Sources speculated that the market will continue to suffering from the effects of inflation and will take some time – hopefully a matter of months – to return to a busy level of activity.

The war in Ukraine continues to haunt global markets, and the lack of movement toward a resolution suggests those impacts may continue for quite some time.

Few deals were completed last week, but there were notifications of price changes for sales within Europe – and unsurprisingly these changes were downwards in almost every case.

A number of cargoes loaded toward the end of the year, which would have been helpful in addressing inventory issues. Parcels loaded were of mixed sizes and covered all types of base oil. Destinations included India, the United Arab Emirates, South Africa and West Africa.

There have been some interesting movements, such as a couple sizeable parcels of 5,000-6,000 metric tons moving out of a ”new” Danish location at Aabenraa. It has been suggested that a Russian supplier may be using storage in that port to bridge material from Kaliningrad or Gulf of Finland ports to export destinations such as the West Coast of India or the Middle East Gulf. There is also mention of base oils coming out of Aabenraa bound for Gebze, Turkey. These destinations hint that this operation may be linked to Lukoil or its subsidiary Litasco, but a connection has not been confirmed.

Since New Year’s Day fell on a weekend, Monday was a holiday in many countries, so markets for crude and petroleum products were not functioning, and prices reported here are from the end of last week. Dated deliveries of Brent crude oil posted at $85.91 per barrel, now for March front month settlement, almost exactly $2 higher than a week earlier.

West Texas Intermediate rose by a similar amount, keeping the crack between the two benchmarks at around $5/bbl. Low-sulfur gas oil prices were steady, still around $350 lower than peaks in May and June.

Europe

There have been few reasons to adjust prices for API Group l exports from Europe, since last week saw few individuals working other than those actually involved in loading and other operations. Cargoes that were loaded were negotiated earlier in December. As mentioned, an above average number loaded during the last ten days of December, as sellers tried to minimize inventory levels and buyers took advantage of year-end specials offered to those who could take prompt loadings.

A significant portion of cargoes that did load were internal transfers of oil majors, but there were a few bona fide transactions for receivers in Turkey, the U.A.E., South and East Africa. These are in addition to the Mediterranean cargo that loaded last week for Apapa, Nigeria.

Prices are adjusted here into wider ranges, reflecting that lower numbers were believed to have been offered for a number of prompt sales, whilst deals were made at existing levels. Some discounts have been confirmed, and others are filtering in.

Prices for solvent neutral 150 range $855 per ton and $950/t, while SN500 is at $889/t-$1,000/t and bright stock at $1,030/t-$1,085/t.

Trade within Europe had virtually ceased last week and many buyers, sellers and traders will not return to work until Jan. 9. Information about January prices eked out toward the end of last week, and more will come this week. There appears to have been several downward adjustments – movements described by some on the buying side as long overdue.

Most sellers have offered lower prices across all the Group l grades. Values for SN150 are now believed to be €1,055/t-€1,100/t, SN500 at €1,175/t-€1,225/t, and bright stock, where available, is around €1,385/t.

The euro’s value against the United States dollar remains steady at $1.06669.

The differential between prices for exports and sales within the region lessened but remains higher than normal at €145/t-€325/t, exports being lower.

Group II base oil prices are unchanged since a number of discounts had already been factored in here over the past couple months. Negotiations for January levels may still be in progress. Rising crude and feedstock values may exert upward pressure on prices.

Group II prices are unchanged on decent demand in the latter half of December. Prices are at $1,265/t-$1,407/t (€1,200/t-€1,335/t) for 100 neutral, 150N and 220N, while 600N is at $1,410/t-$1,460/t (€1,335/t-€1,385/t).

These prices apply to a range of Group II oils from Europe, the U.S., Asia-Pacific and the Middle East Gulf.

Group III base oil markets around Europe are still described as relatively tight, but a number of replenishment cargoes have arrived from the Middle East Gulf and Malaysia to strengthen inventory levels. If not for that infusion, some suppliers might have initiated allocations. Availabilities remain snug, but producers may start to increase supplies into the European market – providing, of course that demand requires it.

Prices for Group III oils with partial slates of finished lubricant approvals are unchanged at €1,700/t-€1,735/t for 4 and 6 centiStoke oils and at €1,675/t-€1,725/t for 8 cSt, all on an FCA basis ex Amsterdam-Rotterdam-Antwerp or Northwestern Europe.

