Weekly EMEA Base Oil Price Report

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Base oil prices are mainly holding firm throughout Europe, the Middle East and Africa, as supply pressures keep values higher than what would generally be expected at this time of year.

Europe continues to experience availability issues for API Group I grades, with greater demand for heavier neutrals rather than the lighter ends. One source suggested last week that a number of blenders switched to Group II the past year when Group I light neutrals were extremely short and many blenders could not access sufficient quantities.

Having switched to lighter-viscosity Group II base stocks, blenders are not about to change back to Group l, perhaps expecting the latter to eventually be overtaken by the former.

Certainly within Europe there are a dwindling number of producers of Group l. Rumors are circulating that one Group I refinery will convert to Group II. It has not been confirmed which producer is considering this project, market insiders have speculated it could be one of the refiners along the Mediterranean.

This move would make sense to a number of refiners currently facing major capital expenditure to maintain existing Group I capacity. In such a predicament, it might make sense to build a new Group II facility that would launch Europe into the future. With only one large indigenous Group II producer in the region, in Rotterdam, there is certainly scope for further players to get involved.

Group II imports from the United States will continue, since the plants built in that market were designed not only to cover the U.S. market, but also to make surplus for exports, particularly for Europe.

There is talk around the market of more Group II capacity being drafted into Middle East Gulf regions. Adnoc’s plant in Ruwais, United Arab Emirates, makes Group III oils and just a small amount of Group II, so the latter part of its operation could perhaps be expanded to help cover increasing requirements in the region, which currently relies on imports from Saudi Arabia, the U.S., Europe and Asia-Pacific sources. In Middle East Gulf regions, forecasts are that Group I will continue to be the day-to-day workhorse base oil but that Group II demand will grow exponentially over the next few years.

South and East Africa will also see rising demand for premium base oils in a general move away from Group I supplies, although in West Africa, those quantum steps to premium base oil use may yet be some time away, with Nigeria, Ghana, Cote d’Ivoire and Guinea all reliant on Group I imports from European and U.S. sources. Russian traders are also targeting the Nigerian market, even against a backdrop of local reluctance to use Russian material for political and quality reasons. 

Crude oil prices appear to have stabilized around levels reached last week, with only insignificant movements during the past seven days. Questions are being asked regarding poor demand from major buyers, with one commentator postulating that cheaper Russian barrels are tempting large purchasers like China and India away from traditional sellers such as Saudi Arabia, Kuwait and United Arab Emirates.

The availability of Russian crude is clearly a major factor in the demand picture at the moment, but buyers in India offered comments which supported them purchasing large quantities of Urals crude oil at below $40 per barrel.

Dated deliveries of Brent crude were at $85.75 per barrel Monday, now for September front month settlement, some $0.20 higher than last week. West Texas Intermediate reached $84.50/bbl, for August front month. This level is around $3.50 higher than last reported, narrowing the crack between WTI and dated Brent to around $2.

Low-sulfur gasoil prices have firmed but not on a massive scale. This petroleum product comes in at $795 per metric ton, some $15 higher than last week’s level,still for July front month. All of these prices were obtained from London ICE trading late July 1.

Europe

With Europe remaining tight for supplies and availabilities of Group I base oils, there are still no quantities available for export offers. Moreover, there are few if any destinations available for European Group I cargoes.

Traditional export markets such as Nigeria are basically closed to traders since the payment situation is farcical.  Arbitrage opportunities are closed to the Middle East Gulf and India, due to higher freight costs and the logistics involved to send cargoes around the Cape of Good Hope. Destinations such as Guinea, Cote d’Ivoire and Ghana in West Africa are being covered by regular shipments by ExxonMobil out of Rotterdam and Fawley, United Kingdom, with both refineries having completed major turnarounds.

Instead of exporting, Europe is now importing Group I, with shipments arriving from the U.S., Egypt, Turkmenistan and the Red Sea. Regional markets around Europe are relatively tight, so more Group I imports are being planned to come in during July and August.

European markets remain tight even despite availabilities returning from Port Jerome, France. Mol in Hungary has begun an extended maintenance turnaround at its refinery in Szazhalombatta, Hungary, and clarification is being sought about the status of Group I base oil production from that site.

So far prices have not risen in July. The stabilizing of crude and petroleum products pricing may have reduced the upward pressure on Group I numbers, which rose significantly the past couple months.

