Weekly EMEA Base Oil Price Report

The news late Monday evening in the Europe was that Trump has cancelled a military attack on Iran planned for Tuesday at the behest of a number of Middle East Gulf states, including the United Arab Emirates, Qatar and Saudi Arabia. Trump added that the U.S. military would be prepared to go forward with full scale assault on Iran if no acceptable deal was reached.

Submissions to peace negotiations from Iran include the right to pursue nuclear developments, reparations from the U.S. for war damage, the right to control the Strait of Hormuz and the cessation of all attacks by Israel on the Hezbollah proxy in Lebanon.

These are anathema to Trump, who has countered by demanding the surrender of quantities of enriched uranium, and a 20-year moratorium on nuclear development, the opening of Hormuz to all shipping without hindrance or conditions and the cessation of attacks on nearby countries, where U.S. military bases are located.

The two sides are poles apart on any form of agreement to any of the above terms, with Trump reiterating warnings to Tehran to move to a ceasefire and peace treaty with immediate effect.

In Ukraine, Russia launched a huge drone and missile attack on Kyiv, at the end of last week, killing twenty civilians and injuring a 50 more. In response, Zelensky ordered almost 600 drones to be targeted at Moscow over the weekend, hitting refineries, munitions factories and communication centers.

External reporting on damage and disruption have been blocked by a “Putin edict’ which prohibits information being disseminated through the media on news from the area and region. 

Moscow has denied that Russian forces are starting to lose battles on the front line or that casualties are soaring, with latest statistics gathered from international sources putting the toll at more than 1.6 million troops killed or injured.

The Middle East conflict perhaps imposes more threats to European, Middle Eastern and African base oil markets than the War in Ukraine, but both wars are having a massive effect on energy prices around the globe.

Base oil prices continue to climb across API groups, firming on the back of diminishing availabilities and high demand. An increase in demand would normally be expected at this time of year, but it is being amplified this year due to tightening supplies of API Group I and Group III base stocks.

Refineries in Europe that produce base oils are pruning output of base oils in favor of optimizing distillate output. Severe limitations loom on diesel and jet fuel coming into the European markets from Middle East Gulf sources, and with the region being net short of distillate fuels, sacrifices are being made to accommodate the greater good.

The Irony is that currently base oils are contributing huge margins. Base oils are generally bringing premiums of around $2,000 per metric ton over diesel price levels now.

Some industry players are calling for more imported fuels from sources in the U.S. and a return to producing larger quantities of base oils, but the practicality of the situation is that due to restrictions on base oil availabilities, prices are higher than would otherwise be achievable.

A number of traders are investigating imports into Europe and Africa from the U.S. and Asia-Pacific, but the latter has also been affected by the dearth of crude supplies and hence limitations on refinery production.

Hurricane season is approaching in the U.S., which in recent years has triggered sellers and buyers to significantly build inventories to insure against supply interruption, since such a large portion of U.S. base oil capacity is along the Gulf of Mexico coast.

The bottom line is that there is very little leeway to supplement European and African supply, with only relatively small quantities of Group I and Group II base oils being made available from a Red Sea source, perhaps partly due to the suspension of supplies to the base oil market in the Middle East Gulf.

Base oil prices have never been so high as they are today – at least in your columnist’s memory, which stretches back many years. Finished lubricant prices have skyrocketed as many companies have declared force majeure on supplies of finished lubricants, citing insufficient availabilities of base oil and additives to produce the quantities required to cover orders.

Prices are having a detrimental effect on budgets, with consumers of finished lubricants seeing exponential hikes in price, covering raw material replacement costs. Some are countering blenders, citing that their end-users will not pay higher prices, but buyers have little choice: either pay the price or prepare to have no lubricants delivered.

An inflationary cycle is fully underway and will affect many economies negatively, with not only base oil and finished lubricant prices escalating, but fuel costs moving in tandem with crude prices that are reacting to the perceived negative vibes coming from Trump and Tehran. Economists are warning that we are on the verge of a global recession and that it will take months, if not years, to emerge from this downward spiral, even if a solution to the Middle East conflict was found tomorrow.

Where this scenario leaves companies and business engaged in the lubricants industry varies, but many smaller blending operations are considering closing down permanently, with others commenting that they may close their gates for a period of time to re-assess the situation following a resolution to the conflicts in the Middle East and Eastern Europe.

Crude and Gas Oil Prices

Fundamentals continue to be fickle as crude prices remain volatile, moving swiftly up then down in response to announcements  and news from Tehran and Washington.