Values for Group III oils with full slates of approvals are also unchanged at €1,755/t-€1,800/t for 4 cSt and at €1,770/t-€1,820/t for 6 and 8 cSt, again on an FCA basis ex Amsterdam-Rotterdam-Antwerp or Northwestern Europe.

Baltic and Black Seas

Baltic Sea activity has dwindled to almost nil, with no reported cargoes coming out of that region during last week. The cargo quantities posted as shipping inquiries to move material from Aabenraa are very similar to quantities that were circulated as other shipping enquiries from Svetly back in mid-December. Given that the destinations are also identical for the Danish parcels, the similarities are too many to discount that the loadings from Aabenraa are linked to Lukoil. More investigation is required, although it is not understood how Russian export barrels of base oil could end up in storage in Denmark, an EU country. 

There are no production facilities for base oil in or near to Aabenraa, so the assumption is that quantities of material have been imported or are being bridged through this port facility.

Russian exports to all EU countries have been halted with new export destinations being sought, such as the United Arab Emirates, India and South and Central America. The sorties into those markets have only been partially successful, with the logistics and costs of transporting base oils from the Baltic to India and the Middle East Gulf being challenges in themselves.

There was an inquiry to move a 5,000-ton cargo lot from Kaliningrad to Hamriyah, but it is not clear if this cargo was successfully loaded or not. The parcel was due to load around mid December but remains as an inquiry.

Obtaining offers for suitable shipping to load out of Russian ports is starting to become a real problem – perhaps somehow shipping out of a Danish port can mitigate this disadvantage. European owner and operators are unable to offer vessels to potential Russian charterers, with protection and indemnity insurance clubs involved restricting vessels from engaging with Russian charterers, with crew and hull cover and protection not available for Russian cargoes.

FOB prices from Svetly for SN 150, as indications only, continue to be assessed at $825/t-$855/t, with SN 500 at $845/t-$890/t.

Gdansk has availabilities, with one cargo of 3,250 tons loading for Antwerp and then Tarragona in Spain.

FOB prices from Gdansk are aligned with European mainstream levels. As an indication only, SN 150 is placed at $875/t-$955/t, with SN 500 at $895/t-$1,010/t. Bright stock remains assessed at $1,035/t-$1,100/t.

Black Sea regions have a number of Russian cargoes going into the Turkish market, some are still coming out of Volgograd with the Volga River system remaining navigable. However, the inquiry loading out of Novorossiysk for 6,000 tons of base oils could indicate the end for Volga transportation. The Novo loading may show Russian exports coming out of Volgograd by truck, being stored in Novo and moved from that port.

Greeks put up an offer for a cargo of 5,300 tons of base oils to receivers in Derince, which would have loaded just prior to Christmas. This movement is assumed to have taken place, since it would have depleted inventory at Aghio. It would have been at sea at the start of the New Year, an ideal situation for both sellers and receivers.

Prices are believed to have been keen, with offers for Greek barrels heard to be around $935/t-$960/t for quantities of SN 150, with SN 500 and 600 at around $975/t-$1,020/t. These prices for solvent neutrals are believed to be similar for any offer emanating from Livorno, although with a large cargo for Nigeria removing 11,000 tons of stock, sellers ENI in Italy may not be keen to offer into Turkey at this time. Indications for bright stock from Livorno could be around $1,115/t-$1,145/t basis CIF Gebze or Derince.

The local Turkish refinery at Izmir still offers Group I base oils from Tupras, with levels reported at $889/t for SN 150, $1,035/t for SN 500, with bright stock at $1,250/t. Prices are for truck loads from refinery being purchased in Turkish lira. 

Group II prices on an ex-tank basis for material from various sources which has been imported are maintained and are assessed at €1,485/t-€1,565/t for the three lower vis products, with 600N at €1,590/t-€1,640/t. Supplies of Group II grades can come from the Red Sea, the United States via Antwerp, and South Korea.

Group III base oils sold on an FCA basis for partly-approved grades remain at €1,765/t-€1,800/t. Fully-approved Group III grades delivered into Gebze from Cartagena in Spain continue to be priced at around €1,795/t-€1,855/t FCA.

