However, one major situation is affecting base oil movements going east- and westwards through the Suez Canal and Red Sea. Prior to Christmas, some base oil participants were postulating that logistical problems caused by Houthi attacks on merchant vessels transiting the Red’s Bab al-Mandeb strait would disappear due to action with a coalition flotilla of warships moving into the area.

Houthis are targeting tonnage which has “any connection” to Israel, since the Iranian backed rebels are supporting Hamas in Gaza, but at least some of the targeted vessels have no connection to Israel.

A few of the operators and owners of vessels have reversed the decision to send vessels around the Cape of Good Hope in South Africa due, in the main, to demurrage problems incurred at Durban port, with delays of ten days or more for loading of bunkers, affecting schedules for goods to be delivered into European and United States destinations.

Another reason for the reversal of that decision was that allied warships would be on patrol to protect tonnage passing through the strait, but further attacks have been launched from Yemen. Drones and missiles have intercepted most, but a Maersk container ship was reportedly struck by a drone and sustained minor damage before continuing north toward the Suez Canal.

These events are of great importance to base oil shipments through the Red Sea. Some ship owners are unwilling to offer vessels for charter through those waters, whilst vessels that have already loaded cargoes or are already in transit are encountering delays and demurrage costs, which will have only one effect on delivered prices. Logistics have become a nightmare for both bulk and containerized shipments of base oils and additives, and liner services for container ships are in disarray.

There are also obvious risks to crude and petroleum product supplies to Western refineries and receivers, with cargo trading taking on a whole new outlook on risk and assessment.  

Apart from the danger to crew and hull, costs of shipping have risen dramatically, and will continue to rise as long as the threat continues, due to higher insurance costs.

In spite of Red Sea events, crude oil prices dipped during the past week, reflecting poor demand from major economies such as China, which remains slow to recovery following the coronavirus pandemic.

Dated deliveries of Brent closed Friday at $77.10 per barrel, down around $3 from one week earlier, now for March front month settlement. West Texas Intermediate also dropped to $71.60/bbl, still for February front month.

Low-sulfur gasoil prices slid $40 per metric ton over the week to $751 per metric ton, for January front month. All of these prices were obtained from London ICE trading late Friday Dec. 29.

Europe

European Group I export markets are dull and very quiet, with few availabilities for export cargoes. The exception to the above is a large cargo reportedly loaded out of Livorno, Italy, during the last few days of December. This event has not yet been confirmed, since sources are missing from desks, but information is being sought this week about the quantities, grade and destination. Nigeria seems an option.

Prices for Group I exports from Europe are maintained this week at between $750/t and $810/t for solvent neutral 150, $875/t-$955/t for SN500 and $1,130/t-$1,225/t for bright stock.

Prices for Group I trade within Europe are static, with most buyers and sellers taking holidays between Christmas and New Year. A few deliveries of base oils were made during last week, but these were all previously arranged.

Prices are assessed at €895/t-€950/t for SN150, €975/t-€1065/t for SN500 and €1,185/t-€1,295/t for bright stock. The dollar’s exchange rate to the euro was noted at $1.10374 Dec. 29. The price differential between Group I exports from Europe and sales within the region remained at €95/t-€180/t, exports being lower.

Following offers of temporary volume allowances and additional discounting, European Group II prices stayed in the same ranges as those identified last week: €1,075/t-€1,185/t ($1,170/t-$1,300/t) for 100 neutral, 150N and 220N; and at €1,255/t-€1,335/t ($1,375/t-$1,445/t) for 600N.

These prices apply to a large range of Group II oils from European, U.S., Asia-Pacific and Red Sea sources, imported in bulk and in flexi-tanks. In Europe, 100N and 150N are typically priced higher than 220N due to the demand pattern with higher usage of the two light grades.

Group III prices in Europe are unchaged this week. Values for those with partial slates of finished lubricant approvals or with no approvals are at €1,325/t-€1,415/t for 4 and 6 centiStoke, while 8 cSt remains at €1,310/t-€1,355/t, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe. Rerefined 4 cSt remains assessed at €1,320/t-€1,375/t, on an FCA basis ex rerefinery in Germany. Prices for fully-approved Group III base oils from Spain are unchanged at €1,665/t-€1,700/t for 4 and 6 cSt and at €1,645/t-€1,660/t for 8 cSt. These prices apply to FCA sales ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

There is a lack of any news on the base oil quantities that were available out of Vyborg, and it is unknown whether this cargo has been loaded. No vessel information was available from shipping reports. The cargo was to be delivered to receivers in Apapa, Nigeria.

