Weekly EMEA Base Oil Price Report

Meanwhile during last week Iran attacked Dubai with missiles and drones, citing alliance with U.S. forces in the United Arab Emirates. Various vessels have been targeted in the UAE and Qatar, with structural damage to the ships. The picture is further muddied by the continuous rejections, by both sides, of peace proposals that are being brokered through Pakistani sources in Islamabad.

U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu want the enriched uranium stocks held by Iran to be surrendered, whilst Iranian demands include the reparation of war damage, release of frozen financial assets held in the West and the lifting of all U.S. sanctions. The final Iranian call is for control over Hormuz. All of these demands are totally rejected by Trump, hence the impasse appears to continue, with the so called ceasefire being extended ad infinitum.

The base oil industry in Middle East Gulf countries is in ruin, with many lube companies closing down either on temporary basis, waiting for better days when supplies of raw materials can be reinstated. A small number of businesses have closed the door permanently. Regionally, the situation will take years to return to a form of normality, with supply interruptions to processes in refineries in Kuwait, Bahrain and Qatar, whilst the UAE has experienced missile and drone damage to one of the refineries in Al Ruwais.

Base oils have been affected in two main ways. The first is that supplies of base oils have not been reaching receivers or blending operations since the closure of Hormuz following the U.S. and Israeli attacks on Feb. 28. Secondly, the production and export of Group III base stocks from Qatar, Bahrain and Abu Dhabi have been halted, with the first two facilities being damaged thus affecting production of grades from these sources.

One of the main keys to moving forward would be the reopening of the Strait of Hormuz to all merchant shipping, but with this scenario a faint mirage this time, the situation appears to be deteriorating further.

The impact of the Middle East war is not confined to that region, since crude oil, petrol chemicals, petroleum products and fertilizers markets far and wide are being severely affected by the breakdown in supply chains. Shortages of fuels and lubricants have developed in a number of markets.

Base oil markets are facing a perfect storm in the supply breakdown from Middle East Gulf, planned maintenance across many refineries in Asia-Pacific and Europe, and the U.S. market not being able to build inventories ahead of hurricane season this year. Add into this mix, the monsoons starting in Southeast Asia, and the rainy season coming in few months to sub-Saharan African states, and the outlook is not pretty.

There have been more instances of force majeure being announce by countless numbers of operators in the lubricants business, with one major contacting customers who would be buying finished automotive lubes for factory fills for vehicle manufacturers, and advising that it will not be possible to meet contracted supplies of these grades until further notice.

Without lubrication nothing moves, hence a looming catastrophic meltdown cold be on the cards for economies where manufacturing and production of essential items cannot be completed due to a lack of lubricants designed specifically for particular end-uses.

Force majeure has been announced at a rerefiner in Kalundborg, Denmark, with a number of receivers in Northwestern Europe and the U.K. being dependent and reliant on supplies from this source. The reason appears to be mechanical  breakdown, with the operator bringing forward planned maintenance by a couple of weeks to try to rectify the issue.

Other instances are PK Orlen in Gdansk, Poland, where production of Group I base oils has ceased due to prioritizing distillate output, and it is not clear whether production at Mol in Hungary has restarted after some time. Some Mediterranean producers are short of specific grades and cannot provide the whole slate of Group I base oils.

Problems continue to unfold almost every week, with the whole base oil industry around the European, Middle Eastern and African regions smarting from the current situation, over which many players in the industry have little or no control.

Base oil prices have reacted to high demand, product shortages and the threat of some base oils being removed from the supply slate. Immediate repercussions have seen prices vault across all types of base oil, with prices climbing to levels never witnessed before in the history of base oil.

Some weeks back it was being considered that base oil prices might reach their zenith and then plateau, but this scenario has not played out, and prices continue to move upwards. For example, one major European Group II supplier has now applied eight increases since the start of the Iran war, and these increments have been adopted by other suppliers in this field.

Upward pressure seems to still exist despite some base oils currently trading at a premium of almost $2,000 per metric ton over gas oil.

