One such shipment has a vessel now fixed to move almost 25,000 tons of mixed grades for West Africa before delivering most of its cargo into Durban, South Africa. The latter part of the exercise looks like being repeated in February with almost 16,000 tons being prepared for delivery to Durban in March or early April. These cargoes typically load out of Rotterdam and Fawley, where the supplier has refineries.

Prices for the various markets are mixed insofar that sense that API Group I values are trying to pitch above diesel prices, and whilst this is happening in some cases due to diesel prices falling, the premium is still not sufficient to incentivize refiners to shift feedstock back to base oil production. The emphasis remains on producing optimum quantities of distillates and diesel in particular.

Group II prices remain buoyant, although the premium to diesel remains at the lowest point for some time. Group III levels remain high, amidst somewhat of a pretense that this segment is tight in supply terms. That may have been true late last year, but a number of large Group III cargoes have been imported into mainland Europe from all supply points in the Middle East Gulf and the Far East. A 6,000 ton shipment from Malaysia has loaded and will discharge into Gebze, Turkey, in due course. Demand for this grade remains strong and is forecast to stay that way for the rest of this year.

A ban on Russian base oils by the European Union and allied countries will come into force Feb. 5, and there have been a couple last-minute imports into Antwerp-Rotterdam-Amsterdam. Those of course will have been made under a previous clause allowing petroleum products trade to continue under existing contracts, but that provision expires next Monday.

Thereafter, the only imports allowable will be pipeline supplies of Urals crude to refiners totally dependent on this supply source. Countries such as Hungary and Slovakia will continue to receive allocations of Urals crude, the price of which will however be capped under EU rules.

Crude oil prices softened over the past week, declining around $2 per barrel. Dated deliveries of Brent crude sank to $85.85 per barrel for March front month settlement, while West Texas Intermediate dropped to $78.90/bbl, also for March front month, pushing the the crack between the benchmarks to more than $7.

The diesel rollercoaster is in action again as low-sulfur gas oil prices rose above $1,000 per metric ton last week before diving to $910/t this week, still for February front month – doing the opposite of what some feared ahead of the ban on imports from Russia.

All of these prices obtained from London ICE trading late Jan. 30.

Europe

Trade of Group I exports from Europe subsided in number after the December and January rush to load cargoes for West Africa and the Middle East Gulf, for example. Activity has cooled, but a couple of inquiries around last week have converted into firm deals, including one cargo of around 6,000 tons loading out of Svetly terminal in Kaliningrad, Russia, headed to Gebze, Turkey. Another parcel of 10,000 tons is headed from Livorno, Italy, for receivers in the United Arab Emirates.

In addition to these sales, there are repeated cargoes moving to West and East Africa and to South Africa – some transfers within oil majors but others being sold to third parties in countries such as Ghana, Nigeria, Kenya and Tanzania. Prices have certainly steadied and may even have reversed the trend of moving ever lower. An increase in diesel prices last week may have created pressure on producers to raise base oil values, but then diesel levels fell back,

A number of buyers are still searching for alternatives to Russian sellers, but options are limited for large swathes of Group I oils. It is still possible that the Group I market will tighten if demand increases while Group I refineries cut output in favor of diesel.

Group I export prices reported here take into account the range of numbers heard around the markets, and those may change in February. There has been no sign of discounts lately. Prices for solvent neutral 150 are between $885 per ton and $945/t, while SN500 remains at $910/t-$975/t and bright stock at $1,055/t-$1,100/t.

Group I sales within Europe are still not picking up as some had predicted would happen in February. Buyers are still taking smaller than normal quantities, and are either postponing of cancelling regular supplies. Some players have not lifted material since November, having cancelled scheduled orders.

The impact of the ban on Russian imports remains to be seen, but if quantities that had been imported from Baltic terminals into the EU, Scandinavia and the United Kingdom are removed from the market, there will most certainly be some impact.  

Sellers appeared to try rolling over January prices during some negotiations last week, but buyers were keen to point out the large differential between export offers for trade within the region. Whilst buyers are not looking to take large slugs of Group I, the difference between those segments is a valid point of discussion.