Middle East

Red Sea reports contain news of a large cargo of 19,000 tons of Group I and Group II base oils loading from Yanbu and Jeddah. This parcel is now discharging into receivers in the U.A.E. The cargo is delivering into three ports – Fujairah, Hamriyah and finally, Jebel Ali. Apart from the smaller cargoes going to Singapore and Alexandria, there will be large parcels during January for the west coast of India, and a cargo may move to South Africa, which is thought to be comprised only of Group II grades.

Middle East Gulf receivers are looking at various options to take cargoes of Group I base stocks. Europe and the U.S. are options on the list, in addition to Baltic and Black Sea sources for Russian barrels. Problems seem to be the high freight rates associated with moving cargoes from those sources, with buyers in the U.A.E. looking to take material from India, an interesting reversal of usual trade routes. Iranian material normally goes out from Hamriyah and into either Hazira, Mumbai port or Mumbai anchorage

The European cargo of 10,700 tons loading out of Rotterdam and Fawley is still programmed to load around mid January. The vessel chartered will call at Yanbu, then Fujairah and finally, Jebel Ali.

Large quantities of Group III base oils are loading this week out of Sitra for Bapco and Stasco, and Al Ruwais for Adnoc. Bapco will load a large cargo of 16,000 tons for receivers in Mumbai anchorage. These cargoes are in addition to the parcels which are on the high seas and due to arrive in Europe, the U.A.E. and China during January and early February.

The large parcel of 29,000 tons of Group III+ base oils from Ras Laffan in Qatar has completed loading and calling into the Mediterranean and also Antwerp-Rotterdam-Amsterdam. This cargo will be integrated into the Shell system.

Netbacks for partly-approved and non-approved Group III base oils loading out of Al Ruwais and Sitra continue to be maintained. They are assessed at $1,690/t-$1,725/t, for the range of 4 centiStoke, 6 cSt and 8 cSt partly-approved Group III base oils.

Netback levels are based on local FCA prices in markets. For example, European, Indian, U.S., and Chinese destinations are used. Thereafter, netback levels are derived and assessed from regional selling prices, less marketing, handling and estimated freight costs.

Group II base oils selling on a FCA basis in the U.A.E., are sourced out of European, U.S, Asia-Pacific and Red Sea refiners and are resold ex-tank, or on a truck-delivered basis within UAE. Prices are unchanged, with levels at $1,540/t-$1,575/t for the light vis grades, with 500N and 600N at $1,600/t-$1670/t. The high ends of the ranges refer to road truck wagon-delivered base oils.

Africa

There are no further announcements from regular South African sources this week about further cargoes of base oils. The latest cargo will load out of Rotterdam and Fawley around the end of January. Additionally, the performing vessel will call at Tema in Ghana, with 5,000 ton of three Group I grades – SN 150, SN 500 and bright stock. The vessel will then sail to Durban with the 20,000-ton balance of the cargo.

Going into West Africa, the same major will load a cargo of up to 6,000 tons this week for regular receivers in Conakry in Guinea, and Abidjan in Cote d’Ivoire. The total quantity of Group I grades will be split between the two discharge ports. This is a relatively large cargo for the two ports, perhaps indicating that demand in those local markets for finished lubes is thriving.

Last week saw the loading of the 11,000-ton parcel of three Group I base oils out of Livorno, for delivery into Nigeria. The traders behind this cargo are well known in the Nigerian market. With the return to full production in Livorno, this cargo could not have come at a better time for the Nigerian market, which was running exceptionally low on stocks of base oils for blending purposes.

The 12,000-ton Baltic cargo has arrived in Apapa and should be in the process of discharging. News on the actual discharge is cloudy, with suggestions that the vessel involved may have encountered some unknown problems. More information is to be gathered this week on the latest news, when sources will be back in the offices.

CFR levels for base oils discharging in Apapa are changed a little to reflect the latest FOB numbers. Numbers are given as indications only.

Levels are advised as follows, with freight costs contributing a substantial part of the delivered prices. Prices are estimated at around $1,035/t for SN 150, SN 500 at around $1,100/t, and SN 900 at $1,155/t. Also, as an indication, bright stock from Livorno is assessed at around $1,235/t CFR Apapa.

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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