Crude oil still reacts to various pieces of news and announcements from both Trump and Iran, with what is perceived as positive news towards the end of hostilities pushing prices lower, only for another outburst from either side hiking levels higher.

Crude and Gas Oil Prices

Dated deliveries of Brent crude prices have remained above $100 per barrel for more than four weeks, with petroleum product prices showing extreme volatility, particularly for distillates. Jet fuel and gas oil have registered dramatic movements in both directions. These products were closely correlated to crude prices, but of late, potential shortages in regional markets have had the pronounced effect of hoisting levels much higher than may have been expected.

Brent crude: $104.65/bbl, July front month
West Texas Intermediate: $96.60/bbl, June front month
European low-sulfur gas oil: $1,197/t, May front month

Source: London ICE trading late Monday, May 11

Europe

Group I base oil around Europe is declared short, with blenders unable to procure all base stocks needed to blend a full range of finished lubricants. Some have mentioned that order books remain full, but customers have little chance of being able to access all requirements.

There is now clear evidence of supply chains starting to break down, with large gaps appearing in the ability of blenders to access full quantities of Group I base oils.

Prices continue to rise as blenders search for any availabilities on the market. Sellers acknowledge that they do not have sufficient barrels coming from production to cover total demand at this time of year. Some are blaming the move in refineries to maximize distillate runs rather than produce base stocks. The irony being that base oils currently yield much higher margins than normal and provide excellent returns. But distillate fuels are required right now, with jet fuel shortages looming on the horizon, and the busy summer schedules about to start for airlines throughout Europe.

Some base oil buyers are trying to establish new relationships with rerefiners, including newer operations. New supplies are being set up from Egyptian, Saudi Arabian and  Greek rerefiners, who are becoming active into distant destinations, supplying buyers in Northwestern Europe and the United Kingdom.

Some blenders have been reticent to hike finished lubricants, commenting that they are protecting market share. Some of these operations appear to now be trading at significant losses.

There are no possibilities for export sales at this time, with all available European barrels of Group I base oils being taken by local buyers looking to protect their operations.

Group I

European exports, FOB
No current prices

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $2,150/t-$2,200/t
SN500: $2,260/t-$2,300/t
Bright stock 150: $2,525/t-$2,650/t

Eastern Europe, FCA
No prices available from PK Orlen or MOL

Mediterranean prices, FCA Spain, Greece, Italy
SN150: $2,175/t
SN600/500: $2,265/t
Bright stock: no Availabilities

Pan-European, FOB/FCA
SN150: €1,925/t-€2,000/t
SN500/600: €2,125/t-€2,200/t
Bright stock 150: €2,400/t-€2,525/t

Pan-European prices are assessed on an aggregate basis taking prices from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the U.K. and Baltic States.

The euro exchange rate with the U.S. dollar was $1.17778 Monday.

European Group II base oil prices have been raised again, for the eighth time since the start of the Iran war. This has rapidly become an almost weekly event with one European producer taking the lead by issuing what appears to be almost random numbers to existing prices.

Last week saw increases of $135/t being applied to the light grades and $160/t added to 600 neutral prices. This means that prices as of today stand at around $2,425/t for 150N grade, while the heavier 600N base oil is at $2,530/t, both on the basis of FCA sales Antwerp-Rotterdam-Amsterdam.

Many buyers believed that the price spike would be short lived, but this belief has been shaken by the announcements that the war could last months and supply chains could take more than a year to return to pre-war normality.

Availability of Group II base stocks was previously declared adequate, but buyers are reporting some supply shortages due to delays of cargoes coming in to Europe from U.S. sources. One major supplier has apparently no stocks currently in tank, but a vessel is on the high seas en route to Antwerp-Rotterdam-Amsterdam with a large cargo of Group II grades.

Supplies of Group II base oils are being directed towards the European markets from Luberef in Yanbu, Saudi Arabia. With the European market being relatively tight, prices are more attractive than alternative markets in India and South Africa.

Price levels are very much subject to upward moves. Levels are therefore increased to reflect the latest round of increases advised to the market last week. Prices are now assessed at around €2,050/t-€2,175/t for 100N and 150N grades and to €2,255/t-€2,320/t for 600N.

