The level of activity does vary between regions. Europe is subdued due to many players taking extended before or after Easter weekend. Africa has also been quiet as many areas observe the Christian festival while many Muslim communities have been involved in the Ramadan Holy Month, which ends April 9.

In Middle East markets many participants have been missing from their desks, taking advantage during Ramadan to visit family while waiting for the Eid al Fitr holiday at the end of Ramadan. The Eid holiday is one of major celebrations in the Muslim calendar and will interrupt markets for a few days at least.

There were few dramatic events the past other than the elections in Turkey that went against the current government. President Recip Tayyip Erdogan’s party took massive hits in centers such as Ankara and Istanbul, which lurched to opposition parties. Whether these results affect relations with Russia remains to be seen.

There could be significant changes to the Turkish economy, which have been a long time coming since most inhabitants are fed up with galloping inflation and high interest rates. Many are looking for change to the government’s economic policies. If those come about they could have major effects on the base oil scene if domestic lube blenders become reinvigorated.

Houthi rebels in Yemen continue to target merchant ships transitting through the Bab-al-Mandeb Strait in the southern Red Sea, causing most vessels that would pass that way to detour around the southern tip of Africa. This detour has affected base oil cargoes moving from Asia and the Middle East Gulf to Europe and the United States, as well as cargoes of API Group I and II base oils moving in the opposite direction.

Crude oil prices were generally steady the past week, perhaps reflecting a slowdown in trading, and some pundits predict they will stabilize for a few weeks.

Dated deliveries of Brent crude were at $86.95 per barrel late last week, now for June front month settlement, almost identical to last week. West Texas Intermediate rose slightly to $83.25/bbl, for May front month.

Low-sulfur gasoil likewise were stable, dropping around $15 to $815 per metric ton, still for April front month. Due to the holiday weekend, all of these prices were obtained from London ICE trading late March 29.

Europe

The European market for Group I exports market remains dormant, but one Spanish refiner has offered small quantities in flexies, which could be classed as export. However, there still were no offers for supplies of bulk quantities from any known source within the region.

Cepsa have offered two grades on an ex works basis, from San Roque, Spain, near Cadiz. The offers are for flexies only and pertain to solvent neutral 150 and bright stock 150 only. There are no availabilities for SN600 during April. Prices are $940 per ton and $1,160/t, respectively.

Prices for Group I oils sold within Europe rose significantly the past few days as a number of sellers imposed hikes from April 1. Some blenders continue to express concerns re getting sufficient quantities of Group I light grades to cover requirements. Some have made the decision to move over to Group II 100 neutral and 150N.

A number of maintenance turnarounds are starting to affect availabilities, and these maintenance schedules will continue over the next three months. In some instances, the absence of production for up to six weeks will have a negative effect on availabilities in the market.

Sellers have almost unanimously announced that they will look after regular lifters, who will be allocated usual quantities but will not be permitted to increase quantities.

A number of cargoes are due to land into Europe from locations in U.S. and Saudi Arabia, supplementing European production. Europe may be on the way to becoming a net importer of Group I base oils rather than the exporter it has been historically.

With Group I prices firming, and diesel prices remaining relatively stable, the Group I premium to diesel is moving towards acceptability for refiners.

Prices for Group I oils sold in Europe are firmer at between €935/t-€975/t for SN150, €980/t-€1,035/t for SN500 and €1,095/t-€1,225/t for bright stock.

The dollar exchange rate to the euro dropped to $1.07451 on Monday.

European Group II prices are steady, and with crude and feedstocks also remaining stable, some immediate pressures have been lifted to move prices higher. Suppliers of these grades have acknowledged that the timing is probably not quite right to try to hike numbers higher, with large swathes of Group II grades arriving into Europe from the U.S. Even against the added costs of import duty being levied on imports from U.S., sellers are keen to establish a share of the European Group II market which is forecast to grow exponentially over the next five years.

Importers continue to lobby Brussels for leniency on the duty element of 3.7%, which does not apply to any other type of base oil, and only started to affect imports from countries not having FTAs with the EU, when the duty waiver was reduced and finally removed.

A major turnaround has started in Rotterdam, and will have the effect of keeping the Group II market relatively tight, although with the quantities arriving from the U.S., there are no suggestions that the market will move short. The refinery’s operator, ExxonMobil, advised customers that adequate preparations have been put in place to accommodate regular customers.

