As London heads into conference week for base oils, swiftly followed by what is now called International Energy Week, base oil markets are bracing geopolitical events unfolding across the Middle East and Europe. Base oil markets are looking for positive news coming out of meetings and networking at the two events being held next week.
For example, further details are expected regarding the API Group II plant being built at PKN Orlen’s Gdansk, Poland, refinery including its schedule for start-up.
Missing from the attendees and exhibitors this year will be representatives from Iran’s base oil producers, Sepahan and Iranol in particular. Travelling is severely limited, with contact with Western companies and individuals being actively discouraged. This latter news was obtained from sources close to the companies in the United Arab Emirates.
The contretemps between Iran and the United States appears to be reaching a boiling point, when either the Iranian regime sits down to negotiate a deal on nuclear arms or U.S. forces strike Iranian targets, with all the implications which that action will bring.
Meanwhile, the seven day “cease fire” in Ukraine, which includes a halt to Russian missile strikes on civilian targets, is reaching an end, and with no acceptable proposals yet for a peace treaty. A resumption of fighting appears very likely.
Should the Iranian situation spiral into conflict there will certainly be a major impact on surrounding regions and markets, with base oils being but a small part of the overall equation. Supplies of Group III base stocks from the UAE, Qatar and Bahrain will certainly come under pressure, with shipping becoming more difficult and expensive as war risks drive up insurance premiums for protection and indemnity clubs – likely to the point that some vessel owners would decide not to enter a declared war zone.
Middle East imports of Group I and Group II base oils from sources in the U.S. and Asia-Pacific will become subject to cancellations and delays, perhaps causing shortages of base oils throughout Middle East Gulf regions.
Overall the outlook appears grim, with little light appearing at the end of a long dark tunnel. With Ramadan starting Feb. 17, the Holy Month may bring more than routine fasting to parts of the Muslim world.
A report published last week looked at “lost production” of petroleum products caused by unplanned downtime at European refineries. Unscheduled stoppages were responsible for a relatively large quantity of base oils, which were lost from supply chains across various markets. One major contributory cause of production loss was fires at a number of refineries, including an October blaze at Mol’s refinery in Szazhalombatta, Hungary, which hamstrung Group I base oil output until last month.
A September 2024 fire at Motor Oil Hellas’ refinery in Agioi Theodoroi, Greece, damaged one of two main crude distillation units at the site, leaving the second-largest refinery in Greece to operate at 65%-80% of capacity.
Earlier in 2024, a major fire engulfed the Group I production at ExxxonMobil’s Port Jerome refinery in northwestern France, and since that occurrence there have been minor issues affecting the normal running of the refinery.
The refineries in which all these fires started tend to be the older units, producing Group I base oils in the main, along with the normal slate of petroleum products. Whether age is a factor in the safe operation of these refineries has been investigated by insurers and operators, and whilst no direct conclusions have been arrived at, there are indications that large capital investment is required to bring these units up to standard for the future.
The debate regarding the continuing production of Group I base oils will continue for some years to come, and cannot be adjudged singularly, but must be taken in context along with production of fuels and other petroleum products, many of which are being refined by national or government sponsored oil companies.
With the spat between the U.S. and Iran escalating during last week, crude oil prices underwent a mini price spike, and dated deliveries of Brent crude breached $70 per barrel. Prices have since softened as the sides turned to diplomacy.
The tensions between Washington and Tehran are one of two opposing metrics weighing at the moment on crude values, the other being a decision by OPEC+ oil-producing nations to increase production. Analysts have said this could lead to an oversupply that would depress prices this year. Now come concerns that new strikes by the U.S. could lead Iran to take countermeasures that could disrupt crude supply, such as restricting tanker traffic moving through the Strait of Hormuz, conduit for a large portion of global oil supply.
Crude and Gas Oil Prices
Dated deliveries of Brent crude: $66/bbl, April front month
West Texas Intermediate: $61.85/bbl, March front month
European low-sulfur gas oil: $680 per metric ton, February front month
Source: London ICE late Monday Feb. 2.
Europe
European Group I base oil supply has backtracked to a situation where buyers are prepared to wait rather than commit to large quantities of Group I grades, since they are almost assured that supply is more than adequate and they are able to pick and choose when they require material into tank. Prices appear to be relatively stable, with no new dynamics appearing to distort the market one way or another.
Orlen announced its Gdansk refinery will begin a maintenance turnaround at the refinery during March or April time. The temporary shutdown is believed to be scheduled for a period of six weeks, which suggests major work being undertaken. How much of the turnaround will be geared to the new Group II production coming on stream is not yet known, but meetings during this week with relevant persons from Gdansk may reveal this information.
