Group I prices in Europe continued to rise as many producers imposed markups that took effect May 1. Group I supply is tightening, with not many producers having large quantities of stock, stores of now banned Russian oils depleted and multiple refineries closed temporarily for maintenance turnarounds or preparing to begin them. Many sources now report difficulty finding larger quantities for export destinations.

This may open the door for Group I barrels to be imported into the European markets, as a few instances of this practice have already occurred. Last week a 5,000-ton parcel loaded in Jeddah, Saudi Arabia, bound for Northwestern Europe, and there are other instances of shipping inquiries for Group I base oils coming into the European market from sources in the United States.

The ban on Russian base oils by the European Union and allied countries in Scandinavia and the United Kingdom has caused changes in trading patterns and may continue to do so.

The Group III camp had some interesting news last week: Two different parties were reported to be shipping product from Malaysia – Petronas, which owns and operates a Group III plant in Kuala Lumpur, and a trader said to be buying directly from the oil company and shipping cargo-sized quantities to Europe. It’s an unusual situation and one that reportedly is causing hard feelings between Petronas and its representatives in Europe.   

The other unusual aspect of this business is that the trader in question is able to offer lower prices than the direct sales from Petronas in Europe. Such situations sometimes devolve into legal challenges.

Crude and feedstock prices have dipped across all markets the past week, perhaps signaling that crude oil demand is waning, particularly in China. The downward trend is happening despite a recent decision by the OPEC+ group of oil-producing countries to reduce production.

Brent crude and West Texas Intermediate both decreased around $2.5 per barrel, leaving the crack between the benchmarks around $4. Dated deliveries of Brent fell to $79.30/bbl, now for July front month settlement, while West Texas Intermediate slid to $75.60/bbl, still for June front month.

Low-sulfur gas oil prices fell around $35 per ton to $690/t, still for May front month. All three products rose above the troughs that they hit, however, perhaps indicating volatility in the markets. The above prices were obtained from London ICE trading late May 1.

Europe

Once again there were very few offers the past week for Group I exports from Europe, but those that were reported indicated small hikes from prices quoted during April.  Alternative sources such as refiners in the U.S. and the Red Sea are able to offer lower prices and extensive availability for all Group I grades, as few European producers can currently offer large parcels for export.

Turkish markets have gone quiet following a mini surge a few weeks ago. Looming elections, the end of Ramadan and the Eid holiday, and the noticeable economic downturn after the recent earthquake, have all contributed to this market going slower.

There are still some offers for material from Italy and Greece, but the latter source does not have much availability, so offers to ship into Turkey may take a breather.

Prices for European Group I exports are now assessed between $995/t and $1,025/t for solvent neutral 150 and at $1,070/t-$1,120/t for SN500, both on an FOB basis. Bright stock is being offered at $1,275/t-$1,330/t, depending on source and quantity, but to repeat, offers are extremely limited for material coming out of Europe.

Prices for Group I sales within Europe rose in response to an increase in purchases, which in turn followed an uptick in finished lubricant demand. As mentioned, Group I imports from areas such as the Red Sea and the U.S. are now showing up in Europe. Sellers are prioritizing local markets where demand is improving, rather than export destinations, which offer lower prices.

Maintenance turnarounds are causing uncertainty in the markets, with some producers commenting that they may have reduced quantities for sale during their shutdowns.

Some buyers said they intend to continue making small, more frequent purchases, but this practice may start to change should the Group I supply tightens.

The markups imposed this week drew few complaints or counteroffers from buyers, perhaps indicating that the increases were expected. Values are now at €1,050/t-€1,080/t for SN150, €1,155/t-€1,185/t for SN500 and around €1,390/t for bright stock. Decreasing crude and feedstock costs could offset upward pressure from rising base oil demand, but if raw material costs reverse course, it could alter the equation.

The euro’s exchange rate against the U.S. dollar slipped the past week to $1.0973 on May 1. The price differential between Group I exports and sales within the region rose to €125/t-€185/t, exports being lower.

European demand for Group II oils is increasing, as blenders are keen to stock up for summer, when commercial and industrial activity gain pace. There are rumors around that EU and U.S. officials may implement a Free Trade Agreement. If so, it would cancel the 3.7% import duty currently charged to Group II imports from the U.S. This would remove a thorn from sellers of U.S. Group II in Europe, for whom the duty represents an additional cost of doing business.