Some sources expect buying to revive during February as lubricant blenders look to replenish inventories. Some companies that use Russian base oils have laid away quantities in recent months, and some intimated that they may have enough to operate on until May or June.

Prices for Group I sales within Europe remain at €1,055/t-€1,100/t for SN150, at €1,175/t-€1,225/t for SN500 and around €1,385/t for bright stock, where available, all on an FOB basis. The drop in diesel prices may have reduced upward pressure on base oil values, but there is still sentiment to re-establish a base oil premium to distillates.

The euro has gone slightly stronger against the dollar, posting at an exchange rate of $1.08798. The price differential between exports and sales within the region drifted apart this week to €155/t-€295/t, exports being lower.

Group II base oil prices around Europe are stable, although there were talks of increasing prices during last week. So far it is not clear where producers are going for February. For now, prices are at $1,300/t-$1,380/t (€1,200/t-€1,275/t) for 100 neutral, 150N and 220N and at $1,520/t-$1,580/t (€1,405/t-€1,460/t) for 600N. These values apply to an extensive range of Group II oils from Europe, the United States, Asia-Pacific and the Middle East Gulf, supplied in bulk or in flexi-tanks.

European Group III base oil markets have been boosted by the influx of cargoes arriving from the Middle East Gulf and Malaysia, along with large parcels being supplied from Cartagena, Spain, to Rotterdam. Last week saw a cargo of around 16,000 tons loaded for this destination.

Demand remains excellent and there is little spare material and the market seems balanced. 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 centiStokes and at €1,675/t-€1,725/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Group III oils with full slates of approvals are heard at higher levels although the range has also widened due to some sales at extremely low prices where oils with approvals have to compete with those that are without. Four cSt grades are at €1,720/t-€1,890/t, while and 6 and 8 cSt oils are at €1,735/t-€2,100/t. These prices refer to sales on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Baltic and Black Seas

Baltic trade in the form of a Lukoil cargo, loading out of Svetly in Kaliningrad with 6,000 tons for receivers in Gebze is just one more cargo of Russian exports seen to be going into the Turkish market. Quite why this material is not supplied from Volgograd refinery is not plain to see, but it could be that Svetly has to keep through-putting base oils to maintain storage tanks and loading systems, or it may be that the right vessel has been found. The vessel fixed appears to be Iranian flagged, which will suit the purposes of Russian exporters to a tee.

There are other Baltic trades to report but these are coming out of the southern Baltic port of Gdansk. One cargo is to move 2,750 tons of Group I grades to Hull in the east coast of the United Kingdom. This is business that may in the past have come out of Riga or Liepaja using Russian export barrels, but now receivers in the United Kingdom have taken the decision to look at alternative sourcing for Group I grades, with Gdansk refinery fitting the bill nicely. The other Polish cargo is a smaller quantity of 1,500 tons for Dordrecht, again perhaps a substitute parcel for ex Russian trades.

There are no signs of any last-minute cargoes coming into EU ports from the Baltic, although local sources in Antwerp-Rotterdam-Amsterdam confirmed that substantial stocks of Russian material have been laid down in storage tanks in northwest Europe, with some reports that stocks could last a few months before blenders are faced with replacing these barrels with alternatively sourced Group I base oils.

The cargo that loaded out of Riga during the first half of January will have reached Rotterdam and will have discharged the cargo of Russian grades into storage. This parcel is made up of 6,000 tons of SN 150 and SN 500. This may be the final cargo “under existing contract,” the terms under which Russian cargoes have to qualify to be permitted to discharge in an EU port prior to Feb. 5. Talking to EU sources in Brussels, it was made clear that Russian sanctions and the ban on hydrocarbon imports will not be reversed anytime soon. Even if hostilities were to ceases in Ukraine and some form of settlement is agreed upon, EU sources have declared that rules and sanctions against Russia will not be reversed and that the ban on petroleum products is here to stay.