Dated deliveries of Brent crude prices are being maintained above $107, with petroleum product prices showing the same degree of extreme volatility, especially jet fuel and gas oil. These products were traditionally correlated to crude prices, but with potential shortages in regional markets there has been a pronounced effect of hiking levels higher than could have been anticipated.

Dated deliveries of Brent crude: $110.85/bbl, July front month
West Texas Intermediate: $106.95/bbl, June front month
European low-sulfur gas oil: $1,225/t, June front month

Source: London ICE trading late Monday, May18

Europe

Group I base oil has become incredibly short in Europe. Many buyers are looking around various parts of the market, forming buying cooperatives and exchanging information on available barrels with other buyers and blenders. Most blenders are living hand to mouth at the moment, unsure about when and where the next availability is coming from. Most have stuck with existing suppliers, but many of these supplying companies have declared force majeure to contract buyers, outlining that they do not have the available product due to a number reasons.

For Group I supplies, many have been restricted due to cutbacks in refinery runs and many producers turning to optimum distillate production, sacrificing quantities of base oils.

Prices continue to rise as blenders search for any and all possible availabilities. Sellers acknowledge that they do not have sufficient stocks to cover total demand.

The ironic twist is that base oils currently yield much higher margins than normal, providing excellent returns. Distillate fuels such as jet and diesel are in demand with a large number of imports moving now from the U.S. to Europe, but at higher prices.

New Group I supplies are being set up from Egyptian, Saudi Arabian and Greek rerefiners, who are becoming supplying to more distant markets than they might normally – exporting to buyers in Northwestern Europe and the United Kingdom.

There are no possibilities for export sales at this time, with every available European barrel of Group I base oils being purchased by regional buyers.

Some enormous price increases were announced the past few weeks, for example one producer having imposed nine rounds of hikes since Feb. 28. The resultant outcome of some majors leading the increases has been widening ranges as illustrated below.

Group I

European exports, basis FOB
No current prices

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $2,350/t-$2,930/t
SN500: $2,450/t-$3,050/t
Bright stock 150: $2,795/t-$3,200/t

Eastern Europe, FCA
No prices available from PK Orlen, Mol

Mediterranean prices, FCA Spain, Greece, Italy
SN150: $2,780/t
SN600/500: $2,850/t
Bright stock: no availabilities

Pan-European, FOB/FCA
SN150: €2,200/t-€2,485/t
SN500/600: €2,125/t-€2,585/t
Bright stock 150: €2,560/t-€2,730/t

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

The euro’s exchange rate with the U.S. dollar was $1.18485 Monday.

European Group II base oil prices have been pushed higher again, now for the ninth time since the start of the Iran war. This is actually now a weekly event with one producer taking the lead by issuing what appears to be almost random numbers to existing prices. It is understood, having talked to a number of receivers of these grades, that the prices issued are akin to posted prices and can be subject to individual negotiation with discounts being applied in many cases for larger, regular buyers. The extent of discounting was not revealed and remains confidential between sellers and buyer.

Last week saw increases of $150/t being applied to both light and heavy grades. Prices as of today have broken through the $3,000/t level to $3,030/t for 150 neutral and $3,160/t for 600N, on the basis of FCA sales Antwerp-Rotterdam-Amsterdam. We await the news for the week to come.

Availability of Group II base stocks was previously declared adequate, but buyers are reporting some supply issues stemming from delays to imported cargoes from U.S. sources. One major supplier had very little stocks in tank, but the arrival of a vessel in Antwerp-Rotterdam-Amsterdam with a large cargo of Group II grades has solved the immediate crisis.

Supplies of Group II base oils are also being directed towards the European markets from Yanbu, Saudi Arabia, presumably because the European market is relatively tight and has higher prices than alternative markets in India and Africa.

Prices here have been increased to reflect the latest round of increases advised to the market last week. Levels are now assessed at €2,425/t-€2,570/t for 100N and 150N grades, with 600N at €2,550/t-€2,680/t.

Group II, FCA basis
110N: €2,425/t-€2,570/t
150N: €2,425/t-€2,595/t
220N: €2,400/t-€2,475/t
600N: €2,555/t-€2,680/t

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

Group III European base oil markets are running shorter, with a number of distributors issuing force majeure notices to contracted and regular buyers. Some of the notices are effective immediately, while others appear to have been backdated to May 1. The reasons given are essentially all the same, citing the current logistical and supply issues emanating from the Iranian war in the Middle East.

Buyers are searching for alternative suppliers 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 the South Koreans for many years.