Group II prices are adjusted this week to €1,090/t-€1,175/t ($1,196/t-$1,289/t) for 100 neutral, 150N and 220N and to €1,295/t-€1,360/t ($1,421/t-$1,492/t) for 600N. These prices apply to a broad range of Group II oils from Europe, the U.S., Asia-Pacific and Red Sea sources, imported either in bulk or in flexi-tanks.

During the next couple of months, Group III supplies in Europe will be boosted by a number of cargoes arriving from Middle East Gulf and Malaysian sources, plus local production from Cartagena refinery which will soon undergo maintenance.

The competition between suppliers of Malaysian Group III could be positive news for the European market, which had become short on that category of base oil. It may also add to downward pricing pressure that was already developing due to new entrants from Asia, who were offering significant discounts. The first material to be affected will be Group III oils with partial or no slates of finished lubricant approvals, since the new entrants fit that description.

Large shipments from Cartagena, Spain, continue moving to Rotterdam, providing customers with cover during the looming shutdown at the Cartagena refinery.

European prices for Group III base oils with partial slates of approvals are adjusted this week due to new levels being reported at lower levels – perhaps because 4 centiStoke oils from one South Korean supplier new to the market have lower performance specifications than those from existing suppliers.

Prices for unapproved or partially approved 4 and 6 cSt oils are assessed between a wide range of €1,690/t-€1,835/t, while 8 cSt material, where available, is at €1745/t-€1765/t, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Group III oils with full slates of approvals are currently available only from Cartagena, and prices remain higher at €2,020/t-€2,060/t for 4 and 6 cSt. Quantities of 8 cSt being sold into Europe are insignificant, but sales into destinations such as India and Turkey are reported at around €1,920/t on an FOB basis. Prices for 4 and 6 cSt grades are for FCA sales from hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

Russian base oil exports from the Baltic saw one cargo loaded out of Svetly terminal in Kaliningrad bound for Gebze in Turkey. The cargo size was not established and may have been governed by the vessel chartered by Lukoil to carry the cargo. Other shipping inquiries remain on the table for further supplies to move to Turkey and also a further 10,000-ton cargo is offered into Nigeria.

Buyers in Lithuania and Latvia are starting to look to mainland Europe for supplies of Group I base stocks to cover requirements for blenders in those regions. This reversal in trade has come about following the cessation of Russian stocks going into European Union countries. Stocks of Russian exports that were stockpiled prior to the EU ban have now been depleted, and thus replacement stocks will move from supply points in northwest Europe into the Baltic. 

Rerefined base oils will also play a part in the new supply picture, coming in from Kalundborg in Denmark, where rerefiner Avista has also secured extra storage in Aabenraa.

Baltic outgoing cargoes, other than Russian, are loading from Gdansk, which may start to act as a replacement source for buyers in the United Kingdom and Benelux.

FOB prices from Svetly are nominal at best and are estimated on the basis of material going into Gebze in Turkey. Precise numbers are impossible to obtain, but as estimates and indications only, SN 150 levels are put at $795/t-$845/t, with SN 500 at $825/t-$865/t. FOB levels depend on destination and receivers, and additionally, terms of payment. It has been heard that offers to Nigerian receivers have given 120 days open credit, but it is not clear how import licenses are issued, since no letters of credit are issued or processed by Russian banks.

FOB prices for Group I material from Gdansk refinery are in line with European mainstream pricing, so they are tweaked slightly higher. SN 150 is now assessed at $1,010/t-$1,065/t. SN 500 is at $1,085/t-$1,125/t, depending on destination. Quantities of bright stock remain estimated at $1,295/t-$1,340/t.

Black Sea reports have the Turkish base oil market quiet because of Ramadan ending and the Eid holidays. The recent earthquake has also taken its toll on companies based in that region, with the heavy loss of life and severe damage to property and premises. Some say that it will take years to rebuild and replace many of the facilities, with some saying that the regions will never recover from the event. Turkish blenders were previously looking to take material from Mediterranean sources, such as Livorno, Aghio and Augusta in Sicily.

