The Iranian war has become a prolonged impasse with each side making claims on successes in the ongoing operations, all of which are being disputed by the other side while Tehran and Washington continue to trade threats.
The Trumpian economic stranglehold on Iran does not appear to be working swiftly, with comments from Scott Bessent, U.S. Secretary to the Treasury, that an “economic D-Day is coming for Iran” with “the greatest financial offensive on Iran” about to take place. He claimed the Iranian military has been destroyed and that the nuclear threat has been satisfactorily controlled. An Iranian spokesman refuted these remarks, stating that Iran’s latest intention is to block all vessels trying to transit the Strait of Hormuz, an action which would inflict severe damage on global economies.
Bessent is about to announce a raft of new sanctions on Iran and global markets are standing by to assess what these will mean. The bottom line at the moment remains that Hormuz is still effectively closed to all marine traffic, with the continuing U.S. blockade of Iranian ports limiting exports of crude which are necessary to buoy the Iranian regime with dollars.
With the strait still shut, a number of vessels have been reported attacked by the IRGC in Omani and Middle East Gulf waters, with one oddball report of a Saudi vessel being struck in Yanbu in the Red Sea. This latest development is unconfirmed as this report is being written, and more clarification is required as to whether fire from Iran, or from Houthi rebels in Yemen caused damage to this vessel.
As Ukraine celebrates the anniversary of leaving the Soviet Union, hosting visits from a number of global leaders, the conflict continues between Moscow and Kyiv, with Putin increasing drone and missile attacks on civilian targets within Ukraine. Kyiv has responded by striking Russian refineries, storage terminals, and warehouses belonging to Wildberries, the Russian equivalent of Amazon. These strikes are designed to bring home the realities of the war to the Russian people, who, for the last four and a half years, have been kept in the dark by Kremlin propaganda and a news blackout on any adverse effects of Putin’s “Special Military Operation.”
Using long-range drones, Ukraine is causing fuel and lubricant shortages across Russia. Refineries have been badly damaged following multiple strikes, and some reports suggest it may take years to effect permanent repairs to some facilities. The Kremlin has banned exports of petroleum products. Base oil producing refineries have been badly hit by Ukrainian drones, halting base stock production at a number of sites. This may be due to feedstock interruption, or direct damage to base oil production units. Information is scarce and can only be assumed.
Sources au fait with Russia have told this report that Russian traders have been told to scour “friendly” markets for possible sources of mogas, jet kero and gas oil from countries such as Kazakhstan, Tajikistan and Uzbekistan. North Korea and China have also been approached on a government-to-government basis to facilitate the import of petroleum products.
A number of lubricant blending plants have been targeted and hit by Ukrainian drones, such as Volgograd and Perm where Lukoil has large blending facilities. Similarly, Bashneft’s Ufa refinery has reported damage. Yaroslavl was reported damaged last week, where Slavneft has its main Group I and API Group III production. Rosneft and Gazprom have also suffered refinery hits. Across the Russian market cracks are appearing in base oil production and the blending of finished lubricants for automotive and industrial end users.
Crude and Gas Oil Prices
Crude prices spiked last week but eased in early trading this week. Crude markets continue to react to news from Iran and the U.S.
Dated deliveries of Brent crude: $92.20/barrel, October front month
West Texas Intermediate crude: $85.00/barrel, October front month
European low-sulfur gasoil: $1247/t, September front month
These prices were obtained from London ICE trading late Monday, Aug. 24.
Europe
With some players starting the trickle back to work following holidays, the market has not gained a lot of impetus so far. Those who have returned this week, are commenting that they still cannot locate sellers to negotiate prices for September deliveries.
Next week will see the return of a larger number in the base oil market, but expectations that the Iranian war would have been put to bed by now, and price pressures removed have been dashed with the continuance of economic and military forces still playing a part in the conflict.
The European Group I base oil market is seeing only a few inquiries to purchase for September. Buyers who rely on barge deliveries are investigating alternative methods of delivery due to the crisis of the river system drafts. The whole of Europe has declared emergency measures for the current water levels in waterways.
Drought hit Europe is experiencing exceptionally low river and canal water levels being reported across Europe. Forecasts for rain over the next few weeks are poor, which could see the current situation worsen and prolong cessation of barge deliveries for base oils ( and other products ) through September and into October and November.
