Last week brought the start of Ramadan along with the Lunar New Year celebrations in Asia on the same day, Feb. 17. Ramadan does not have any marked effects on base oil business, other than a general slowing of activities during the Holy Month which is observed in Muslim countries such as Turkey, Middle East regions and Indonesia in Asia.
Contacts and sources in those locations were mostly available this week, with few being affected by the fasting practices during daylight hours.
Conversely, the Lunar New Year has an effect on base oil markets in East Asia – due customs of generally avoiding banking and commercial activities – but the duration of the celebrations is relatively short. People do take holidays and can be absent for a number of days.
In Europe and Africa, trading and business continues as normal, even where many people observe Ramadan.
A number of geopolitical situations are affecting base oil markets throughout Europe, the Middle East and Africa, the first being tariffs that United States President Donald Trump imposed last year but which have now been deemed illegal by the U.S. Supreme Court. Many governments in the European Union are uncertain about what to do next. Elimination of tariffs is welcome, and the bloc would like to resume work on a trade deal with the U.S. There is skepticism, though, that Trump’s administration is done pursuing tariffs.
The second geopolitical happening is the continuing talks between Iran and U.S. delegates regarding Iranian nuclear capabilities and the program for ballistic missiles. This week sees the talks extended, but with the threat of imminent military action from the U.S. should negotiations fail to yield an outcome deemed acceptable by the Trump administration.
In response to threats of strikes against Iranian targets, Tehran and the Islamic Revolutionary Guard Corps has alerted proxies in Lebanon, Gaza, Yemen and Iraq to prepare for retaliatory attacks against selected U.S. and other allied targets across the Middle East and Europe.
Iran continues to threaten the closure of the Strait of Hormuz to commercial shipping, this stretch of water being the corridor through which some 20% of the world’s crude supplies flow. This action could cause crude oil prices to spike – as high as $250 per barrel, according to some analysts.
Base oil prices would take a hit from any crude supply interruption, with prices expected to skyrocket in value for material being imported and exported from Middle East Gulf in particular. But all prices would rise on the back of higher raw material feedstock costs.
The dangers of crude supply interruption are plain to see, and should Iran try to block traffic through the Strait, the U.S. and other allied forces are sure to take swift and preemptive countermeasures.
Meanwhile there are few if any signs of progress toward a ceasefire for the war in Ukraine. The conflict has just passed the fourth anniversary of its beginning, and losses continue to accumulate on both sides.
The war in Ukraine and the confrontation in Iran both have a bearing on base oil availabilities, prices and supply chains. As has been seen the past few years, such crises can bring major impacts on trading patterns. Recent reports indicate large cargoes of API Group III base stocks being loaded from the three Middle East Gulf sources – in Bahrain, the United Arab Emirates and Qatar. Many of these supplies are heading for the Indian market, and large Group I and II cargoes are also being loaded for India from Luberef’s refineries in Yanbu and Jeddah, Saudi Arabia.
These moves may be provisional to avoid possible supply interruptions. API Group III cargoes have also been loaded from the Middle East Gulf to the U.S. and Europe.
If the Iranian situation erupts, then shipping will become very difficult to arrange from within the Middle East Gulf and will also be problematic for cargoes entering the Gulf from Asia-Pacific, the U.S. and Europe. War risk insurance will push freights to new highs, and many vessels would opt not to venture into the Gulf, shorting up tonnage available to move bulk cargoes and containers.
Crude oil prices pushed through the $70 barrier for dated deliveries of Brent crude and are pushing up levels for petroleum products such as gasoline, jet fuel and diesel.
More sanctions from the U.S. and the EU are being called for against products produced using Russian crude, and there are still calls for additional penalties to be imposed on countries that continue importing Russian crude. All of this is designed to limit the flow of funds being returned to the Kremlin through exports of crude and petroleum products.
Russian base oils are now missing from any export slate for products coming out of Russian refineries. Russian companies previously exported large quantities of material to receivers in the Middle East, Asia and Africa, but exports of base oils appear to have totally ceased.
Crude and Gas Oil Prices
Crude levels rose around $3 per barrel from last week, while low-sulfur gas oil rates jumped around $60 per metric ton.