With maintenance starting at the refinery at Livorno on fuels production, it is not expected that base oils will be impacted by the turnaround. Indications from Aghio are exceptionally keen and have been heard on basis of CIF Gebze, with material offered at $1,025/t for quantities of SN 150, with SN 500 and 600 at $1,060/t-$1,085/t. These are very low rates when extrapolated back to FOB numbers, and it is felt that these will be the last offers at those levels. Prices are expected to rise by $50/t-$85/t.

Russian base oils are still being dumped into Turkey, although this exercise has slowed from the peak at the end of last year. Whether this is a function of Russian suppliers having less avails, or whether receivers are opting to take higher spec material from Mediterranean and European sources, is not clear. Sources in Istanbul have offered comments to the effect that the Turkish market has gone quiet, and the country is looking forward to elections that will take place in a few weeks time.

Tupras in Izmir has availabilities from the refinery, with prices in dollar terms at around $955/t for spindle oil, $1,095/t for SN 500, with bright stock at $1,325/t. Prices are for ex-rack truck sales.

Lukoil have two cargoes from Limas terminal in Turkey. One parcel of 4,000 tons is believed to have loaded, or is being loaded on a prompt basis, with another parcel of 6,500 tons of Russian export barrels to load later this month. Cargoes will be supplied from Volgograd refinery, stored in Limas terminal and then re-shipped to receivers in Singapore. All outlets for Russian base oils are crucial to Russian refineries. Vessels chartered will probably be Turkish flagged for acceptance by receivers in Singapore.

Group II ex-tank prices are raised, following increases from major suppliers, with levels now assessed at €1,210/t-€1,245/t for the three lower vis products – 100N, 150N and 220N – with 600N at €1,390/t-€1,485/t. Supplies of Group II grades may be sourced from Red Sea, USA, South Korea and Rotterdam or hub storage in Valencia.

Partly-approved Group III base oils resold by distributors on an FCA basis or on a road tank wagon-delivered basis, are maintained this week and are assessed at €1,865/t-€1,900/t. Fully-approved Group III grades delivered into Gemlik from Cartagena will be priced at around €2,250/t-€2,300/t FCA.

Middle East

Saudi Arabian refiners operating out of the two Red Sea ports of Yanbu and Jeddah have a number of base oil cargoes of varying sizes depending on destination. The United Arab Emirates and the west coast of India are among regular destinations, with cargoes going into Hamriyah, Fujairah and Jebel Ali in the U.A.E., also Mumbai anchorage, and Jawaharlal Nehru Port Trust in Mumbai port. Large cargoes of up to 19,000 tons are expected to load out of both Yanbu and Jeddah with Group I and Group II base stocks. Other movements are to Port Suakin and a cargo of 7,000 tons going into Aqaba in Jordan.

It will be interesting to see if there are any follow-up cargoes of SN 150 and SN 500 loading out of Jeddah, bound for northwest Europe. A cargo of 5,000 tons of Group I grades loaded last week for Antwerp, perhaps trying to gain a place in the European Group I market, which is opportunistic, following the EU ban on Russian imports. 

Middle East Gulf shipping reports are seeing a number of cargoes of varying sizes coming into the U.A.E., which are comprised of Group I and Group II base oils. Group II cargoes are taking over from Group I as the mainstay base oil used in the U.A.E. That is with a heavy reliance on local blending operations for finished lubricants, many of which are blended under license in toll blending facilities. These represent the international brands, in addition to local production where U.A.E. blenders produce their own brand and range of lubricants. Group II cargoes are arriving in the U.A.E. from the Red Sea, South Korea, the United States and Europe. A major shift is taking place, away from Group I base stocks to Group II premium grades.

Group I base oils are still required by many of the smaller blenders, who used to take large quantities of Iranian base oils from producers such as Sepahan, Iranol and Pars. Group I suppliers are based in Rayong in Thailand, and of late Group I material has been coming out of Indian refineries in Haldia and Chennai. With imports of cheap Russian crude, Indian refiners have been able to produce large quantities of Group I base oils which, due to low raw material costs, can be very profitable when sold into regions such as the U.A.E.  Traders are also offering Group I cargoes coming into the Middle East Gulf region from U.S. Gulf Coast sources.