The addition of another European source for Group II is important and raises a great deal of interest, since this will alter the dynamics of the Group II supply scene but still leave room for imports to arrive from the U.S.
Group I prices are steady, with weak demand keeping numbers on a level. Feedstock costs were rising but have softened during the past few days, indicating that there is no pressure from the raw material side to adjust prices for Group I base oils.
Bright stock remains tighter than solvent neutrals, but prices have gravitated downwards, although a couple of suppliers have issued prices for this grade which are exorbitantly high, and have little or no chance of being accepted by buyers.
Quite why some sellers have adopted this tactic is unknown. Perhaps they aim to squeeze one or two truck loads to smaller buyers at the high levels.
Group I export sales from Europe are generally not happening now, but notions of prices that would be necessary are listed below. Currently suppliers do not have the necessary quantities or are unwilling to bring down prices to these levels.
Prices for Eastern Europe will remain valid for up to three months from the start of 2026 as Mol is still being supported to an extent by surplus product from PK Orlen at Gdansk.
Group I
Exports, FOB basis
SN150: $625/t-$660/t
SN500: $695/t-$720/t
Bright stock 150: $1,100/t-$1,125/t
Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: $770/t-$795/t
SN500: $835/t-$865/t
Bright stock 150: $1,220/t-$1,245/t
Eastern Europe, FCA
Supplier (A)
SN150: $995/t-$1,000/t
SN500: $1,020/t-$1,070/t
Bright stock: $1,475/t
Supplier (B)
SN150: €680/t
SN500: €770/t
Bright stock: €1,255/t
Mediterranean prices, FCA (Spanish source)
SN150: $815/t
SN600: $925/t
Bright stock: $1,310/t
Pan-European, FOB/FCA
SN150: €620/t-€665/t
SN500/600: €695/t-€740/t
Bright stock 150: €1,050/t-€1,075/t
Pan-European prices are assessed on an aggregate basis from prices obtained from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the United Kingdom and Baltic States.
The euro’s exchange rate with the U.S. dollar exchange rate was $1.17783 Monday. The dollar remains weak even following rumor that Trump will appoint Kevin Warsh chairman of the U.S. Federal Reserve.
European Group II base oil prices are steady with the new levels accepted by buyers following a realignment of prices from the main suppliers around Europe. Levels are around $1,010/t for 150 neutral and $1m175/t for 600N.
The EU duty element of 3.7% for Group II base stocks imported from countries without free trade agreements with the bloc was to be removed Jan. 28, and this report has heard that the levy has been rescinded.
Additional European Group II production will be forthcoming from Gdansk refinery with a timetable yet to be formally announced. More should be confirmed during this week. The nameplate production will be 400,000 tons per annum, but it is considered that initial production will be staged and start around 160,000 t/y.
Demand is for Group II is growing, and the market will be more than able to accommodate the increase in the supply of these grades once the new production is up and running.
Group II, FCA basis
110N: €825/t-€860/t
150N: €825- €865/t
220N: €820/t-€850/t
600N: €890/t-€960/t
Prices refer to a wide range of Group II base oils that may be sourced from within Europe, the U.S., the Red Sea and Asia-Pacific.
Group III base oil cargoes are arriving from the Middle East Gulf and Asia-Pacific with one cargo that loaded from Al Ruwais, UAE, during the first half of December due to arrive into Dordrecht during this month. Another parcel loaded during the last few days of January from Sitra, Bahrain, is en route to northwestern Europe and should arrive around mid-March.
The cargo of Group III grades from Indonesia should be discharging in Antwerp-Rotterdam-Amsterdam. It is thought that this cargo is trader driven, with one candidate in particular. A Geneva-based trader may be behind this cargo, having lifted Group III cargoes in the past from Petronas in Malaysia, and Bapco in Sitra.
European prices for Group III oils with partial slates of finished lubricant approvals are pushed a little higher, with buyers accepting offered price increases for March and April. The market remains snug, with no spot trades reported or taking place. All quantities arriving into Antwerp-Rotterdam-Amsterdam are allocated to regular or contracted buyers.
Prices for grades with full slates of approvals are adjusted lower as the lone supplier strives to hold market share.
Group III
Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €1,195/t-€1,225/t
6 cSt: €1,185/t-€1,210/t
8 cSt: €1,165/t-€1,190/t
Fully approved, FCA Northwestern Europe
4 cSt: €1,595/t-€1,620/t
6 cSt: €1,585/t-€1,610/t
8 cSt: €1,565/t-€1,590/t
All the above products sold on a delivered basis are subject to transportation charges, added to the prices above.