Group II, FCA basis
110N: €2,425/t-€2,500/t
150N: €2,425/t-€2,500/t
220N: €2,375/t-€2,400/t
600N: €2,520/t-€2,550/t

These values apply to a wide range of Group II base oils that may be sourced from within Europe or imported from the U.S., the Red Sea and Asia-Pacific.

The Group III European base oil markets are facing an extinction in around three weeks time, with some distributors of these grades declaring that they will be dry at the beginning of June. Buyers are looking to alternative suppliers to investigate any possibilities for supplies of Group III base oils, but incumbent suppliers have their own portfolio of buyers, many of whom have been purchasing Group III base oils from sellers such as South Korean refiners S-Oil and GS Caltex.

Two Middle East Gulf Group III sources, the Pearl gas-to-liquids joint venture in Ras Laffan, Qatar, and the Bapco plant in Sitra, Bahrain, sustained damage from Iranian airstrikes and will require repairs. The Adnoc refinery in Al Ruwais, UAE, was also attacked. It may not have been damaged, but shipments of its base oils have been halted by the closing of Hormuz.

Blenders are looking at options to use polyalphaolefins to replace Group III and Group III+ base stocks, but large amounts of spare PAO are not available in the market and those buyers who previously purchased PAOs are being looked after as a priority, and with prices moving higher, levels are heard to be approaching $4,500/t.

The Group III plant in Cartagena, Spain, will reportedly go ahead with planned maintenance but delay the temporary shutdown by around four weeks to accommodate a supply hub in Antwerp. Two large cargoes should be delivered during May.

Prices for Group III oils with partial slates of finished lubricant approvals were increased from May 1, but some distributors have advised that May will be the final month of availabilities. Prices for grades with full slates of approvals rose again the past week. Rerefined Group III oils also underwent markups this week. Sellers are holding back from offering extra quantities of these grades, with buyers receiving allocated quantities based on historical purchases. The force majeure declaration by the Avista plant in Kalundborg will create another hole in the supply scene.

Group III

Partly approved grades, FCA Antwerp-Rotterdam-Amsterdam
4 cSt: €2,850/t-€3,000/t
6 cSt: €2,825/t-€2,875/t
8 cSt: €2,825/t-€2,855/t

Fully approved, FCA Northwestern Europe
4 cSt: €2,950/t-€3,100/t
6 cSt: €2,945/t-€3,100/t
8 cSt: €2,975/t-€3,150/t

Rerefined, FCA Germany
4 cSt: €2,700/t
5 cSt: €2,695/t
6 cSt: €2,695/t

Baltic Sea

Russian domestic base oil prices are again reported to have risen during last week, but selling prices in rubles are not published.

There are no reports of Russian bulk cargoes leaving Baltic ports, although with shadow fleet vessels being used for other products, base oils could be moving under the radar. There are unconfirmed rumors of Russian base oils being exported in flexi-tanks, but supposed quantities are vague and destinations unknown. Some have said that quantities could be going into African receivers, but this possibility is difficult to assess, without shipping information, which is not available from any reliable source. There is no evidence to support these sales or movements.

Black Sea & Turkey

Turkish buyers are scouring the European market for any chances to purchase European quality Group I base oils, with the best chance being taking material from Yanbu or Jeddah, Saudi Arabia. However, prices would be very high, and the ability for Turkish traders to access dollars through the Turkish banking system is extremely difficult.

Purchases would have to be made against letters of credit or cash payments up front, equally difficult to achieve from within Turkey, although some rumors are that certain Turkish traders have access to funds in banks outwith Turkey, allowing them to use trade finance to complete deals.

Russian barrels remain missing from the base oil supply scene in Turkey, though some players are offering material that could be either Uzbek or Iranian in origin.

Turkish blenders did purchase Group I base stocks from AMOC and APC in Alexandria. Group I and Group II base stocks were supplied into Gebze, Turkey.

Tupras prices for base oils from its refinery in Izmir are unchanged this week.