Russian suppliers are having to locate new receivers in permitted countries where import of Russian products are still allowed, although finding and selling to new receivers is not simple, with these customers having previously sourced material from mainstream suppliers from Europe and the United States, where specs are higher than Russian exports. Turkey remains the mainstay for Russian exports, and without this outlet Russian refineries would have to severely cut run rates, or even halt the production of base oils altogether.

Gazprom and Rosneft have been dumping base oils into the local Russian domestic markets in addition to supplying into Belarus and other neighboring “friendly” states. It has also been suggested that both these producers have cut run rates for base oils to the absolute minimum in all refineries, and are struggling to re-align their business model, given that they have had many supply outlets blocked by EU and other G7 nations.

Baltic FOB prices from Riga or Svetly for SN 150 are indicated at $785/t-$835/t, with SN 500 at $800/t-$845/t. Prices are offered as indications only.

FOB prices for Group I material loading out of Gdansk are part of the European mainstream pricing, with SN 150 assessed between $885/t-$945/t, with SN 500 in a range at $925/t-$975/t, depending on destination. Bright stock, where applicable, is assessed at $1,055/t-$1,125/t.

Turkey continues to import large quantities of Russian Group I base oils and in addition has taken some quantities of Group III 4 centiStoke material.  A 6,000-ton cargo has loaded out of the Baltic for import into Gebze, while at the same time a 6,000-ton cargo of Group III grades loaded from Malaysia and will discharge during March into Gebze port, where this material will be broken out and bulk resold to blenders in the Turkish market. A base oil cargo of around 4,000 tons was identified coming out of mainland China to Gebze during February. What grades are involved are not disclosed, but it is considered that the cargo could be Group III grades to be resold into the Turkish market.

There is an interesting shipping enquiry for 3,000 tons of base oils to move from Mersin to a Red Sea port, which is suggested to either be Aqaba or a Sudanese destination. It has been mooted by local sources in Istanbul that this could be Tupras material marked for an export trade rather than going into the local market. The reasoning behind this move is not clear, since it was reported last week that Tupras had ceased production of Group l base oils again at Izmir refinery, and that there was no availability for local buyers.

Other imports for the Turkish market from Livorno and Aghio will have discharged into tank by now, with prices heard at around $920/t-$945/t for quantities of SN 150, with SN 500 and 600 at $965/t-$985/t, both on a CIF basis.

Group II prices ex-tank for material from a variety of sources that is imported into Turkey for resale remain unchanged, assessed at €1,485/t-€1,565/t for the three lower vis products – 100N, 150N and 220N – with 600N at €1,590/t-€1,640/t. Supplies of Group II grades arrive from the Red Sea, the U.S. and South Korea.

Group III base oils sold on an FCA basis for partly-approved grades are maintained at €1,765/t-€1,800/t. Fully-approved Group III grades delivered into Gebze from Cartagena in Spain are priced at around €1,875/t-€2,100/t FCA. Small cargoes of 1,000 up to 1,500 tons load out of Spain for discharge into ports such as Gebze.

Middle East

Red Sea reports the cargo that may load out of Mersin for receivers in a Red Sea port, but it is surprising that if such a supply is to take place, that Luberef out of Yanbu and Jeddah are not participating and competing for this business. Cargoes continue to load for destinations such as Durban, Mumbai anchorage, and Singapore. Additionally, parcels are planned for Alexandria in Egypt and Karachi in Pakistan.

Cargoes originating from South Korea, Thailand and mainland China are all marked down for arrival into Hamriyah port over the next month. These are additional to the Indian based cargoes from Haldia and Chennai, which are still primed to arrive into the United Arab Emirates during February.

The largest cargo of Group I base oils is moving from Livorno to the U.A.E. This cargo will be organized under the auspices of traders and will be sold to receivers in the U.A.E. The cargo is comprised of three Group I grades – SN 150, SN 500 and bright stock. The quantities of each are not disclosed, but the total quantity is large at 10,000 tons. This parcel should arrive into Hamriyah during the first half February, having loaded in Livorno towards the end of December.