Middle East Gulf supplies are coming to a halt with only one cargo yet to arrive into Antwerp-Rotterdam-Amsterdam from Bahrain. The vessel sailed through the Strait of Hormuz on the night of Feb. 28, thus narrowly avoiding 10 weeks inside the Gulf.

Shipments from the three Group III plants in the Middle East Gulf are of course still stalled. Besides being blocked by the strait’s closure, two facilities were damaged by Iranian airstrikes – the Pearl gas-to-liquids joint venture in Ras Laffan, Qatar, and the Bahrain Lube Base Oil plant in Sitra, Bahrain. Adnoc’s refinery in Al Ruwais, UAE, was also struck but may have escaped damage. Nevertheless, one European distributor has advised that shipments might not resume for months after the strait reopens due to expected difficulty chartering vessels.

Blenders are looking at options to use polyalphaolefins to replace Group III and Group III+ base stocks, but PAOs are not readily available in the market with only a few European producers such as ExxonMobil, Ineos and Chemtura all committed to contracted customers. Prices for PAOs have rocketed, with metallodecene grades such as PAO 100 approaching $5,000/t.

Two large Group III cargoes loaded out of Cartagena, Spain, the second leaving port this week en route to Antwerp to discharge a large Group III cargo into hub storage. 

Prices rose the past week for Group III grades with full slates of finished lubricant approvals and for grades with partial slates or no approvals. There were also new hikes for rerefined Group IIIs.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €3,250/t-€3,320/t
6 cSt: €3,275/t-€3,325/t
8 cSt: €2,975/t-€3,100/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 cSt: €3,300/t-€3,375/t
6 cSt: €3,320/t-€3,395/t
8 cSt: €3,350/t-€3,400/t

All the above products sold on a delivered basis will be subject to transportation charges, added to the prices above.

Rerefined, FCA Germany
4 cSt:  €2,965/t
5 cSt : €2,945/t
6 cSt: €2,965/t

Baltic Sea

Russian domestic base oil prices have apparently risen again, and with Ukrainian strikes on a number of base oil producing refineries last weekend, this report awaits any news of further supply interruptions that could cause shortages in country. Bashneft at Ufa, and Lukoil at Perm were reportedly targeted.

There are no reports of Russian bulk cargoes leaving Baltic ports. Shipments in shadow fleet vessels could move under the radar, but suggestions that Russian base oils are being exported in flexi-tanks have not been verified, and it is unclear what destinations could be.

At this point it is considered that no Russian produced base oils are moving from the federation, since material is short within the country and with possible further supply issues the future looks bleak.

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 material from Yanbu or Jeddah, Saudi Arabia, but prices will 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 with European prime bank confirmation being added to any L/C issued by a Turkish bank. Cash payments in advance are a possibility, but would be difficult from within Turkey, although certain Turkish traders have access to funds and credit lines in banks outside Turkey.

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

Tupras prices 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 will blend using this material and will sell finished lubricants at today’s going rate, thus making large margins, but these margins may be necessary to finance replenishment barrels to continue blending finished lubes which are being sold in the Turkish market and also exported to markets such as Ukraine.

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

Group III

Partly approved
Tatneft 4 cSt, FCA: no avails

Fully approved
From Cartagena, CIF Gemlik: €3,450/t/t-€3,520/t

Middle East

A large cargo from Yanbu loaded and sailed for Singapore. This was  the first cargo from Saudi Arabia into Singapore since November last year.

Luberef are also looking to Europe with cargoes of Group I and Group II base oils out of Yanbu. Vessels have not yet been identified to load these parcels, but local sources in Jeddah have advised that this trade could become a major new part for Group I and Group II production from Yanbu.

UAE blenders continuing to open their doors are running at very low rates, with some truck top ups arriving from Fujairah over the past couple of weeks, but quantities are insufficient to sustain operations on a longer term basis. With reaching the end of inventories there are few choices left. Base oils are depleted additives have run out, and packaging has all been used.

One blender talking last week commented that they had enormous quantities of finished branded lubricants in drums and smaller packages in cartons lying in warehouses waiting to be able to get hold of containers to load these quantities to fulfil orders which were place prior to the end of last year!

These stocks were to be moved during March to receivers in East Africa, South Africa, and also to buyers in South American countries.

There are problems regarding the financing of these large quantities with some receivers having paid in advance and others having opened letters of credit.

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 start flowing into Jebel Ali and Hamriyah. This could yet be some considerable time away, with many concerned that even if Hormuz opens immediately, it could take months before cargoes sitting at anchorage could be discharged into shore storage.