In Spain there are still some issues following the recent fire at Repsol’s Puertollano refinery, and Cepsa’s refinery in Algeciras reportedly has no availabilities of solvent neutral 600 or SN500 going into July – just availabilities of SN150 and bright stock quoted at $1,150 per ton and $1,390/t, respectively. These issues could affect the Spanish and Portuguese base oil markets.

Overall prices for Group I sales in Europe are unchanged at between €1,013/t and €1,150/t for SN150, €1,075/t-€1,215/t for SN500 and bright stock at €1,385/t-€1,445/t.

The dollar exchange rate to the euro was barely changed at $1.07229 Monday. The average price differential across all grades between Group I sales within the region and notional exports is still reported her and is unchanged at €10/t-€25/t.

Group II prices remain stable. One U.S. importer had announced hikes during the second half of June following markups in the U.S. market, but that  seller was starting from a low level behind competitors.

Major suppliers have various bands of Group II prices that are wide ranging, and major buyers are able to negotiate prices more than €100/t lower than those attainable for smaller buyers taking only a couple truck loads per month. Larger buyers, taking quantities of Group II grades in barges for example, are able to command much better prices due to offtake.

Group II prices are unchanged this week at €1,090/t-€1,135/t, ($1,170/t-$1,215/t) for 110 neutral and 150N, at €1,120/t-€1,155/t ($1,200/t-$1,235/t) for 220N and at €1,220/t-€1,265/t ($1,305/t-$1,355/t) for 600N. All of these prices apply to a range of Group II oils from European, U.S., Red Sea and Asia-Pacific sources, all imported in bulk.

Group III prices continue to come under pressure, thanks in part to the amount of shipments arriving into the market. There is word now of a large 10,000 ton tender being won by a European trader, and this quantity – perhaps along with another quantity of 14,000-15,000 tons – will be shipped in one or two parcels from Sitra, Bahrain, to Antwerp-Rotterdam-Amsterdam. Prices in tenders are typically lower than offers on the table for Group III oils with partial slates of finished lubricant approvals or without approvals, which are sold around Europe by appointed distributors.

It is puzzling how Bapco, the producer and seller for the tender, can appoint an exclusive distributor – Stasco – and then offer a large quantity of Group III base oils to third parties in a spot tender with no restrictions on destination.

Group III demand remains muted, but some lube blenders recently forecasted an upswing in demand for finished lubes. This has yet to affect larger quantities of Group III being bought to meet increasing demand.

European prices for Group III oils with partial approals are unchanged at €1,460/t-€1,495/t for 4 and 6 cSt oils and at €1,435/t-€1,455/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

A couple of suppliers are still offering lower FCA prices around €1,260/t-€1,270/t for 4 cSt, but market sources said these prices are only available to regular lifters, not spot purchasers.

Prices for rerefined Group III oils are unchanged at €1,425/t-€1,455/t for 4 and 6 cSt oils, on an FCA basis ex rerefinery in Germany.

Prices for Group III oils with full slates of approvals are unchanged at €1,785/t-€1,820/t for 4 and 6 cSt and at €1,825/t-€1,835/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic & Black Sea

No Russian cargoes are reported being arranged for Nigeria where payment problems are only becoming worse.

There may be other problems for Russian barrels going into Nigeria, with a number of blenders opting out of using them due to quality parameters. In addition, political pressures are being exerted on buyers to refrain from purchasing Russian material. With no other cargoes arriving into Nigeria, the Russian option may be the only available alternative to blenders running out of blend stocks during the next few weeks. 

Lukoil loaded cargoes out of the Baltic that are bound for India and Singapore, and the company is also delivering into Gebze, Turkey. More Baltic cargoes are being loaded than is normal, perhaps connected in some way to damage to the base oils production at Volgograd refinery in southern Russia. Ukraine bombed this facility some four weeks ago, but the extent of damage to the refinery is unclear.

FOB prices for Russian SN150 and SN500 ex St Petersburg or Vyborg, Russia, are estimated on a netback basis from the last prices offered into Nigeria, around five weeks ago. Taking freight and margins into consideration, FOB numbers would be between $710/t-$735/t for SN150 and $740/t-$765/t for SN500. Blended SN900 would be priced at around $795/t using SN1200 plus various quantities of either SN150 or SN500.

Lotos reports no availabilities of Group I base oils for offers FOB ex Gdansk. All availabilities from the refinery are being sold in East European markets, where Group I is currently short due to Mol’s turnaround.