European prices are at higher levels than most other regions, and there are signs that demand may start to pick up presently, with a number of sellers – those not in turnarounds – poised to take advantage.

A small parcel from South Korea was misquoted last week as arriving into Antwerp-Rotterdam-Amsterdam. In fact, the 2,000-ton cargo – consisting of 600N – was delivered into Turkey. Prices are being indicated at €1260/t on an FCA basis. How this material arrived into Turkey is not known, with shipping having had to run the gauntlet of the Houthis in the Red Sea, unless this was delivered on board a Chinese flagged vessel.

Group II prices in Europe are described as stable, assessed at €1,020/t-€1,065/t, ($1,105/t-$1,155/t) for 100N, 110N and 150N, at €1,065/t-€1,100/t ($1,145/t-$1,195/t) for 220N, and at €1,155/t-€1,200/t ($1,270/t-$1,365/t) for 600N. These prices apply to a range of oils from Europe, the U.S and Red Sea sources, all imported in bulk.

The Group II premium to diesel is around $385/t on average.

Replenishment Group III cargoes from Asia and the Middle East Gulf will be arriving into Europe during the next few weeks, having incurred extra costs for the detour around South Africa. This would normally exert upward pricing pressure, as would the fact that the Group III premium over diesel has reached its lowest level since Russia invaded Ukraine, which sent diesel values through the roof.

The problem for suppliers is that with the market potentially about to be awash with availabilities and some producers actively encouraging their distributors to accept extra cargoes, moving prices higher could be very difficult. It only requires one or two suppliers to undercut the market for prices to collapse.

The strike affecting logistics and operations at Neste’s refinery in Porvoo, Finland, was due to finish on March 31. Operations are due to return to normal, although it is believed that this may take a couple of weeks.

European prices for Group III oils with partial slates of finished lubricant approvals or with no approvals are unchanged at €1,555/t-€1,595/t for 4 and 6 cSt and at €1,565/t-€1,600/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe. Two suppliers continue to offer material at lower prices between €1295/t and €1365/t. Rerefined 4 cSt is still priced at €1,445/t-€1,495/t, on an FCA basis ex rerefinery in Germany.

Group III oils with full slates of approvals continue to trade at a premium, at €1,685/t-€1,725/t for 4 and 6 cSt and at €1,715/t-€1,745/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

There were no reported cargoes loading out of Baltic ports during the last seven days, but Russian export parcels are getting very difficult to spot in advance of vessels being chartered. Ports being utilized now are Saint Petersburg and Vyborg, this being the case since the cessation of trading through Svetly terminal in Kaliningrad. Traders involved with Russian exports are few now, with the withdrawal of European based traders following the European Union ban on all Russian hydrocarbon derivatives and the withdrawal of EU-flagged tankers offering to take Russian cargoes.

Russian cargoes moving from Baltic ports to the United Arab Emirates and Singapore are said to be given safe passage through the Bab-al-Mandeb Strait by Houthi rebels, but the methodology to get a cargo or vessel approved by Houthi authorities is completely unknown to Western sources. As will be understood, information is not forthcoming either from Russian trading companies – such as Lukoil and Litasco – neither is there any chance to get information from Yemeni sources. 

Lotos and PK Orlen appear to be prioritizing all production from Gdansk refinery to go into the domestic market in Poland or nearby countries. Previously, material from Gdansk found its way into Italian blending operations, with base oils delivered by road to northern Italy. It is unknown if this practice is now being resurrected, following the closure of Livorno refinery.

Russian FOB prices for SN 150 and SN 500 from St Petersburg are indicated only but are believed to be at extremely low levels. It has been communicated to this report that Russian prices had risen a couple of weeks back, realigning the numbers to $560/t-$575/t for SN 150, with SN 500 at around $585/t. SN 900 could be made available at around $635/t. This is understandable on the basis of escalation in crude and feedstock prices.

The elections on Sunday, March 31, in Turkey have taken precedence over all business and trading.  Turkish base oil markets continue to have an influx of Russian base oils, and with prices having risen, some blenders have tried to access European-produced base stocks from sellers such as ExxonMobil, Motor Oil Hellas and Cepsa. In the first case, supplies from Sicily or Valencia were deemed too expensive for Turkish buyers to consider, and in the other two cases, no offers were forthcoming because neither supplier had availabilities of material for export sales into Turkey.

