Weekly EMEA Base Oil Price Report

Trump has called the plan unacceptable and said the U.S. is prepared to walk away from negotiations which are becoming meaningless. Iran has also demanded monetary war reparation compensation from the U.S., along with the release of all assets being held by the West under sanctions.

All this bluster, claims and counter claims are causing increased uncertainty, with crude and gas markets reacting with firmer prices early this week.

At the various anchorages inside and outside the Gulf there are vessels carrying base oil cargoes which have been “swinging on the hook” for six months now, although many of the ships which stayed at anchor early on in the war have found alternative discharge destinations which have been able to accept distress cargoes on board.

However, there are a small number of vessels which have not re-routed and have remained at the anchorage in the Gulf of Oman, whilst there are other ships which have remained inside the Gulf, with few chances to escape the confinement. Many are moored in ports around the Gulf which at least has afforded crews ability to disembark, and with stores and fuel being replenished the vessels are being kept ready to sail should an opportunity to transit Hormuz appear. There are few signs that this will be happening any time soon.

Meanwhile the Iranian economy is suffering with inflation rampant. Prices for everyday foodstuffs and provisions have multiplied more than ten fold since the U.S. blockade was established. The problem is that it is the ordinary people in the street who are suffering the effects of the war, not the theocratic elite and the IRGC.

In the Ukrainian conflict, Russia has been stepping up drone attacks on major cities such as Kyiv, Lviv and Kherson with many casualties and deaths being reported almost daily.

Reports over the weekend have shown Russian attacks on grain silos in Odesa, where huge quantities of cereal crops are stored for distribution to markets in Third World countries which are dependent on supplies from Ukraine to feed starving populations.

Ukraine has struck back at specific Russian targets such as refineries and processing plants, with today’s news that drone strikes were successful in causing severe damage to Nizhnekamsk refinery in Tatarstan, incredibly, some 680 kilometers from the Ukrainian border.

This refinery, run by Tatneft produces large quantities of Group II and Group III base oils from a relatively recently upgraded facility at the refinery. It is assumed that production of base oils will be badly affected along with ongoing fuel shortages which were already causing havoc and problems for the Russian population.

Putin has seemingly retreated to heavily guarded and defended properties, and has not been seen in public by the populace, leading to suggestions of an opportunity for a potential coup or similar, from within the Kremlin’s walls.

Russia has approached North Korea and China for supplies of jet fuel, diesel and gasoline, looking to bolster a dwindling supply chain, with refineries across the Federation coming under relentless drone attacks from Ukrainian forces and cutting availabilities of fuels and lubricants throughout Russia.

With the ongoing global conflicts affecting economies in Asia-Pacific and the West, there appears to be no end in sight for markets to return to pre-Iran war days. Base oils have predominantly been affected by the lack of supplies of Group III grades from Middle East Gulf sources, with Europe and U.S. being directly limited in finding alternative sources to counter shortages in the API Group III supply chains.

Crude and Gas Oil Prices

A week ago prices were reacting to Donald Trump calling off strikes on Iran, with crude and product prices softening against this background. This week sees the opposite, with a continuing impasse on the Strait of Hormuz causing markets to react and adjust to the latest news. Crude prices have firmed, but the alarming post is the prices of diesel in the European market with has leapt by almost $200 per metric ton from the numbers seen in the first part of last week.

These levels reflect the growing demand for distillate fuels around the European markets, perhaps pushing refiners to again limit base oil production at a time when base oil demand is very slow, and to increase output on distillates.

Dated deliveries of Brent crude: $86.50/bbl, October front month
West Texas Intermediate: $81/bbl, September front month
European low-sulfur gas oil: $1,318.00/t, August front month

These prices were obtained from London ICE trading late Monday, Aug. 10.

Europe

European Group I base oil markets have slowed almost to a complete standstill, which was probably to be expected given the season. Only a few enquiries are heard buzzing around the market, with most players missing from their desks for another couple of weeks.

Europe is experiencing a massive problem with exceptionally low river and canal levels which are being reported from every country in Europe. This situation is happening during August, when base oil markets are slow, but forecasts are that not much rainfall in expected during this month, which could affect base oil deliveries going forward into September or even October.

Some experts have said that for the lower reaches of major rivers in Europe to achieve satisfactory draft levels could take between four to six weeks from the first heavy rainfall. Therefore the problems could be extended for a much more prolonged period than ever seen before, altering the economics and logistics of base oil deliveries over the coming months.

Prior to the end of July, buyers of Group I base stocks held back, on a forecast that prices would fall during August, when typically demand disappears until September. this seems a remote possibility at this juncture, with more U.S. and Iranian confusion to be elicited from both sides in the Hormuz dispute.