Prior to July end, many European buyers of Group I base stocks held back, forecasting that prices would fall during August. This has not proved to be the case, hence buyers will have make the best of a deteriorating situation.
With a number of refiners diverting feedstock to maximize distillate production, there is a growing shortage of light neutrals which could speed up a general move for buyers to look at switching to light Group II grades, but only the coming months will reflect any changes or moves in that direction.
There is still no possibility for a European export market.
Prices are slightly weaker, but there have been no really significant price level changes.
Group I
European exports, FOB
No current market.
Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $2,010/t-$2,035/t
SN500: $2,100/t-$2,150/t
Bright stock 150: $2,395/t-$2,425/t
Eastern Europe, FCA
SN85: $1,925/t
SN150: $1,928/t
SN350: $1,985 /t
SN500: $2,150/t
Bright stock 150: $2,239/t
Mediterranean, FCA Spain, Greece, Italy
SN150: $2,025/t
SN600/500: $2,135/t
Bright stock: $2,420/t
Pan-European, FOB/FCA
SN150: €1,825/t-€1,895/t
SN500/600: €2,020/t-€2,080/t
Bright stock 150: €2,250/t-€2,300/t
Pan-European prices are assessed on an aggregate basis using 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 $1.16579 Monday.
European Group II base oil markets remain quiet prior to the start of September. Updated prices have not yet been seen around the market, but this week may show up some numbers for September. Buyers are hoping and assuming that with crude and feedstock prices retreating a little from recent highs, that producers will wait before altering prices. Current prices were issued when feedstock levels were lower, hence there may be some scope for producers to raise numbers.
Barge traffic is slow or not moving, other than within ports and seawater fed canals. Some barge operators have suspended deliveries for certain locations on main river systems such as the Rhine and Danube.
Group II prices are adjusted this week to around €2,245/t-€2,285/t for 100 neutral and 150N grades, with 600N between €2,395/t-€2,425/t.
Group II, FCA basis.
110N: €2,275/t-€2,320/t
150N: €2,325/t-€2,410/t
220N: €2,355/t-€2,395/t
600N: €2,425/t-€2,470/t
Prices refer to a wide range of Group II base oils which may be sourced from within Europe, and also imported from U.S., Red Sea and Asia-Pacific.
Group III supply within Europe is making a go of whatever supplies are available and from wherever. A problem could be looming however, since no one is yet aware of the pricing attached to supplies coming in from Malaysia and Indonesia.
An interesting cargo has been spotted on shipping reports with a parcel of “base oils” to be loaded out of an Indian port, sailing via South Africa and bound for an Italian port.
Ruling out any possibility for Group I and Group II to form this cargo, the parcel may therefore consist of Group III grades. The size of the cargo is currently unknown, but it is assumed that for freight to work this will be a sizeable quantity. More information will be sought this week, regarding the source and receivers.
With Hormuz still effectively closed, the status quo in the Gulf remains too volatile for traders to even consider any cargo movements from United Arab Emirates. Vessel owners (if it were possible to find any prepared to risk the voyage) are demanding extremely high freight rates, war risk insurance cover for charterers’ account, and prompt demurrage payments if a vessel became stranded. These conditions are not possible for traders to work with.
A cargo from Indonesia arrived into Antwerp, with reports of another cargo now en route via South Africa. The vessel will ultimately sail to Antwerp for final discharge. SK Enmove from Cartagena in Spain, have continued to stock up inventory to hub storage in Antwerp, and with the approaching turnaround about to start in another week, no further cargoes are anticipated from this source.
Meanwhile the partner company operating out of the same refinery has issued a notice to all customers stating that there will be no supplies of 4 centiStoke Group III until November, and the only products available will be 2, 3 and 6 cSt. Four centiStoke base oils will be available following the successful restart of operations at Cartagena following the turnaround.
Repsol has also experienced refinery problems during the intense heat of the summer period.
Prices for Group III oils with partial slates of finished lubricant approvals are unchanged this week. They are also now priced on a par with fully approved material. Prices for rerefined Group III are also unchanged. Demand for the latter remains high, with sellers only offering to “contracted” buyers.