The previously mentioned Black Sea movement of around 2,000 tons, perhaps in flexi-tanks, was bought by German traders from the producer in Turkmenistan. The logistics of this parcel are mind boggling, with the material being firstly transported either by road or rail to an eastern Black Sea port where the material would then be loaded into flexies in containers, then finally shipped across the Black Sea to a European port, perhaps Constanza, Romania, or Bourgas, Bulgaria.

More reports have reached this writer regarding blending operations in Turkey struggling to survive on a day-to-day basis. Commercial borrowing is almost impossible, and without financial reserves, some companies are shutting up shop and releasing staff.

Local markets are not performing, and some blenders are resorting to buying finished branded lubricants to resell in the Turkish market. Without banking back-up and access to dollars, businesses are between a rock and a hard place. Many blenders in Turkey are working only with Russian base oils and also Russian additives, which are freely available and can be bought through government sponsorships.

There is a dearth of European quality base oils in Turkey. Motor Oil Hellas sent out numbers for two Group I grades, SN150 and SN600, with prices which were higher than current European Group II levels. Needless to say, no buyers have responded to the offer, which was probably designed to deflect any buying interest.

Russian Group I base oils continue to dominate the Turkish market, with cargoes from the Baltic regularly moving into Gebze – parcels consisting of around 5,000 tons of SN500, sometimes with smaller quantities of SN150, depending on vessel availability. Most of the vessels chartered by Lukoil are Turkish flagged ships making return voyages to home ports in Turkey, following discharging in northern Europe or the Baltic.

Russian barrels are estimated to be priced in Turkey at $825/t-$850/t for SN150, and $835/t-$865/t for SN500. European suppliers cannot compete with Russian prices. 

Local refiner Tupras has maintained the prices circulated three weeks ago: 34,326 lira per ton for spindle oil, Tl 29,745/t for SN150, Tl 31,829/t for SN500 and Tl 43,036 for bright stock. Prices in lira are offered ex rack, plus a loading charge of Tl 5,150/t.

Group II prices remain unchanged at €1,290/t-€1,345/t 100N, 150N and 220N and at €1,475/t-€1,525/t for 600N. These grades were previously sold in dollars, but dollars are now unavailable.

Group II base oils were previously imported from Red Sea sources, the U.S. or South Korea, but now Russian Group II grades are being offered in Turkey and are considerably lower in price. Prices for Russian Group II base oils were not available from contacted sources. Cargoes and flexies from South Korea are no longer available due to Houthi attacks on commercial shipping in the Red Sea.

Group III with partial approvals or no approvals include 4 cSt from Tatneft. This grade is being priced now at around €1,445/t. Supplies in tank, having previously been imported from the U.A.E., Bahrain and Asia-Pacific and had FCA prices between €1,625/t-€1,670/t, but most of these stocks are no longer available.

The problem for supply of Group III base oils from the Middle East Gulf and Malaysia is that a vessel delivering either bulk or flexies in containers would have to sail around the Cape and then into the Mediterranean to discharge in a Turkish port. This voyage is uneconomic and cannot be considered in supplying quantities of Group III from those sources into the Turkish market.

Smaller quantities of fully-approved Group III grades from Cartagena refinery in Spain, are regularly delivered into Gemlik and are resold on an FCA basis to local blenders with prices maintained between €1,960/t-€1,995/t on an FCA

basis.

Middle East

In the Red Sea there have been reports from Indian sources alluding that Houthis are granting safe passage to Indian flagged vessels making the transit through the Bab-al-Mandeb Strait in the southern Red Sea. Quite how this has been achieved is not disclosed, but other sources in the U.A.E. have commented that only western flagged vessels are being targeted by the Houthis and that all other “neutral” vessels are granted safe passage.

Getting confirmation and a statement from Yemen is impossible, but this disclosure could explain how so many cargoes have been moved from Yanbu and Jeddah, Saudi Arabia, to the West Coast of India and the U.A.E. It has also been suggested that Iran holds the decisions on which vessels are attacked, and which are allowed to pass through the strait.

Another S-Oil cargo of Group I grades for Northwestern Europe is being planned for Antwerp-Rotterdam-Amsterdam. This cargo will load toward the end of July and will arrive into Antwerp-Rotterdam-Amsterdam during August or early September.

In Iran, Iranol and Sepahan have raised export prices for SN500 and SN150. Cargoes coming out of Bander Khomeini and Bandar Bushehr, are moving relatively small quantities of base oils into the U.A.E., but no longer into Indian ports according to the latest data, which shows that India now has a surplus of Group I and is looking to export quantities to Pakistan and the U.A.E. This trade could be useful for blenders in the U.A.E. who are facing Group I shortages in the absence of imports from Europe or the U.S.