The elections have thrown up some interesting results, with Erdogan having his wings clipped by opposition parties being successful in major centers, such as Istanbul and Ankara. These indications on a local basis could suggest changes happening when the national elections take place in 2028.

Inflation remains very high and is one of the main grievances people in Turkey have. They understand that high interest rates are necessary to curb inflation – contrary to economic actions taken under the current government – although this has now been reversed, with the Central Bank commissioned to raise rates to whatever levels are required. One of the problems facing traders and blenders in Turkey is the difficulty in accessing foreign currency to be able to open letters of credit for international purchases of base oils. The Korean cargo of only 2,000 tons of 600N perhaps reflects the ability of buyers to buy cargoes on the open market.

Tupras at Izmir prices remain valid this week with levels ex-refinery as follows. Spindle oil priced at $965/t (Tl 31,116), SN 150 at $907/t (Tl 29,269), SN 500 at $861/t (Tl 27,784) and bright stock at $1,028/t (Tl 33,167). Prices in Turkish lira are ex-rack plus a loading charge of Tl 5,150/t.

Group II ex-tank prices remain at around €1,175/t-€1,195/t for the three lower vis grades – 100N, 150N and 220N – with 600N at €1,385/t-€1,475/t. The new cargo from Korea has not been factored into the pricing as yet but is indicated at $1,260/t (€1,175/t) basis FCA Gebze, which would appear to be well below market prices. Group II grades may be sourced from the Red Sea, the United States, South Korea or Rotterdam,

Partly-approved Group III base oils being sold FCA, with Tatneft continuing to import and resell their 4 centiStoke grade, which is priced at around €1,420/t. Supplies that previously arrived from the U.A.E., Bahrain and Asia-Pacific remain at €1,575/t-€1,620/t FCA. It is unclear how supplies from the Middle East Gulf and the Far East will be affected, since it will be uneconomic for cargoes to be re-routed via the Cape, then sail through the Mediterranean, before discharging in Turkey. Smaller feeder cargoes may load out of Antwerp-Rotterdam-Amsterdam, following the discharge of the main cargo.

Fully-approved Group III grades from Cartagena in Spain are being delivered into Gemlik and resold on an FCA basis to local blenders, which require these grades to meet formulations for fully-approved lubricants. Prices are maintained at €1,920/t-€1,965/t FCA.

Middle East

Red Sea shipping traffic dwindled as a result of the Houthi strikes against merchant marine vessels plying their trade through the Bab-al-Mandeb Strait in the Red Sea. Shipping problems remain in loading out of Yanbu and Jeddah for vessels moving south in the Red Sea. North bound cargoes have been loaded, but these are smaller and fewer than the large parcels that loaded for the west coast of India and the United Arab Emirates previously.

Other cargoes to the west coast of India and the U.A.E. remain a problem, with few vessels willing to take the gamble of the Houthi attacks. Some owners have decreed that no vessels will enter the Red Sea or sail close to Aden since protection and indemnity insurance clubs have forbidden any operations in that region.

Supplies of Group III base oils from Onsan in South Korea normally delivered to Yanbu in 5,000-ton parcels by sea will be under review. The absence of Group III supplies could affect blending and formulations for finished lubricants in Yanbu.

Middle East Gulf regions reflect slower activity, with the Ramadan being underway, with another 10 days or so before this year’s Holy Month finishes on April 9. Eid al Fitr holiday then takes place, lasting around three days, so it will be another couple of weeks before business returns to normal in parts of the Middle East.

Sources in the U.A.E. maintain and confirm that Saudi cargoes from Luberef in Yanbu and Jeddah are being delayed and cancelled, with no large cargoes servicing ports such as Fujairah, Jebel Ali, Ras Al Khaimah and Hamriyah. Sources say that alternative arrangements are being considered by taking Group I cargoes from Indian suppliers, and Group II cargoes from Asia-Pacific sources in Korea and Singapore.