Group III
Partly approved, FCA Antwerp-Rotterdam-Amsterdam and Northwestern Europe
4 cSt: €3,125/t-€3,160/t
6 cSt : €3,100/t-€3,125/t
8 cSt: €3,085/t-€3,000/t
Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €3,395/t-€3,445/t
6 cSt: €3,380/t-€3,420/t
8 cSt: €3,425/t-€3,460/t
All the above products sold on a delivered basis will be subject to transportation charges, added to the prices above.
Rerefined, FCA Germany
4 cSt: €3,120/t
5 cSt: €3,125/t
6 cSt: €3,125/t
Baltic Sea
Russia has imposed an export ban on all petroleum products, moving all available fuels and lubricants into the domestic markets to support an energy industry which has come under intense pressure from Ukrainian drone strikes on refineries, storage complexes and rail and road transport links to population center.
All the major base oil producers have experienced hits on their refineries, with some such as Lukoil having several attacks on Volgograd refinery.
Rosneft, Bashneft, Gazprom, Tatneft and Slavneft have all lost part or all of their refining capabilities over the past few months, and with an escalation on the frequency and the number of strikes, damage has become incremental, with each attack destroying further parts of the refining process.
Prices for available base oils and finished lubricants have ballooned with some blending operations unable to afford to purchase base oils and additives. Packaging is in short supply with problems obtaining barrels, drums and smaller metal and plastic containers.
Russia is importing fuel from Kazakhstan and North Korea and is looking to China for supplies of gasoline, jet kero and diesel.
Black Sea & Turkey
A Group II cargo which loaded out of Ulsan in South Korea has discharged in Gebze, Turkey,, Turkey,. This cargo comprised of Group II base oils from GS Caltex. This is the second Group II cargo to enter Turkey following the parcel which arrived in June from Taiwan.
Turkish blenders reconfirmed that Group I base oils, imported into Turkey from Iran remain missing from the market. It may not be possible to restart this trade until some time next year. Quantities of Group I base oils were being trucked through Iraq, and across the Turkish border.
Turkish buyers have been relying on Turkmeni and Uzbek barrels for Group I imports in addition to Group I grades from Luberef ex Yanbu and from the two Egyptian producers in Alexandria. There have been approaches to MOH in Greece and ExxonMobil from the hub in Valencia, but either no avails were forthcoming, or prices offered were too high to be considered for the Turkish domestic markets for finished lubricants.
The Turkish market is quiet, with a number of blenders closed for one month, until first week of September.
Group I, ex rack Izmir
Spindle oil: Tl 80,006/t plus, VAT Tl 18,030.50/t
SN150: Tl 78,825.00/t plus, VAT Tl 17,794.30/t
SN500: Tl 80,560.00/t plus, VAT Tl 18,141.30/t
Bright stock: Tl 96,914.00/t, plus VAT Tl 21,412.10/t
Sales incur a standard loading charge of Tl 10,146.50/t which should be added to the prices above.
Traders in Turkey have advised no resale offers will be available for Group II base oils. There are no offers out of Turkey for either Group I or Group II base stocks. All material is being retained for domestic blending and local sales.
Group III base oils appear to have been removed and missing from the Turkish market, although it has been suggested by one source that Group III grades may have been included in the cargo from Korea.
Fully-approved Group III from Cartagena, Spain, is no longer being supplied into Gemlik.
Middle East
July and August Yanbu loadings of base oils has slumped in numbers with the Houthis declaring that the Bab-al-Mandeb Strait is closed to all Saudi Arabian vessels.
As mentioned, there is a report that a vessel was hit by missile or drone in Yanbu port, but this is as yet unconfirmed. It seems highly unlikely that this vessel would have been targeted from Iran, a more plausible explanation is that Houthi forces from Yemen have targeted the ship and sent a missile to strike the vessel. Why the vessel was targeted in Yanbu port remains unknown.
Vessels have been loaded from Yanbu for receivers in Egypt, possibly EGPC, taking another cargo of 3,000 tons of bright stock. There are also shipping reports of another vessel loading out of Yanbu and Jeddah which will sail north through Suez to northwestern Europe. This vessel will be loaded with a part-cargo of Group I base oils ex Jeddah, and in addition either Group II grades or bright stock would have been loaded ex Yanbu.
Saudi vessels attempting to move any crude or products through the Bab-al-Mandeb Strait are experiencing threats against Saudi flagged ships with a number of vessels turned around, fully loaded and currently at anchorage in Yanbu, Jeddah or other safe Saudi ports.