Dated deliveries of Brent: $71.50/bbl, April front month
West Texas Intermediate: $66.40/bbl, April front month
European low-sulfur gas oil: $736/t, March front month
Source: London ICE trading late Monday Feb. 23
Europe
Group I base oil trading activity around European markets continues on an almost ad hoc basis, meaning producers have sufficient material to accommodate all current demand, with only a few exceptions where maintenance or urgent repairs are being carried out due to accidental stoppages such as fires.
The reports heard last week that Mol in Hungary may face longer term crude supply problems have been confirmed, and whilst the refinery has sufficient crude stocks to last a number of months, the problem has occurred with supplies coming through the Druzbha pipeline. A pumping station for the pipeline in Ukrain was damaged.
Hungary and Slovakia have been granted an EU exception to continue using Urals crude from Russia since they are landlocked. One suggestion is that an alternative pipeline route from Croatia may be able to supply both countries, but this would involve refineries changing crude runs as the Croatian crude may come from Libya.
European base oil prices are under downward pressure amid poor demand. Lower numbers were becoming more prevalent around the markets. However, rising feedstock prices press against that pressure.
Sellers are starting to look at export markets to move quantities of Group I base stocks, but many producers lack sufficient quantities of each Group I grade to be considered for export cargoes. Bright stock remains relatively tight, and prices have stabilized on good demand.
Group I
European exports, FOB (levels necessary to make deals)
SN150: $625/t-$650/t
SN500: $675/t-$695/t
Bright stock 150: $1,055/t-$1,075/t
Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $755/t-$775/t
SN500: $810/t-$840/t
Bright stock 150: $1,225/t-$1,255/t
Eastern Europe, FCA
Supplier A
SN150: $995/t-$1,000/t
SN500: $1,020/t-$1,070/t
Bright stock 150: $1,475/t
Supplier B
SN150: €680/t
SN500: €770/t
Bright stock: €1,255/t
Mediterranean, FCA Spain
SN150: $815/t
SN600: $925/t
Bright stock: $1,310/t
Pan-European, FOB/FCA
SN150: €600/t-€645/t
SN500/600: €675/t-€710/t
Bright stock 150: €1,020/t-€1,045/t
Pan-European prices are assessed on an aggregate basis taking prices 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 was $1.17919 Monday.
European Group II base oil prices remain steady with consistent demand. Current levels are around $1,010/t for 150 neutral and $1,175/t for 600N.
Unless pressure starts to build from raw material costs increasing – vacuum gas oil values rose last week – prices for Group II do not appear to be under upward or downward pressure. That would change if feedstock costs start to rise. On the other hand, downward pressure could develop if Asia-Pacific Group II producers start to target European markets with surplus material.
Group II prices in Europe are still higher than other regions, so there is every incentive for spot sales in what could become a very competitive market. Reports are confirmed of parcels loaded from Taiwan and South Korea bound for Europe.
Group II prices in Europe are unchanged this week.
Group II, FCA basis
110N: €825/t-€860/t
150N: €825/t-€865/t
220N: €820/t-€850/t
600N: €890/t-€960/t
These values apply to a wide range of Group II base oils that may be sourced from within Europe, the U.S., from the Red Sea and Asia-Pacific.
A Group III base oil cargo that loaded from Sitra, Bahrain, during January will arrive into Rotterdam imminently. Another cargo is loading around now out of Al Ruwais, UAE, for Adnoc’s distributor in Europe. The cargo will sail around the Cape and should arrive into Dordrecht, Netherlands, around the end March or early April.
A cargo already arrived from Al Ruwais some weeks back, and regular shipments are now programmed to lift product around every six to eight weeks. Yet another cargo was reported shipping to Europe from Indonesia.
New Group III capacity is under development in the U.S. and Saudi Arabia, so the European market should soon be optimally supplied with Group III.
A large cargo of Group III has loaded out of Cartagena, Spain, for a reselling hub in Northwestern Europe – the first for that route this year.
European Group III prices are unchanged this week after buyers accepted offers of numbers for March and April. Sellers continue to mention that they are able to adjust prices, but only by small increments of around €15/t-€25/t.
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 Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
Basis FCA northwestern European hub:
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 will be subject to transportation charges, added to the prices above.