Russian refineries will start the year still desperate to move material to export markets and prices may show lower over the coming days.

Current FOB prices for SN 150 and SN 500 from the Baltic remain estimated around $725/t for SN 150, with SN 500 around $740/t. Blended SN 900 could be put at around $785/t.

No news was received from Turkish sources during last week, with many people in that Muslim nation deciding to celebrate the Christian festival by taking holidays in line with the rest of Europe.

Russian imports of SN 150 and SN 500 remain the number one supply of Group I base oils going into the Turkish market. It is almost as if the Turkish market has been “annexed” as part of the Russian domestic scene. Russian Group I base oil prices remain at the same levels, with CIF indications for SN 150 at around €875/t, and SN 500 around €895/t.

It is assumed that Tupras prices remain unchanged, with SN 150 at $1,166/t (Tl 24,519), SN 500 at $1,227 pmt (Tl 27,024) and bright stock at $1,450/t (Tl 33,167). Prices in Turkish lira are ex-rack plus a loading charge of Tl 5,150/t. 

Group II prices ex-tank are unchanged, with levels around €1,195/t-€1,175/t for the three lower vis grades – 100N, 150N and 220N – with 600N at €1,385/t-€1,475/t. Group II grades may be sourced from the Red Sea, the United States, South Korea or Rotterdam.

Partly-approved Group III base oils FCA have prices maintained, with Tatneft 4 centiStoke grade at €1,325/t. Supplies from the United Arab Emirates, Bahrain and Asia-Pacific are at €1,475/t-€1,525/t FCA.

Fully-approved Group III grades delivered into Gemlik have prices maintained at €1,865/t-€1,895/t FCA.

Middle East

One problem facing Luberef loading cargoes out of Yanbu and Jeddah may be a lack of available vessels to load cargoes for regular receivers in India, the U.A.E., Pakistan, and other export destinations, such as South Africa and Singapore, all of which have to transit the Bab al-Mandeb Strait. With reluctance from many vessel operators to send ships into the Red Sea, there may be a dearth of ships for Saudi Aramco to charter. Saudi flagged vessels may be discriminated against by Houthi rebels, due to the recent conflict between Saudi Arabia and the Yemeni rebels, coupled with the suggestion that Israel and Saudi Arabia were in talks and were close to “an arrangement.”

Information on this subject will be sought during the course of this week.

Not many sources in the Middle East Gulf were available for comments during last week, although most of these parties will be returning to offices and desks this week.

One interesting snippet heard, was that the large trader “Gunvor” has entered the base oil market, with representation in Dubai.

Companies in the Middle East Gulf are being affected by a lack of suitable vessels to load, with Group III grades going westwards to Europe and the U.S. through the Suez Canal. Also base oils bound for Middle East Gulf ports could be delayed or cancelled. The situation could lead to tight availabilities of Group III base oils within Europe and the U.S.

Russian base oils continue to be delivered into the U.A.E., with prices currently around $875/t for SN 150, with $895/t for quantities of SN 500.

Group III suppliers Adnoc and Bapco have loaded cargoes for the west coast of India and mainland China to be received by distributors in those regions.

Netbacks for partly-approved base oils from Al Ruwais and Sitra remain unchanged this week, with netback levels assessed at $1,410/t-$1,455/t, for 4 cSt, 6 cSt and 8 cSt partly-approved Group III base oils.

Netbacks for gas-to-liquid Group III+ base oils from Ras Laffan in Qatar are also maintained at around $1,520/t-$1,575/t.

Netback levels are established from distributors’ selling prices, less estimated marketing, margins, handling and freight costs.

Group II base oil prices for material resold FCA in the U.A.E. are maintained at $1,565/t-$1,595/t for the light vis grades 100N, 150N and 220N, with 600N at $1,695/t-$1,760/t. The high ends of the ranges refer to road tank wagon deliveries to buyers in the U.A.E. and Oman.

Africa

Durban port in South Africa has become a major supply hub for vessels that were diverted around the Cape. Waiting times in Durban port were reported and reconfirmed at an average of 230 hours, with vessels looking to take on bunkers, water and food supplies, while effecting crew changes. This is due to lack of other suitable facilities in sub-Saharan African ports, with vessels enroute to Europe and U.S.

West African news was missing during last week, but players will be available later this week, following the holiday period.

It is hoped to glean some information on the Baltic cargo which may have loaded out of Vyborg – a Russian port in the Gulf of Finland – and also if the Livorno parcel is destined for receivers in Apapa.

Prices are maintained for this report, with CFR Apapa prices and are assessed around $975/t for SN 150, $1,020/t for SN 500 and SN 900 at around $1,145/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.