As mentioned, a large cargo of Group II base oils has loaded and sailed from Singapore for receivers in the United Arab Emirates. The cargo will discharge in Fujairah port, then the base oils will be transhipped by road and by train to blenders in Sharjah/Dubai and Abu Dhabi.
Confusion continues over what is happening regarding the Strait of Hormuz. No further news has been heard regarding the Iranian/Omani to allow vessels to transit Hormuz.
Trump appears to have changed tack on the war in Iran and is now trying to squeeze the Iranian economy to such an extent that either Tehran admits defeat and requests for lifting of sanctions to allow access to markets to purchase goods and services including everyday items such as food and medicines.
On Monday, threatened to hit the Iranian regime with severe financial and economic sanctions, which may force the regime to come to the table to negotiate and peace deal. Washington confirmed that the blockade of Iranian ports will continue until Iran gives up on proposals for tolls and charges for vessels to transit Hormuz. In response Iran has said that the country is proposing to block all Middle East Gulf shipping from transiting Hormuz, in either direction, thus closing the strait completely. The global stage awaits Washington’s sanction package.
Iran has also commented on any moves to circumvent Hormuz by building pipelines, will be designated targets by the Islamic Revolutionary Guard Corps, and any project s starting will come under attack during preliminary development.
Supplies of Group I and Group II base oils which had been in storage in the UAE prior to the start of the Iran war have been exhausted. These stocks were being routinely resold on an FCA basis, or delivered by truck. Reporting of prices here is suspended until base oils are once again discharged into storage.
Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, were said to be available from Adnoc at Al Ruwais. But quantities are very small, with difficulties in finding other base oils to blend with Group III, in addition to accessing additives to meet formulations.
Group III FCA prices are suspended, as are netbacks in respect of Group III base oils ex Al Ruwais, Sitra and Ras Laffan.
Africa
A cargo of around 3,000 tons of bright stock is en route to Alexandria to supply under the EGPC contract. The cargo loaded out of Yanbu and with the size of the cargo and the dwt of the vessel, it is understood that the ship will discharge around 3,000 tons of bright stock in Alexandria, and then proceed to Northwestern Europe to discharge the remaining cargo, believed to be Group I and Group II grades.
The Group II cargo from Luberef has discharged in Durban. This may the last until the Houthi situation can be solved.
A cargo of Group II base oils has loaded out of Ulsan in South Korea during second half June, arriving in Durban on a prompt basis.
Another large Group II parcel loaded ex U.S. Gulf Coast during mid July has arrived in Durban.
A large base oil cargo loaded out of Rotterdam and Fawley at the end of June and will be supplying distributors and affiliated companies in South Africa. The vessel is believed the be currently discharging in Durban but will only discharge part-cargo. The vessel will proceed to Mombasa to discharge the balance of the parcel.
A Group I cargo for a major loaded out of Fawley with around 10-11,000 tons of three Group I grades for delivery into Conakry in Guinea, Abidjan in Cote d’Ivoire and Tema in Ghana.
The Nigerian market has one interesting development this week, with a “suggestion” that an Indian cargo is again being offered and considered by buyers in Lagos. This follows an offer for a Indian cargo of Group I base oils which comprised of Iranian and Russian Group I grades which would have been priced accordingly.
Buyers in Nigeria may be getting short of material now, and may be starting consider options to be able to continue supplying blenders and resellers around Nigeria.
The quality and specifications of the grades in the Indian cargo will be of lower standards, but prices may be the ultimate decider in a Nigerian scenario.
The new offer has not been seen or heard as yet, but a vessel enquiry has been floated on the market to load base oils out of either Mumbai anchorage or Haldia, with discharge of the cargo in a “West African port.”
Buyers are still looking for low prices which are unachievable, some traders will maintain contacts with buyers, but will not enter serious discussions, which will only prove to be a waste of time, effort and money. It will be interesting to see what prices are attached to the Indian offer.
The official exchange rate for the Nigerian naira was NGN 1,344-1350 to the dollar Monday, while the black market rate was NGN 1,405-1,428.
The last cargoes which arrived into Apapa, sold at prices valid prior to the Iranian war.
Group I, FCA Apapa
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.