Group I, ex rack Izmir
Spindle oil: Tl 82,410.00/t plus, VAT Tl 18,511.30/t
SN150: Tl 78.933.00/t plus, VAT Tl 17,815.90/t
SN500: Tl 80,668.00/t plus, VAT Tl 18,162.90/t
Bright stock: Tl 99,318.00/t, plus VAT Tl 21,892.90/t

Sales incur a standard loading charge of Tl 10,146.50/t which remains unchanged and should be added to the prices above.

Traders in Turkey have advised that no sale offers will be issued relating to Group II material recently arrived from Taiwan. Traders are holding on to stocks and using the product in local blends. The finished lubricants produced using these base oils will yield Turkish blenders with exceptionally handsome profits whether sold within Turkey or exported to Europe.

Group II, ex-works
110N and 220N: no offers
350N: no offers
150N: unavailable
500N/600N, ex Taiwan: Product being used in blends locally

Group III

Partly approved
Tatneft 4 centiStoke FCA: no avails.

Fully approved
From Cartagena, Spain: €3,150/t-€3,200/t.

Repsol supplies Group III from Cartagena, shipping cargoes of 800-1,200 tons. It is not confirmed if these cargoes are continuing due to significant price rises.

Middle East

A large cargo from Yanbu has been loaded and has sailed for Singapore. The is the first cargo from Saudi Arabia to Singapore since November last year. Luberef is also looking to Europe with cargoes of Group I and Group II base oils out of Yanbu.

Base oil cargoes have also been loaded and are en route to receivers in Durban, South Africa, and another large parcel is moving into the West Coast of India in the next couple of weeks.

Investigations into moving base oils by road from Yanbu and Jeddah, do not appear to have come to anything, with sources in the UAE commenting that the operation would be very expensive, and would only provide relatively small quantities of base oils, insufficient to use in an economical manner.

Those UAE blenders continuing to operate are reaching the end of their inventories. Either base oils have been depleted or additives have run out, or packaging has all been used. Some companies are operating on a part-time basis, but a few have closed down until such time as supplies of base oils and additives arrive into ports such as Jebel Ali and Hamriyah. This could yet be some time, and many are concerned that even if Hormuz opened tomorrow, it may take months before cargoes now sitting at anchorage could be discharged into storage.

Port congestion will be rife and cause further delays to blending operations receiving base oils.

Some sources in Dubai and Sharjah have reported that there are huge financial penalties being applied because of capital tied up in cargoes, and that these penalties have had to be paid to traders and shippers. Banks are said to have been flexible to a point, but they cannot maintain businesses with costs but without cash flows. This may be one of the reasons why some companies have shut their doors and may not re-open.

Some enterprising companies have been trying to access base oils from storage in Fujairah, or Muscat in Oman, but with new Iranian strikes on facilities in Fujairah, there is hesitation to continue these operations. Base oils would be loaded in trucks then driven across to Sharjah and Jebel Ali. Storage is at a massive premium in Fujairah, with the blending operations based in that location supplying finished lubricants to the UAE markets, maintaining a supply of lubes for continuous operations, including government and military.

Luberef occasionally delivers into Fujairah, so bridging supplies of Group I and Group II base oils to Sharjah and Abu Dhabi is a feasible option to keep operations ticking over. Nevertheless, these supplies are in no way a substitute for a number of cargoes which are waiting offshore outside the Gulf.

Some vessels have now been at anchor for more than ten weeks and will have to continue waiting if they are to discharge cargoes into Middle East Gulf ports. Crews remain onboard but launches have been used to rotate people, maintaining crew numbers for safety and security. Water, victuals and fuel are being delivered to vessels waiting at anchorage by ships’ agents.

Talking to shipping agents in the UAE, it would appear that there are around 16-20 cargoes of base oils swinging at the hook, waiting to discharge in ports such as Hamriyah and Jebel Ali. Cargoes are from the U.S., South Korea, Thailand and Singapore. Most of the vessels arrived just as the war commenced and are in communications with owners to wait for orders to discharge. Some vessels were diverted to alternative ports such as Mumbai and Karachi where the cargoes were sold to new receivers.