Rerefined Group III, FCA Germany
4 cSt: €1,030/t
5 cSt: €1,020/t
6 cSt: €1,075/t
Baltic Sea
There are still no reports of Russian base oils leaving from Baltic supply points such as St. Petersburg or Vyborg, Russia, as supplies are apparently being directed to domestic markets. Lukoil and Rosneft appear to be suffering under sanctions, whilst Ukraine’s armed forces continue to launch drone strikes on refineries and storage terminals, there are no signs of any base oils leaving Russia.
Lukoil and Rosneft have been forced to sell off substantial foreign holdings, including fuel stations and storage terminals.
Another market report said recently that a large Russian base oil cargo had been delivered into Indian receivers, but no records or shipping details have been found to corroborate.
It is plausible that shadow fleet vessels could be employed to deliver cargoes of base oils into markets such as India, but why Russian producers would want to export to India, and why Indian receivers would want to take quantities of Russian SN150 and SN500 is anyone’s guess. Prices may be important, with suggested numbers heard below $500/t, on a CIF basis, for SN150 and SN500.
For the sake of good order and interest, your columnist continues reporting notional prices for Russian base oil exports.
Group I, FOB St. Petersburg, Vyborg
SN150: $610/t-$625/t
SN500: $640/t-$665/t
Black Sea & Turkey
Turkish blenders have returned to purchasing Group I base stocks from Sonatrach out of Augusta, Italy, and from AMOC and APC in Alexandria. ExxonMobil was asked to offer for cargoes of Group I base oils, but the price levels offered were too high according to traders.
Motor Oil Hellas has also been approached, but the Greeks have little to offer right now, although there was a rumor last week of an offer for material to go into receivers in Derince, which was previously a routine delivery for the Greek company.
Prices for domestic sales from the Tupras refinery in Izmir are unchanged this week.
Group I
Tupras, ex rack Izmir
Spindle oil: Tl 31,224.00/t plus, VAT Tl 8,274.60/t
SN150: Tl 28,185.00/t plus, VAT Tl 7,666.30/t
SN500: Tl 34,864.00/t plus, VAT Tl 9,002.10/t
Bright stock: Tl 50,823.00/t, plus VAT Tl 12,163.40/t
Sales also incur the standard loading surcharge of Tl 10,146.50/t.
Traders in Turkey reported only spotty availabilities of base oils this week. Group II 110N and 220N were said to not be available, while no offers were reported for 350N, perhaps indicating the same for that grade. There was news of Group II cargoes loading out of Taiwan for Europe, which may mean 150N is coming to Turkey.
Group II, ex-works
110N and 220N: no availability
350N: no offers, assuming no availabilities
150N, ex Taiwan or Saudi Arabia: $1,020/t
500N/600N, ex Taiwan or Saudi Arabia: $1,185/t
Group III
Partly approved, from Tatneft, FCA
4 cSt: €933/t (last known, no current availabilities)
Fully-approved, from Cartagena, Spain, CIF Gemlik
Small lots of 800 t-1,200 t: €1,655/t/t-€1,680/t.
Middle East
Large Group II cargoes resumed loading out of Yanbu this month for receivers in Mumbai anchorage. There does not appear to be requirements in India now for Group I grades from Yanbu or Jeddah, and some suggest prices may be too high compared local production – and perhaps Russian imports.
Cargoes of mainly Group II base oils are going into Chennai and Mumbai anchorage, whilst others are being split between Mumbai anchorage and the UAE ports Fujairah and Hamriyah.
Other smaller cargoes are due to be loaded out of Yanbu and Jeddah for receivers in Aqaba, Jordan, Durban, South Africa, and Alexandria.
The refinery at Yanbu will undergo a major maintenance turnaround during late summer as part of preparatory work for the launch of Group III production at this site. The company has confirmed that initial production is targeted toward the end of this year.
Ramadan is now in full flow, and many companies in the UAE are relatively quiet, even in the face of potential fighting between Iran and Western allies, particularly the U.S., which now has two battle groups of naval vessels in the region. Blenders and traders have been purchasing cargoes of Group I and II as insurance in case of conflict.
In the UAE there is a confirmed shortage of 20- and 40-equivalent unit containers for shipping finished lubricants (in addition to other goods) to export markets such as East Africa and South Africa. Fewer vessels are calling at UAE container ports such as Fujairah and Jebel Ali.
UAE-bound cargoes are arriving from the U.S., South Korea, Thailand and Indonesia, discharging in Fujairah, Hamriyah and Jebel Ali, and there are more cargoes on the high seas, which may be subject to diversion should trouble break out in Iran.