Rerefined, FCA Germany
4 cSt: €990/t
5 cSt: €990/t
6 cSt: €1,050/t
Baltic Sea
Zero information has been gleaned from sources and contacts who were in weekly contact with this report prior to 2022 and the Russian invasion into Ukraine. The contacts have presumably been instructed to have no contacts with this report. Supplies of Russian base oils continue to be directed toward the domestic market, following significant and major damage to production and storage facilities at a number of refineries and terminals around Russia.
From some press reports, it has become apparent that the damage to refineries and storage facilities has been extensive, and also there are problems with sanctioned spares and parts finding their way into Russian refineries to effect repairs. The problems are far greater than Russian newscasts portray, with domestic markets desperate for additives and base oils to be able to supply Russian armaments for Ukraine.
Export destinations such as Turkey, the UAE and Nigeria have not had any offers from the traders who specialized in Russian barrels, with at least one trader who was engaged with Russian supplies having to purchase a cargo of base oils from U.S. Gulf Coast sources.
Domestic base oil prices will be higher, so barrels being allocated for export sales is unlikely. Nevertheless, this report continues to list notional levels for base oil exports for the sake of good order.
Group I exports, FOB St. Petersburg or Vyborg (notional)
SN150: $625/t-$655/t
SN500: $660/t-$685/t
Black Sea & Turkey
Contacts in Turkey reconfirmed no Russian base oils in any shape or form have been seen in Turkey for some months. From talking with blenders and traders in Turkey it is unlikely that Russian imports will resume. Traders and blenders who were dependent on Russian additives and base oils in the past have nothing to offer. Turkish blenders have instead turned to purchasing Group I base stocks from Sonatrach in Augusta, Sicily, and also from AMOC and APC in Alexandria, Egypt.
Domestic prices for base oils from the Tupras refinery are unchanged.
Group I
Spindle oil: Tl 32,090.00/t plus VAT Tl 8,315.44/t
SN150: Tl 278,620.00/t plus VAT Tl 7,621.44/t
SN500: Tl 35,299.00/t plus VAT Tl 8957.24/t
Bright stock: Tl 51,258.00/t plus VAT Tl 12,149.04/t
Sales also incur a standard loading charge of Tl 9,487.20/t that should be added to the prices above.
Group II, ex-works through Turkish traders
110N and 220N: no availabilities
350N: no offers, assuming no availabilities
150N, ex Taiwan or Saudi Arabia: $990/t
500N/600N, ex Taiwan or Saudi Arabia: $1,185/t
Group III
Partly approved, FCA
Tatneft 4 cSt, FCA: €933/t (last price heard, now no avails)
Fully approved, CIF Gemlik
SK Enmove from Spain: €1,655/t/t-€1,680/t
Middle East
Trade has been ramping up with a number of large cargoes of Group I and II base oils being loaded for receivers in India and the UAE. Cargoes mainly of Group II base oils are going into Chennai and Mumbia anchorage, with one smaller parcel moving into Kolkata.
Receivers in the Red Sea – for example in Port Sudan, Sudan – are taking regular shipments of Group I base oils from Jeddah, Saudi Arabia. When bright stock is required, the loading is combined into two parts with Yanbu, Saudi Arabia, being used to load bright stock.
The maintenance turnaround at Yanbu was partly preparatory work for the introduction of production for Group III base oils. Timing and dates for this expansion are yet to be announced, but clarification may be forthcoming from contacts at the Argus base oil conference this week.
Elsewhere Group II cargoes are being arranged for receivers in Durban, South Africa, and 3,000 tons of bright stock loaded during January for Alexandria under the EGPC contract.
A number of large blending operations in UAE are moving to cover any eventualities by purchasing cargoes of Group I and Group II base oils in case of conflict arising out of the Iranian situation with the U.S. Cargoes are arriving to fill storage to insure against any problems with supplies.
Other logistic difficulties are being encountered, with a reported shortage of available containers for shipping finished lubricants to export markets such as East Africa, where a large markets exists with distributors appointed to resell products blended then transported to seaports in East Africa where, the containers are then moved inland to service landlocked receivers in the hinterland. This problem is only set to get worse with fewer vessels calling at UAE container ports such as Fujairah and Jebel Ali.
UAE cargoes are arriving from the U.S., Korea, Thailand and Indonesia, discharging in Fujairah, Hamriyah and Jebel Ali. No Russian base oils have arrived into the UAE, and no vessels are sailing from Limas terminal in Turkey, from the Baltic or from the Sea of Azov.
Imported base oil prices into U.A.E. are firming on the back of increasing demand.