One agent in Dubai informed this report that if there were no changes in the situation with Hormuz by the end of May, that a couple of the ships would weigh anchor and sail to an alternative port for discharge of the cargo on board.

Base oil prices in the UAE had risen but with very little product left in storage, there are no reported FCA sales. The most recent prices are shown below since these were confirmed a couple of weeks ago, but there are doubts regarding the availability of base oils.

Prices are no longer valid and are only given as information for the last deals to be conducted.

Group I, CIF/CFR UAE ports
SN150: $1,965/t-$1,995/t
SN500: $2,150/t-$2,185/t
Bright stock 150: $2,400/t-$2,475/t

Group II base oils are offered basis FCA or on an RTW delivered basis in the UAE and Oman. Supplies of Group II in storage are all depleted, and prices have been suspended until new cargoes are discharged. There are small quantities arriving by truck from Fujairah, but these quantities are not being resold.

Group II
110N, 150N and 220N: Prices suspended
600N: Price suspended

Group II base oils were/will be imported into the UAE and other Middle East Gulf ports in Qatar, Bahrain and Kuwait and were supplied from a number of  sources in the Red Sea, the U.S., South Korea, Singapore and Europe. Cargoes were discharged into storage in the UAE, then smaller parcels were transshipped to ports around Middle East Gulf or delivered by RTW.

There are no updates the past week on damage to the Pearl or Bapco plants in Ras Laffan and Sitra.

The base oil plant at the Adnoc refinery at Al Ruwais has apparently not experienced damage, but storage and pipeline facilities are not confirmed so there could be problems loading an moving Group III base oils from this source. Quantities of Group III grades cannot be loaded from storage due to no vessels or transit through Hormuz.

Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, are no longer available due to the shutdown at Sitra, and it would appear that no product is presently coming out of Al Ruwais.

The distributor in the UAE has temporarily ceased selling product and will only restart as and when material is forthcoming from Adnoc. With the news that Adnoc base oil plant is undamaged by the Iranian strikes, supplies from this source may be reinstated sooner than was first imagined, but these are tentative thoughts at this time.

Group III prices are suspended for the moment.

Netbacks for Group III base oils ex Al Ruwais, Sitra and Ras Laffan are suspended for the time being.

Africa

A large cargo of Group I and Group II base oils loaded out of U.S. Gulf Coast for discharge in Durban. The cargo will be discharged in Durban, restocking inventory for representatives of a U.S. major, and the cargo is believed to have arrived a couple of weeks back and has competed discharging.

It has been reported elsewhere that a European major had loaded 10,000 tons of Group I oils out of Fawley, U.K., for receivers in and Tema, Ghana, and Nigeria. This report can confirm that the supplier will not be discharging any cargo into Apapa port in Lagos. The cargo is underway, and will probably arrive into the first port in a few days time, and will then discharge into another two West African ports, as is the norm for this supply.

The ports nominated will be Conakry, Guinea, and Abidjan, Cote d’Ivoire.

No further cargoes are expected to arrive into Nigeria for some considerable time, with receivers in Lagos facing the prospect of prices having risen three-fold since their most recent purchases. Traders report that the Nigerian market is of no not interest presently. Traders are looking at Indian markets and at opportunities arising in South and Central America. Nigerian buyers would have to pay around $3,259/t for SN900 to be delivered into Apapa. Resellers based in Lagos will merely walk away from base oils until prices return to levels considered to be competitive.

All recent arrivals had been negotiated prior to the Iran war, therefore resellers in Lagos will be making considerable margins on new sales where they can.

The Nigerian naira exchange rate was NGN 1,363 to the dollar Monday.

The last round of Nigerian Group I prices, CFR Apapa, remain valid, since no new offers have been made or received since the Iran war. Indications as to new prices have terrified Nigerian receivers, and hence no new cargoes will be entering this market for the foreseeable future.

All cargoes recently arrived into Apapa, were sold at prices valid prior to the Iranian war. Levels were around the following numbers.

Group I
SN150: $885/t
SN500: $925/t
SN900: $1,035/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.

Historic and current base oil pricing data are available for purchase in Excel format.