traditional shortage of access to foreign currencies, the added value will have made base oil purchasing nigh impossible for many companies.
Turkish traders and blenders have taken delivery of a cargo of Group II grades from Taiwan, this cargo having passed through the Red Sea and Suez.
Turkish domestic prices from Tupras are raised again, now a regular weekly occurrence.
Group I, ex rack Izmir
Spindle oil: Tl 59,965.00/t plus, KDV Tl 14,022.30/t
SN150: Tl 56,488.00/t plus, KDV Tl 13,328.90/t
SN500: Tl 62,728.00/t plus, KDV Tl 14,574.90
Bright stock: Tl 79,126.00/t, plus KDV Tl 17,854.50/t
Sales incur a standard loading charge of Tl 10,146.50/t which remains unchanged and should be added to the prices above.
Traders in Turkey have advised that offers cannot be given for material that recently arrived from Taiwan. Traders are holding on to stocks, not knowing if they will be able to purchase future barrels due to high prices and shipping costs. Due to the volatility of prices, the trader will not be offering availabilities.
Group II, ex-works
110N and 220N: No offer
350N: No offer
150N: Unavailable
500N/600N, from Taiwan or Saudi Arabia: No offers
Group III
Partly approved, FCA
Tatneft 4 cSt: No availabilities
Fully approved, CIF Gemlik
4, 6 and 8 cSt from Cartagena: €2,410/t-€2,465/t
Middle East
A cargo has loaded out of Ulsan, South Korea, for Luberef and will arrive during May. This vessel will be carrying a cargo of Group III base oils from S-Oil, which is majority-owned by Saudi Aramco and supplies parcels of Group III grades to Yanbu for in-house blending of finished lubricants.
Such cargoes usually consist of around 5,000 tons of three grades, but this stand-alone vessel may be taking a larger parcel. The vessel will have to make the transit through the Bab-al-Mandeb Strait, near Yemen, where the Houthis are active, but since Luberef is able to sail vessels from Yanbu and Jeddah to Indian ports, there should not be a problem with an incoming cargo for discharge in Yanbu.
Meanwhile, Saudi Aramco has started using a pipeline link from Al Jubail in the Eastern part of the kingdom to pump crude and products across to Yanbu where it could be loaded, thus avoiding the closure of Hormuz. Cargoes moving south would have to run the Bab-al-Mandeb Strait, but base oil cargoes have been moving from Yanbu and Jeddah with impunity for some time and apparently not getting any problems from the Houthis.
UAE sources that have blending operations face difficulty as stocks of base oils and additives run out, and with no signs of the Hormuz situation getting better, many of the companies are making plans to try to access base oils from storage in Fujairah or Muscat in Oman. Base oils would be loaded in trucks and then driven across to Sharjah and Jebel Ali.
A number of receivers in the UAE have cargoes waiting at the anchorages at Khorfakkan and Fujairah, and if berths are available vessels could discharge at least partial cargoes into vehicles to create a bridge to keep blenders open in Sharjah and Dubai.
Traders and resellers are no longer allocating supplies, but have informed customers that they will be unable to offer base oils until further notice.
This report has been trying to ascertain how the costs of demurrage or delays are to be handled, but was informed that that arrangements were private and confidential and were between the traders or receivers and owners of vessels. Some vessels could have incurred demurrage charges up to around $500,000 so far, and numbers rise daily.
A speciality oils producer has suspended operations due to a lack of base oils, additives and packaging for finished lubricants. Without base oils arriving in bulk and with additives coming in by container, the operation has had to close down for the time being.
The next problem facing receivers is that as and when Hormuz reopens, there will be major congestion in UAE ports.
Base oil prices in the UAE continue to rise, but little is available since no new material has arrived since Hormuz closed. Prices are given since these have been notified to this report, but caution was added that product may or may not be available.
Group I, CIF/CFR UAE ports,
SN150: $1,725/t-$1,755/t
SN500: $1,770/t-$1,795/t
Bright stock150: $1,965/t-$1,995/t
Group II base oils are being restricted to regular and contracted buyers only, with no new customers being accepted. But news is that availabilities are running low, and that within days rather than weeks, supplies will run out.