The export market does not exist from a European perspective, and should refiners concentrate on producing more fuels rather than base oils, an export scene will remain a distant and remote possibility.

Prices are unchanged.

Group I

European exports, FOB
No current market.

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150 : $2,025/t-$2,055/t
SN500 : $2,120/t-$2,150/t
Bright stock 150 : $2,395/t-$2,450/t

Eastern Europe, FCA
SN85 : $1,945/t
SN150 : $1,957/t
SN350 : $2,013/t
SN500 : $2,045/t-$2,055/t
Bright stock 150 : $2,261/t

Mediterranean prices, FCA Spain, Greece, Italy
SN150 : $2,025/t
SN600/500 : $2,135/t
Bright stock: $2,420/t

Pan-European, FOB/FCA
SN150: €1,855/t-€1,900/t
SN500/600: €2,050/t-€2,110/t
Bright stock 150: €2,270/t-€2,320/t

Pan-European prices are assessed on an aggregate basis using 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 $1.15526 Monday.

European Group II base oil prices were stable up until the end of July, and have not fluctuated during the first part of August, with demand having dropped away. Vacuum gas oil prices are moving higher, and producers may be eyeing an opportunity to bolster Group II prices early in September. It is not thought that suppliers will make any moves at least prior to the end of August.

Barges are not moving other than within ports and seawater fed canals. Barge operators have suspended deliveries to nearly all freshwater locations until September, if rainfall is forthcoming during the latter days of August. Some buyers still complain that prices should be dropped and brought into line with an acceptable premium over diesel, but with diesel prices accelerating higher across Europe, this argument becomes weaker.

Prices are maintained with levels around €2,285/t-€2,365/t for 100 neutral and 150N grades, with 600N between €2,395/t-€2,470/t.

Group II, FCA basis
110N: €2,325/t-€2,400/t
150N: €2,325- €2,410/t
220N: €2,245/t-€2,285/t
600N: €2,410/t-€2,500/t

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

The European Group III supply situation remains critical, with replacement barrels from Asia-Pacific, and a ramping up of supplies from Cartagena in Spain, not enough to cover the market requirements come September. Supplementary cargoes from Asia-Pacific will not reach Europe until September at the earliest, and the specter of a number of turnarounds for major producers of Group III base oils will have an impact on availabilities at some point in the future.

The current situation in the Gulf remains too volatile for traders to even consider any cargo movements from the United Arab Emirates. Vessel owners (if it were possible to find any prepared to risk the transit) are demanding multiple freight rates, war risk insurance cover paid by charterers, and prompt demurrage payments if a vessel became stranded. These conditions are just not feasible to embark on trying to move material out of the UAE.

A cargo from Indonesia has arrived into Antwerp, with further reports of another cargo loaded en route via South Africa, and thereafter sailing onwards to discharge in Antwerp. It is not clear if the vessel is discharging a part-cargo in South Africa. The size of the cargo and vessel remain unknown.

Fully-approved Group III cargoes continue to load from Cartagena in Spain. An interruption this supplier will experience is the delayed turnaround which will start at the beginning of September. The producer has planned for this interruption by laying down large stocks in the northwestern European hub in Antwerp to cover contracted, and perhaps some additional supplies.

A number of sources have put forward a reason for some Group III prices to be showing lower. Many buyers purchased large quantities which were available at the start of the Iran war, at prices which were climbing steadily but had not reached the highs seen recently.

These purchases were tying up capital, and are now being offered for sale at high margins, but at levels which are below the recent highs to tempt buyers looking to lay hands on any availabilities of Group III grades, particularly the 4 centiStoke grade.

Prices for Group III oils with partial or full slates of finished lubricant approvals are unchanged this week.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 centiStoke : €3,125/t-€3,160/t
6 cSt : €3,100/t-€3,125/t
8 cSt: €3,085/t-€3,000/t

Fully-approved, FCA Antwerp-Rotterdam-Amsterdam and Spain
4 centiStoke: €3,395/t/t-€3,445/t
6 cSt: €3,380/t/t-€3,420/t
8 cSt: €3,425/t/t-€3,460/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 centiStoke :  €3,120/t
5cst :  €3,125/t
6 cSt:  €3,125/t

Baltic Sea

Today’s new of a major drone strike on Nizhnekamsk refinery which is 680 kms distant from the Ukraine border, shows how vulnerable Russia has become, with Ukraine taking the war into the local arena, where the Russian population can see for themselves what it has been like in the cities of Ukraine.