Group I, CIF/CFR UAE ports
SN150: $890/t-$925/t
SN500: $955/t-$980/t
BS 150: $1245/t-$1275/t
Group I cargoes are being supplied to receivers in the UAE by traders based in the U.S. but also through companies based in Switzerland. Some direct sales are initiated through Luberef and suppliers in Thailand.
UAE prices for Group II base oils are up this week.
Group II, FCA UAE ports or RTW UAE and Oman
110N, 150N and 220N: $1,275/t-$1,325/t
600N: $1,385/t-$1,420/t
Group II base oils imported into the UAE and other Middle East Gulf ports in Qatar, Bahrain and Kuwait are from a number of sources in the Red Sea, the U.S., South Korea and Singapore. The high ends of the ranges refer to material being delivered by RTW in the UAE and into Oman, north of Khorfakkan and Fujairah.
UAE prices for 8 cSt Group III rose $10/t from Feb. 1 but otherwise are unchanged this week.
Group III, FCA UAE ports or RTW UAE and Oman
4 cSt: $1,240/t
6 cSt: $1,250/t
8 cSt: $1,275/t
Middle East Gulf Group III base oils produced in Al Ruwais and Sitra are delivered in smaller parcels of around 3,000-4,000 tons by local vessels into Hamriyah and Jebel Ali, UAE. Prices for Group III prices above include a reseller margin of around $105/t to cover storage, handling, insurance and a margin. RTW deliveries from distributors can incur a further charge of between $20/t-$65/t, depending on delivery location and quantity.
Netbacks for Group III base oils ex Sitra and Al Ruwais for distributor sales in Europe, the U.S., India and China are raised to between $1,075/t-$1,095/t for 4, 6 and 8 cSt Group III grades. Middle East Gulf Group III netbacks are assessed using selling prices in known markets, less estimated marketing costs, margins, handling, storage and freight.
Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are also raised to between $1,125/t-$1,165/t. Levels are given as indications only, since no distributors are involved in these cargoes, the product being mainly retained by Shell affiliates for in-house blending.
Large cargoes have loaded out of Ras Tanura, Saudi Arabia, for receivers in India, including one reported to be around 27,000 tons in total. A large cargo of around 10,000 tons, has loaded out of Al Ruwais for receivers in India.
Africa
Sonatrach has offered barrels out of Algiers to receivers in Morocco, but it is not known if acceptance has been made on this cargo. But if REACH accreditation is required for the base oils then the supply would have to come instead from Sicily.
The large base oil cargo of 19,000 tons loaded out of Rotterdam and Fawley, U.K., for Durban is reported to have arrived some days ago and is presumed to be discharging.
A cargo from the Red Sea will be delivered to receivers in Dar-es-Salaam, Tanzania. The size of the cargo is not yet known but is usually amounts to 8,000 tons-10,000 tons of SN150, SN500 and bright stock.
Logistically, it makes sense to supply out of Yanbu and Jeddah given the shorter voyage time and specification similarity to base oils coming out of Europe or Singapore.
The Nigerian base oil market is gaining traction and is busy at this time of year, with a number of cargoes recently arriving to bolster stocks for the season. Trucks loaded in Apapa port in Lagos from shore storage can take a number of days to reach some destinations, since a few blenders are based in the north of Nigeria, which can take up a week or more to reach.
This report is trying to establish selling prices in the Nigerian market, but this project has not met with much success as yet, with traders and resellers unwilling to disclose selling prices, considered to be confidential.
One trader will load another large cargo out of the U.S. Gulf of Mexico coast around mid-February. The size of the cargo is not mentioned yet, but anything less than 10,000 tons will be uneconomic to ship to Apapa. The trader behind this cargo will be identified later this week.
Traders have been bidding FOB numbers to potential suppliers in the U.S. and in Europe, but reports are that suppliers are not interested to offer at the levels proposed. The numbers are based on what would be necessary to achieve the bid prices from Nigeria.
Prices being proposed by buyers still recall the last Russian cargo to arrive in Apapa, which was some months back. Bid levels continue at $840/t for SN150, $900/t for SN500 and $995/t-$1,030 for SN900.
Bid numbers from buyers are heard at very low levels of $825/t for SN150, $900/t for SN500 and $1,030/t for SN900, on the basis CFR Apapa.
The black market exchange rate for the Nigerian naira was NGN 1,446 to the dollar Monday.
Group I, CFR Apapa
Russian origin (not available but cited in negotiations for U.S. base oils)
SN150: $825/t
SN500: $895/t
SN900: $985/t
U.S. origin
SN150: $840/t
SN500: $900/t
SN900: $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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