UAE prices for imported base oils are unchanged since last week.
Group I, CIF/CFR UAE ports
SN150: $890/t-$925/t
SN500: $955/t-$980/t
Bright stock 150: $1,245/t-$1,275/t
Group I cargoes are being supplied to receivers and buyers in the UAE by traders based in the U.S. and Switzerland. Some direct sales are initiated by Luberef in Saudi Arabia and with a number of suppliers and traders in Thailand.
Prices for Group II oils are also unchanged.
Group II, FCA or RTW UAE or 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 supplied from a number of sources in the Red Sea, the U.S., South Korea, Singapore and Europe. Cargoes are often discharged into storage in the UAE, and then smaller parcels are transhipped to various ports around Middle East Gulf. The high ends of the ranges refer to material being delivered by RTW in the UAE and into the Omani exclave, north of Khorfakkan and Fujairah.
Group III prices in the UAE are also unchanged.
Group III, FCA Hamriyah or Sharjah or RTW UAE and Oman
4 cSt: $1,225/t
6 cSt: $1,235/t
8 cSt: $1,255/t
Middle East Gulf Group III base oils out of Al Ruwais and Sitra are delivered in smaller parcels of around 3,000-5,000 tons by local Middle East Gulf flagged vessels discharging in Hamriyah and Jebel Ali. These prices include a reseller margin of around $105/t to cover storage, handling, insurance and margins. RTW deliveries from distributors can incur an additional charge of $20/t-$65/t, depending on delivery location and quantity.
Large cargoes are reported loading out of Al Ruwais for distributors in the U.S. One vessel loaded three Group III base oil grades and recently sailed for the U.S. Gulf Coast. A cargo that loaded in early January out of Sitra will arrive into receivers in the U.S. Gulf later this week.
Netbacks for Group III ex Sitra and Al Ruwais for distributor sales into Europe, the U.S., India, China and Thailand, are unchanged this week at $1,075/t-$1,095/t for 4, 6 and 8 cSt Group III grades. Netbacks for gas-to-liquids Group III+ ex Ras Laffan, Qatar, are raised to $1,145/t-$1,175/t.
These levels are indications only, since no distributors or third parties are involved in these cargoes, the product being mainly retained by Shell affiliates for in-house blending. Middle East Gulf Group III netbacks are assessed using selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.
Africa
Turkish buyers are taking Egyptian Group I base oils as the busy time of year starts in the Turkish market. Blenders in Turkey have commitments to distributors for supplies of finished lubricants in Syria, Lebanon and around Black Sea regions such as Georgia. Most importantly, blenders in Turkey are responsible for supplying large quantities of finished lubricants into Ukraine. Turkish finished lubricants are also supplied back into countries such as Egypt and Libya.
Another large base oil cargo will load out of Rotterdam and Fawley, U.K., for Durban, South Africa, probably in March, although no vessel fixture has been recorded yet in shipping reports.
Contact has been established with receivers in Guinea and in Abidjan, Cote d’Ivoire, and information regarding landed prices should be forthcoming in coming days. Ghana is more complicated, but your columnist is working on that market, too, and may soon have numbers to report.
More information is being sought regarding the cargo from South Korea that is being loaded toward the end of February or beginning of March. Vessel details are being requested from brokers. Prices are extremely low for Group II base oils. It is not understood yet why a trader would want to offer Group II base oils into Nigeria, presumably at rates having to compete with Group I levels.
Another trader is loading a typical 18,000-ton cargo out of the U.S. Gulf Coast in February, and the trader mentioned above will lift 10,000 tons from other U.S. Gulf sources.
Bid levels remain at $800/t for SN150, $870/t for SN500 and $990/t for SN900. These numbers are incredibly low and adding freight, margin and other expenses to cover items such as demurrage would have FOB levels at around $630/t for SN150, $700/t for SN500 and $820/t for SN900.
The black market exchange rate for the Nigerian naira was NGN 1,343 to the dollar Monday, around NGN 100 lower than last reported.
Group I, CFR Apapa port in Lagos
U.S. origin
SN150: $800/t
SN500: $870/t
SN900: $990/t
These are the lowest heard values in the market and may not be achievable for all cargoes arriving into Apapa. It is to be considered that seller-acceptable levels could be around $50/t-$75/t higher.
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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