Russian base oils are being delivered into the U.A.E., but prices having moved upwards, these grades are now indicated at around $665/t for SN 150, with $695/t for quantities of SN 500. A parcel of around 5,000 tons loaded from Limas terminal in Turkey for receivers in Hamriyah. It is believed that traders are again looking to take a Russian cargo of three grades – SN 150, SN 500 and SN 900 – into Hamriyah and then re-export this cargo to Nigeria. Even with high freight rates, the relatively low delivered prices into the U.A.E. will provide competitive FOB levels and will allow traders to “export” from the U.A.E., delivering into Apapa. The cargo will be of U.A.E. origin.

Netback values for Group III exports from the Middle East Gulf for partly-approved base oils from Adnoc and Bapco have levels maintained at the moment but are being kept under review due to higher freight costs for cargoes moving to the U.S. and Europe. From information received from shipping broker sources, their rates may have increased by anything between $50/t and $80/t. Selling prices continue to remain stable and have not yet responded to higher costs. 

Netbacks are indicated at $1,460/t-$1,510/t for the 4 cSt, 6 cSt and 8 cSt partly-proved and non-approved Group III grades. These cargoes are being moved in parcels of 8,000 to 10,000 tons. Netbacks for Shell gas-to-liquids Group III+ base oils from Ras Laffan in Qatar remain at around $1,475/t-$1,525/t due to larger cargo sizes of around 25,000 tons per parcel, providing relatively lower freight rates.

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

Group II base oils sold ex-tank in the U.A.E., or often on a truck- delivered basis in the U.A.E. and Oman. Prices are maintained, having been recently raised due to increased freight costs from the U.S. and Europe. While few, if any, cargoes are arriving from Yanbu, the market is tight at a time when demand will be high after Eid. As mentioned, buyers are looking at alternative sources, such as South Korea and Singapore, to cover this market. Levels are at $1,685/t-$1,725/t for 100N, 150N and 220N, with 600N at $1,775/t-$1,825/t. The high ends of the ranges refer to road tank wagon deliveries to buyers in the U.A.E. and Oman.

Africa

South Africa shipping sources confirmed that a large European base oil cargo will load during second half April out of Rotterdam and Fawley, sailing to Durban for discharge. Some contacts have suggested that this could be termed an export cargo – which strictly speaking, it is – but then again there are no third parties involved in this parcel, and the chartered vessel will deliver to an affiliated company that will the distribute the cargo to various agencies. The parcel will be comprised of around 19,000 tons of base oils. A shipping inquiry is out on the market, but at the time of writing this report, no fixture had been confirmed. 

West African news is that another 9,000-10,000 tons cargo will load out of Fawley for receivers in Conakry in Guinea, Abidjan in Cote d’Ivoire, and Tema in Ghana. The Ghana delivery will be to cover the tender, which has been successfully retained by a major.

The 8,000-10,000 tons cargo that loaded out of the Baltic with three grades of Russian export barrels – SN 150, SN 500 and SN 900 – is on the high seas and will arrive into Apapa sometime later this month. The Minsk based trader, one of a few companies dealing in Russian base oil exports, handled a smaller cargo of 6,000 tons in December and January into Nigeria.

Reports were that some Nigerian receivers were not keen to take Russian cargoes for fear of reprisals or sanctions but also reluctance from some blenders to use these lower quality base oils – where extra additives including viscosity index improvers have to be utilized – costing more to use in blends. But price is the key to making these deals work, and with very low FOB numbers, traders can make decent margins from these deals. 

The reports of a possible re-exported Russian cargo from the U.A.E. is being promoted, with prices offered to two receivers in Lagos and U.A.E. material being considered for further cargoes into Nigeria. Talks continue in the U.A.E., but these discussions are at an early stage.

The large 18,000-ton cargo from the United States arrived in Apapa with discharge completed. The cargo was sold to multi receivers in Lagos. Landed prices are confirmed in the ranges below, but future cargoes from the U.S. will have to have higher prices, since FOB levels are moving upwards, and freight rates are also rising. Russian offers for material are holding price expectations lower than other traders would want, which in turn leads to difficult negotiations with receivers on future cargoes from the U.S., for example.

Confirmed CFR Apapa prices are indicated in ranges at around $930/t-$950/t for SN 150, $1,000/t-$1,020/t for SN 500 and SN 900 at around $1,040/t-$1,060/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.

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