Tatneft run this refinery producing Group II and Group III base oils after a large capital project to move to premium base oils for the Russian domestic markets and also for export. This production one way or another, will have been damaged or even destroyed.

The Ukrainian strikes are tactical with Zelensky announcing that the attacks are meant curtail exports of refined products which generate dollar income for Putin, and also to place restrictions on the availability of fuels and lubricants for the Russian people.

Strikes on Perm and Volgograd refineries have damaged catalytic converter units in the refineries. These units will take time to replace, and only if the parts can be found and delivered to technicians who can undertake to work on the refinery columns.

Prices for any available base oils and finished lubricants have skyrocketed with many blending operations now unable to afford to purchase base oils and additives.

Fuel rationing and shortages are reported in a number of oblasts

Russia is importing fuels and base oils from Kazakhstan, and is looking to China and North Korea for supplies of gasoline, jet zero and diesel. All exports of fuels and base oils from Russia have been banned, with all available material allocated to domestic markets.

It is illegal for any Russian base oils to be exported.

Black Sea & Turkey

The Group II cargo loaded out of Ulsan in South Korea has discharged in Gebze, Turkey,. This cargo comprised of Group II base oils from GS Caltex.

Two large Turkish blenders have confirmed that Group I base oils imported into Turkey from Iran still remains off the table and suspended due to the war, and with no Russian base oils available, Turkish buyers have been relying on Turkmeni and Uzbek barrels for Group I imports in addition to Group I grades from Luberef ex Yanbu and from the two Egyptian producers in Alexandria.

Previously, Turkish buyers purchased a cargo of Group I base oils from Sonatrach ex Algeria, but after discharging the parcel, discovered that the material did not carry REACH approval, and therefore could not be used to blend finished lubricants which would have been resold in the Turkish market or exported to neighbouring receivers.

The cargo was commingled with Russian base oils and eventually was exported to Nigeria through an Egyptian port.

There have been no updates or news from Izmir. Tupras last prices ex rack Izmir refinery.

Group I, ex rack Izmir refinery
Spindle oil: Tl 82,393.00/t plus, VAT Tl 18,507.90/t
SN150: Tl 81,212.00/t plus, VAT Tl 18,271.70/t
SN500: Tl 82,947.00/t plus, VAT Tl 18,618.70/t
Bright stock: Tl 99,301.00/t, plus VAT Tl 21,889.50/t

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

Traders in Turkey have advised that no resale offers will be available for Group II base oils. There are no offers out of Turkey for either Group I or Group II base stocks. All material is being retained for in-house blending and local sales.

Group III base oils appear to have been totally removed and missing from the Turkish market, and with the Tatneft refinery being hit by Ukraine drones, non will be forthcoming.

Fully-approved Group III from Cartagena, Spain, is currently not being supplied into Gemlik.

Middle East

Troubles continue for Saudi vessels attempting to move any crude or products through the Bab-al-Mandeb Strait. Three ships were turned around and headed back to Yanbu or Jeddah ports. The Houthi militia has pounded the Yemeni port of Mocha with drones, missiles and boats. This port is held by Yemeni national forces, who have struck Houthi targets in the past, and may now resurrect this activity following the deadly attacks on Mocha.

A cargo of Group II base oils loaded for discharge in Durban, and the vessel has arrived in Durban and is believed to be discharging. The vessel navigated the Bab-al-Mandeb Strait without any problems prior to the Houthis announcing the closure of the channel. Indian contacts have confirmed that Luberef have advised of “delays” with some vessels, but are not cancelling cargoes at this point.

From sources close to Saudi Aramco, news has been received that the upgrade to Yanbu refinery to initiate the production of Group III base oils is on schedule to start during Q4 this year. when production will actually become available, is not yet advised.

Confusion continues to reign over what is happening regarding the Strait of Hormuz. Iran is intent on talks with Oman to devise a plan for vessels to transit, but what terms and conditions are attached to this scheme are hazy, and continue to change from one day to another. Meanwhile, Washington has announced that the blockade of Iranian ports will continue until Iran gives up on proposals for tolls and charges for vessels to transit Hormuz, and Trump wants safe passage immediately for all ships entering or leaving the Gulf.

Iran has also made demands that financial war reparations are to be made by the U.S. and that all Iranian assets and funds frozen under sanctions by the West are to be released without delay.

Discussions continue regarding looking at ways to bypass the Strait of Hormuz and also the Bab-al-Mandeb Strait in the Red Sea, with the latest news that allies are examining the potential of an old Israeli pipeline which runs between Eilat in the Gulf of Aqaba and Askelon port on the Mediterranean coast. The implications of this project could be that a spur pipeline between Yanbu and Eilat could be constructed, with vessels loading in a new terminal on the Mediterranean coast. The pipeline could carry crude in addition to petroleum products.