The offer for a cargo of Group I base oils to be imported into the U.A.E. from Lukoil remains on the table and refers to a 7,500-ton parcel to load from the Baltic for receivers in Hamriyah. This cargo continues to be declined by prospective buyers because of the long voyage timing and also vessel approval. Alternative cargoes from Limas terminal in Turkey could be successful, but there are no offers from that source on the table.

Group III export cargoes from the Middle East Gulf are noted, with the first of the Stasco cargoes from Sitra loaded last week with 7,850 tons of Group III grades. This cargo will sail to Rotterdam, where it will discharge storage before being sold on a break or bulk basis, either FCA or delivered by road tank wagon or barge.

Another cargo will load from Al Ruwais for Adnoc, this parcel will go into distributors in Nantong, in mainland China. The vessel has loaded 7,500 tons of three grades of Group III base stocks. Also loaded last week was a cargo of 8,500 tons for receivers in the west coast of India.

Netbacks for partly-approved and non-approved Group III base oils loaded out of Al Ruwais and Sitra refineries are unchanged but may change, should discounting continue tin markets such as Europe and the U.S. Selling prices in Europe are reported to have had several small adjustments. Netback returns are currently assessed at $1,725/t-$1,775/t for the range of 4 centiStoke, 6 cSt and 8 cSt partly-approved and non-approved Group III base oils.

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

Group II base oils resold by distributors and traders on an FCA basis in the U.A.E. may be sourced out of European, U.S, Asia-Pacific and Red Sea producers. These grades are sold ex tank U.A.E., and on a truck-delivered basis within the U.A.E. and Oman. Prices are maintained, but with levels moving up in Europe, prices will be reviewed during the course of this week and may be amended for the next report. Levels are at $1,470/t-$1,485/t for the light vis grades, with 600N at $1,520/t-$1,555/t. The high ends of the ranges refer to road tank wagon deliveries.

Africa

West African reports a number of potential new offers being prepared for receivers in Nigeria, with traders investigating a number of alternative sources for Group I base stocks, one of which is Jeddah in the Red Sea. Whether the freight rates would stack up for a cargo to load from this port and discharge in Apapa, remains to be evaluated. Other European sources in addition to U.S. suppliers are also in the frame if quantities are made available. Other options are Indian ports of Haldia and Chennai, where low priced Group I base oils are available. The freight costs could be a problem for this movement, but depending on total quantity this option has potential.

Russian material is also offered out of the Baltic, but it is unknown as yet if this movement will eventually take place, due to confusion regarding letters of credit and import licenses.

The ExxonMobil parcel that loaded out of Fawley with around 6,500 tons of two Group I grades will discharge in Abidjan in Cote d’Ivoire and Tema in Ghana. The rotation of the vessel is unknown, but it may be that the first port of call will be Tema, due to possible draft restrictions in Abidjan.

The large cargo from the U.S. Gulf Coast with 18,000-19,000 tons loaded with a top off quantity in Paulsboro on the U.S. Atlantic Coast. The Nigerian part of the cargo has been discharged in Apapa, the vessel now being en route or arrived in Luanda in Angola, with the balance of the cargo for Sonangol. The relative quantities for each port are not released.

The Livorno parcel of 12,000 tons of three Group I grades will arrive into Apapa during the first half of this month, discharging SN 150, SN 500 and SN900.

Price levels were heard initially to be at $910/t for SN 150, SN 500 at around $990/t, with SN 900 priced at around $1,050/t. However, prices increased by around $100/t in each case, to more accurately reflect FOB numbers plus the freight element of the deal.

Confirmed prices for a current cargo have CFR levels at $1,020/t for SN 150, SN 500 at $1,070/t, and SN 900 at $1,150/t. Should bright stock have been loaded as a grade as part of the Livorno cargo, the price is estimated to come in at around $1,320/t CFR Apapa. This grade could conceivably have been blended with SN 500, during or on loading, to produce SN 900.

Offers for cargoes that will arrive later in May or June will have higher prices due to FOB levels rising. CFR prices are assessed at SN 150 at around $1,025/t-$1,040/t, with SN 500 at $1,075/t-$1,095/t and SN 900 at $1,155/t-$1,175/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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