Port congestion will be horrendous, with limited berths available for bulk cargoes and with containers delayed, supplies of additives could be months before arrival.

Some sources in Dubai and Sharjah have reported that there are huge financial problems developing with State banks stepping in to furlow companies during this period of unrest. This would involve financing companies by way of loans to insulate businesses from the effects of the war.

With capital tied up in cargoes which have had to be paid to traders the local banks are also turning to Governments to bail out companies in the short to medium term to allow trade and business to resume.

Some enterprising companies have been trying to access base oils from storage in Fujairah, or from Muscat in Oman. This process has not been successful, only scratching the surface of supplies to maintain operations.

Others continue to look at overland supplies by truck from Yanbu, but delivery times and costs are against this exercise.

Luberef occasionally deliver into Fujairah, but this supply is for local Fujairah blenders, not for bridging across to Hamriyah and Jebel Ali. Bridging supplies of Group I and Group II base oils to Sharjah and Abu Dhabi is not a feasible option due to limited storage facilities in Fujairah, all of which is utilised by local companies.

Vessels have now been at anchor for almost three months, with even longer to wait if they are to discharge cargoes into Middle East Gulf ports. Crews remain onboard but launches are being used to rotate crew numbers for safety and security.

Ship agents in UAE, have confirmed that there are 16-20 cargoes of base oils swinging at the hook, waiting to discharge in ports such as Hamriyah, Jebel Ali and Ras al Khaimah. Cargoes are from U.S., South Korea, Thailand and Singapore.

Most of the vessels arrived just as the war commenced or in the days following, and masters maintain communications with owners awaiting orders. Some vessels were diverted to alternative ports such as Mumbai and Karachi where the cargoes were sold to new receivers.

Base oil prices in UAE had risen but with very little product left in storage, there are no reported FCA sales.

The last 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. Prices currently would be hiked by around $1,000/t if products were to become available, taking into account costs for demurrage for three months plus.

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 sold basis FCA or RTW in 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 are not being resold.

Group II, FCA or110N, 150N and 220N: Prices suspended
600N: Price suspended

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

No further updates or reports have been heard from either Ras Laffan in Qatar, Sitra in Bahrain or Al Ruwais in Abu Dhabi.

The base oil plant at the Adnoc refineries at Al Ruwais has apparently not been damaged, but storage and pipeline facilities are not confirmed as intact, hence there may be potential problems loading and moving Group III base oils. With Hormuz still closed, surmising about the refinery is academic.

Group III base oils, FCA Hamriyah/Sharjah port or RTW in UAE and Oman, are no longer available due to the shutdown at Sitra, and it would appear that material is not presently coming out of Al Ruwais.

The distributor in the UAE has temporarily ceased selling product and will 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.

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 discharge 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.

A further large composite base oil cargo has, or will load in the next few days out of Rotterdam and Fawley for a major, supplying distributors and affiliated companies in South Africa. The vessel will discharge in Durban during second half June or early July.

The reports that a northwestern European base oil cargo loaded for Nigeria is false, the cargo loaded will discharge in Ghana, Cote d’Ivoire and Guinea.

No further cargoes are expected to be supplied into Nigeria for some considerable time, with receivers in Lagos having to face having to purchase base oils at three times the prices paid on the last arrivals, all of which were consigned prior to the Iran war. Buyers in Nigeria are not ready to accept the higher prices which now have to be paid for any future cargoes and trading inNigeria is just too risky.

The sums involved in moving a cargo into Apapa, would now extend to around $60 million dollars, and the system is not geared up for such large sums. There would be too much dollar exposure, the constant risk of buyers back trading ( re-negotiating the price after the cargo is loaded and on the water ) and as one trader identified this week, one important point, there is no availability of a quantity of base oils to make up an export cargo at this time, either from Europe – impossible – or U.S., also impossible.

The Nigerian market is of no not interest presently, with attention now being paid to realistic business, where receivers are prepared to face up to paying market rates for base oils.

Nigerian buyers would have to pay around $3259/t for quantities of SN900 to be delivered into Apapa. Resellers based in Lagos will walk away from base oils until prices return to levels considered competitive.

All the last arrivals had been negotiated prior to the Iran war, therefore resellers in Lagos will now be making considerable margins on new sales, where they can, having hiked their selling prices to ‘international’ levels.

The Nigerian naira exchange rate was NGN 1,361 to the dollar Monday.

The last round of Nigerian Group I prices, CFR Apapa, remain valid, since no new offers have been made or will be made. 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.