Prices are not known as yet, but FOB numbers are assumed to have been very keen, in moving this quantity out of inventory prior to year end. Indications for delivered prices could be around $925/t for the SN 150, $985/t for the quantity of SN 500 and bright stock at around $1,125/t, all CIF.

Other alternative Group I base oil cargoes are offered from mainland Europe and the U.S. Gulf Coast and U.S. Atlantic Coast, with options for discharge into the U.A.E. or alternatively, Mumbai anchorage. Offers for supplies from Baltic and Limas terminal in Turkey are also on the table for both destinations. With Russian suppliers offering exceptionally low prices just to break into these markets.  Specification can be an issue, with lower viscosity index and darker color than alternative supplies from Europe or the U.S., but prices are paramount. The other problem is lengthy sailing times and high freight rates for cargoes loading out of the Baltic.

Another ExxonMobil cargo of 12,000 tons is planned for loading out of Rotterdam and Augusta, with a combination of Group II and Group I base oils, going first to call at Yanbu, then final discharge in Jebel Ali. This cargo will probably commence loading in Rotterdam around the middle of February, so it will possibly have an estimated time of arrival into the U.A.E. around the end of March. 

There are no reported cargoes loading out of Al Ruwais and Sitra, but a large parcel of 10,000 tons of Group III+ base oils will move from Ras Laffan during the middle of February and will proceed to discharge in Mumbai port. This cargo will be made up of Group III+ GTL base oils from Qatar, which are produced exclusively for the Shell system.

Netbacks for partly-approved and non-approved Group III base oils loading out of Al Ruwais and Sitra remain unchanged, with selling prices in regional markets reported at steady or stable levels. Netback returns are assessed at $1,690/t-$1,725/t, for the range of 4 cSt, 6 cSt and 8 cSt partly-approved Group III base oils.

Netback levels are based on local FCA prices in markets such as Europe, India, the U.S., and China. Thereafter, netback levels are derived from regional selling prices, less marketing, handling and estimated freight costs.

Group II base oils sold on a FCA basis in the U.A.E., sourced out of European, U.S, Asia-Pacific and Red Sea producers. These grades are available FCA U.A.E, or on a truck-delivered basis within the U.A.E. and Oman. 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-$1,670/t. The high ends of the ranges refer to road tank wagon-delivered base oils.

Africa

South African sources have reconfirmed the large cargo of base oils and chemicals loading out of Rotterdam and Fawley. The latest cargo is now fixed, with the vessel loading last week with the total quantity of almost 25,000 tons. The vessel will deliver 5,000 tons of three Group I grades to receivers in Tema in Ghana. The vessel will then proceed to Durban to discharge the remaining balance of the cargo.

In addition to supplying the Ghana tender into Tema port, ExxonMobil will deliver 6,000 tons of Group I base oils to receivers in Conakry in Guinea and Abidjan in Cote d’Ivoire. The cargo will be comprised of three Group I grades – SN 150, SN 600 and bright stock.

The Lukoil cargo of up to 10,000 tons being considered for Apapa appears not to have gone ahead. Reasons behind the cancellation or delay of this cargo are not known, but the problems could rotate around the banking system in Nigeria, which shows no sign of improving.

A fascinating inquiry is placed for a vessel to take 10,000 tons of base oils from South Korea to Lagos. A vessel would load during second half of February, but with freight rates remaining exceptionally high. the rationale behind such a voyage remains unclear. The cargo would presumably consist of three grades of Group l base oils, but from which refinery source and how the sale is to be organized with banks etc. remains unclear.

Banking problems are still a deterrent to conducting business in Nigeria. The system still cannot lay hands on sufficient quantities of foreign currency, which in turn prevents local Nigerian banks from being able to open a letter of credit.

CFR levels for base oils discharging in Apapa are confirmed but are given as indications only.

Levels are established at $1,000/t for SN 150, SN 500 at around $1,050/t, and SN 900 at $1,095/t. Also, as an indication, bright stock is assessed at around $1,220/t CFR Apapa. Bright stock would have been part of the Livorno parcel and also the Rotterdam and Fawley cargo.

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.