No further news has been heard regarding the new refinery to be built by a Texas corporation in either Saudi Arabia or the UAE. Where and how this refinery will help solve the problems are completely unknown, although Fujairah has been put forward as a potential site.

Base oils of all types in the Gulf are largely missing, with many blenders in the UAE, Qatar and Bahrain, closing their doors until “normality” returns to Middle East Gulf. Supplies of Group I and Group II base oils which had been in storage in the UAE prior to the start of the war are exhausted and long gone. Listing here of prices in the UAE is therefore suspended until new cargoes can be discharged.

Quantities in trucks are arriving from Fujairah and containers are being used to pack flexies for transport by train from Fujairah to Dubai and Abu Dhabi. Quantities are not being resold, and are only being delivered to “approved” blenders, blending finished lubricants for local markets, including contracts for the UAE military, police and civil government. Additives are being sourced and provided from containers unloaded in Fujairah.

Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, are seemingly available from Adnoc at Al Ruwais, but the quantities are very small, with difficulties in finding other base oils to blend with Group III, in addition to accessing additives to meet formulations. Again, listing of prices in the UAE remains suspended. Netbacks for Group III base oils ex Al Ruwais, Sitra and Ras Laffan are likewise suspended for the time being.

Africa

A cargo of around 3,000 tons of bright stock is en route to Alexandria to supply under the EGPC contract. The cargo loaded out of Yanbu and with the size of the whole cargo and the vessel, it is understood that the ship will discharge around 3,000 tons of bright stock this week in Alexandria, and then proceed to Northwestern Europe to discharge the remaining cargo, believed to be Group I grades.

A Group II cargo from Luberef has loaded and has discharged in Durban. This may the last for some time until the Houthi situation can be addressed.

A cargo of Group II base oils has loaded out of Ulsan in South Korea during second half June and has arrived in Durban. Another large Group II parcel loaded ex U.S. Gulf Coast will arrive into Durban port around mid-August for a part-cargo discharge. The vessel will then proceed to an Indian port to discharge the balance of the cargo.

A large base oil cargo has loaded out of Rotterdam and Fawley, supplying distributors and affiliated companies in South Africa. The vessel should discharge in Durban during second half of August, more information to come from the vessel’s agent.

A Group I cargo for a major will load out of Fawley with around 10-11,000 tons of three Group I grades for delivery into Conakry in Guinea, Abidjan in Cote d’Ivoire and Tema in Ghana. The latter discharge will be for around 5,000 tons divided proportionately between three Group I grades, SN150, SN500 and bright stock.

Rainy season in Nigeria, and no signs of buyers in Lagos looking to purchase one or more cargoes from the handful of traders involved in this business. Traders appear to have taken the view that they are wasting time going to buyers with offers for cargoes, which will require terms and conditions which will not be acceptable to receivers.

Unfortunately, with FOB prices as they are today, (even if material were eventually available) are much higher than any previous deals done. Traders not requiring cover of the transaction under a letter of credit would be taking enormous risks. There are probably three or four mainline traders who get involved in this market, and additionally there are a couple of companies who previously sold Russian base oils onto the Nigerian market. This will not be happening in today’s market.

There is little appetite to look at new possible cargoes, and it may be some time before traders venture to offer available barrels into this market. Buyers have to realise that the market does not remain in the same place, and that monumental changes have happened which affect prices and the way of doing business in Nigeria. Higher prices require risk assessments which have to be made regarding finance and payments.

The risks outweigh all else, with buyers not prepared, to open letters of credit to cover the value of higher priced cargoes,The value of a large 18,000 tons cargo could be around $60 million. No trader is going to offer extended, open credit with part or full payment in naira just to place a cargo in Nigeria.

Finance is a major issue at current price levels, coupled with the real possibility of back-trading or non-performance. Traders will demand full coverage for any cargoes under a letter of credit, issued by a local Nigerian bank and then confirmed by an acceptable prime European bank.

The Nigerian market has been spoilt over the last few years by some traders introducing extended credit terms with open ended payment options including settlement in naira, which then have to be converted on the black market into dollars and then transferred to Western banks where traders hold their accounts.

The Nigerian naira’s official exchange rate was NGN 1,361 to the dollar Monday, while the black market rate was between NGN 1,410 and NGN 1,425.

For the sake of historical value, the last cargoes which arrived into Apapa, sold at prices valid prior to the Iranian war.

Group I, FCA Apapa port, Lagos
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.