Group III cargoes from Bahrain, Qatar and Al Ruwais are now more complicated because fewer vessels are available in the Gulf. Those that do become available are very expensive to charter given the extra voyage times and additional logistics for crew, bunkering and victualling. Some owners have said that they are more content with vessels being longer at sea, since with voyage times extended, the vessel is being optimally employed, rather than accepting shorter voyages with more frequent port calls.

In the U.A.E., Group I imports are arriving in Hamriyah and Ras al Khaimah from Thailand and now India, Russia and also from Saudi Arabia. Reports indicated record quantities of base oils were shipped from Saudi Arabia during April and May. This is contrary to some reports from U.A.E. sources who confirmed that there were still problems shipping from Yanbu and Jeddah. Just who is right is being investigated by this report.

Russian base oil cargoes are being discharged in Hamriyah, and this report has obtained the latest price indications from U.A.E. sources: $835/t for SN150 and $845/t for SN500, both on a CFR basis. These prices are $15/t higher than last heard, perhaps due to increased freight rates.

Parcels of between 5,000-12,000 tons have loaded from Limas terminal in Turkey or from northern Baltic ports. This report is still trying to establish the quantities of Russian base oils imported into U.A.E. this year to date.

Netbacks for partially approved Group III exports from the Middle East Gulf ports of Al Ruwais and Sitra unchanged again at $1,425/t-$1,475/t for 4, 6 cSt and 8 cSt oils.

Netbacks for gas-to-liquids Group III+ oils ex Ras Laffan, Qatar, are also unchanged at $1,500/t-$1,560/t. Primary economics and cost allocations of Shell cargoes are not disclosed.

Netback levels are assessed from distributor selling prices less estimated marketing, handling and freight costs plus margins.

Prices for Group II base oils being sold ex tank in the U.A.E. or on a truck delivered basis in the U.A.E. and Oman are unchanged this week though they are relatively high compared to other regions at $1,685/t-$1,725/t for 100N, 150N and 220N and at $1,775/t-$1,825/t for 600N. The high ends of the ranges refer to RTW deliveries to buyers in remote locations in the U.A.E. and Oman.

Africa

West Africa reports contain news that a cargo will promptly load for ExxonMobil, solely out of Fawley, with around 10,000 tons of three Group I grades for receivers in Guinea, Cote d’Ivoire and Ghana. Five thousand tons of three grades will cover the contracted supply in Tema for the Ghana annual tender. The balance of the cargo will be split into two parcels discharging in Abidjan, Cote d’Ivoire and Conakry, Guinea.

Nigerian news is that no progress has been made in the government and local banks problems in accessing dollars. Without assurances of payment or timing thereof, traders are staying away from importing base oils into Apapa, although one trader has been scouring U.S. markets for a cargo of Group I base stocks but with little success.

There are supplies and possible material to load, but FOB prices plus increases in freight rates have made the delivered prices totally unacceptable to receivers in Apapa, who have been regularly receiving offers for Russian material out of the Baltic with price ideas around $150/t-$200 lower than material from the U.S.

One inquiry has been issued from receivers with a company based in the United Kingdom. The problem is that it was received by a trader last week, and delivery laycan was to be July 3 or 4. The parcel was for a total of around 5,000 tons of SN150, SN500 and SN900.

The Nigerian base oil market is in danger of receiving no base oil in the foreseeable future, and meanwhile the rainy season has started running through until September. The rains slow down the movement of goods and services due to roads flooding.

The cargo that was to load out of El Dekheila does not appear to be moving. A quantity of 5,000-6,000 tons of bright stock was purchased from a U.S. East Coast refinery and subsequently shipped to Egypt. Bright stock will be blended with other base oils to produce SN900. Russian origin SN150 and SN500 would make up the balance of the cargo.

The parcel remains in tank and has not been loaded and is now eight weeks late for arrival into Apapa. Payment issues may be the reason for the delay since part of the cargo was sold to Nigeria’s NNPC, which is desperately looking for its supply of base oils.

Prices for possible future trades, other than Russian barrels, are indicated higher, at around $1,125/t-$1,165/t for SN150, $1,195/t-$1,225/t for SN500 and $1,275/t-$1,300/t for bright stock, all on a CFR basis.

Russian offers have been much lower, the most recently heard levels still indicated at $930/t for SN150, $970/t for SN500 and $1,020/t for SN900.

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.

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