Some buyers are looking at trucking Group II base oils from Yanbu, across Saudi Arabia, but this is a very expensive operation and will only be attempted as a last resort. Estimates are that such an exercise could add $500/t to each grade on a delivered basis, UAE.
Group II, FCA or RTW UAE and Oman
110N, 150N and 220N: $1,725/t-$1,775/t
600N: $1,870/t-$1,900/t
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.
Group II base oils imported into the UAE and other Middle East Gulf ports in Qatar, Bahrain and Kuwait had been supplied from a number of sources, in the Red Sea, the U.S., South Korea, Singapore and Europe. Cargoes were discharged into storage in the UAE, then smaller parcels transshipped to ports around Middle East Gulf, or delivered RTW by road in some cases.
Following drone and missile strikes by Iran on the Shell-Qatar Petroleum natural gas and gas-to-liquids complex in Ras Laffan, Qatar, production of GTL Group III+ base oils has stopped, and new reports suggest production may not resume for around two years due to extensive fire damage.
Sources in the UAE have commented that Sitra refinery in Bahrain, and the production of Group III base oils, will be out for at least one year. A cargo that narrowly escaped the Hormuz closure is about to arrive in the U.S. Gulf of Mexico coast, for discharge but will probably be the last Group III cargo from Sitra for some time. Stasco had another cargo recently arrive into Rotterdam from Sitra, and that will be the last.
One of the the Adnoc refineries at Al Ruwais is closed. Still no news has been heard regarding the extent of damage and estimated downtime for the refinery. Appointing specialist contractors to undertake repairs will be the next challenge, since companies such as Bechtel will have teams assessing the damage and estimating work schedules to activate repairs and replacement.
Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, are no longer available due to the shut downs at Al Ruwais and Sitra. The UAE distributor often quoted here has ceased selling product and will only restart as and when material is forthcoming from Adnoc and Bapco. The reseller has announced that it may be into 2028 before operations are back to normal.
This report is therefore suspending reporting of UAE Group III prices until the situation resolves. Netbacks for Group III base oils ex Al Ruwais, Sitra and Ras Laffan are likewise suspended for the time being.
Africa
The Moroccan requirement appears to have been finally covered by a cargo of Group I base oils loading out of the U.S. and en route to discharge in at the refinery in Mohamedia. The cargo due to arrive into port during second half April. At that stage, agents will be contacted to obtain details on grades, quantities and perhaps CIF prices for each grade.
A large cargo of Group I and Group II base oils, around 28,000 tons, loaded out of the U.S. Gulf Coast and will discharge in Durban. The total cargo will be discharged in Durban restocking inventory for representatives of a U.S. major.
The South Korean cargo of around 10,000 tons of 600N has arrived in Apapa but has not yet started discharging. There are suggestions that alternative storage may be needed since the cargo is made up of Group II base oils. Normally such issues would already have been sorted.
An 18,000-ton cargo out of the U.S. has arrived in Lagos, and another trader is lifting 10,000 tons from other U.S. Gulf sources. With the addition of the Korean cargo, around 48,000 tons of base oils will discharge in Apapa during March and April, with another cargo coming into Apapa from the U.S. East Coast. From past cargoes under trader BB Energy, it is estimated to be around 10,000 tons of Group I SN150, SN500 and SN900.
With prices going sky high, receivers in Nigeria are shying away from looking at further cargoes, citing that they would be unable to resell base oils to the market if the prices would have to reflect levels around $2,000/t for SN900. Traders have informed receivers in Lagos that they should consider looking at future cargoes now, and that they should be prepared to buy at increased prices, with no end in sight to the conflict in Iran.
Suggestions are that Nigerian resellers have increased prices locally in line with other international numbers advised in industry reports. Resellers are holding back from offering material which they have in tank at the moment, hoping that prices will rise and they will be able to increase selling prices and make increased margins on material purchased at lower cost.
The black market exchange rate for the Nigerian naira was NGN 1,383 to the dollar Monday.
Group I prices in Apapa remain valid since no new offers have been made or received since the Iran war. The U.S. East Coast cargo would have been negotiated and agreed prior to the Iran war, therefore prices should be in line with those below.
Group I, FCA Apapa
U.S. origin
SN150: $885/t
SN500: $925/t
SN900: $1,035/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.
Historic and current base oil pricing data are available for purchase in Excel format.