Weekly EMEA Base Oil Price Report

Zelensky was adamant that all Ukrainian occupied territories should be returned to Kyiv, and that all Russian forces should withdraw behind their own boundaries. Only on these terms, plus financial restitution for damage caused in Ukraine by Russia would consideration be given to a peace settlement.

Thus the war continues and is being called to move into the winter and beyond without capitulation from Kyiv.

Drone attacks on Russian refineries, transportation routes and other energy targets continue. U.S. President, Donald Trump, appears to have taken a back seat on this conflict, perhaps concentrating attention on the other global distraction, the war against Iran in the Middle East.

Iran and the U.S. traded fire over the weekend with the usual responses by energy markets to escalations, with firming crude prices evident on the opening of trading in Asia Monday morning. The Strait of Hormuz remains a “no go” transit for merchant marine traffic, preventing any progress towards free movement of vessels through this channel.

An ad hoc survey conducted by this report suggest that there are no longer any vessels carrying base oil cargoes waiting outside the gulf. All ships that were anchored offshore Oman and the United Arab Emirates have either sailed to alternative ports in India, South Africa and East Africa, or have managed to discharge in ports such as Fujairah or Muscat, where cargoes are transferred by truck and rail to a small number of internal receivers in the UAE.

The information was compiled from port authorities, ships’ agents and original receivers and traders who had purchased large quantities of base oils for blending, producing and reselling base oils and finished lubricants around the Middle East Gulf, and also for exports of lubricating oils to international markets.

Within the Middle East Gulf, players have been innovative in adapting to the conditions imposed by the war in Iran, and whilst the quantities and volumes of base oils and finished lubricants has been severely diminished, many blending operations have scaled back, or in some cases, have ceased all production of lubricants.

Base oils and additives continue to be difficult to arrange in sufficient quantities to meet local demand, and with limitations on packaging and movement of goods both in and around the gulf, and for international exports the region has changed and altered dramatically over the last six months.

Some companies in the gulf region have moved operations to alternative countries such as India, South and East Africa, and in some cases to locations such as Singapore and Thailand. Whether these companies revert to MEG following the end of the Iran conflict remains to be seen, with a number of companies indicating that they may not return to original sites, although the picture is more complicated, with variances in tax and fiscal arrangements playing vital parts in operations.

The Middle East exists from day to day, with a reported resurgence in Hezbollah and Hamas activities in Lebanon and Gaza. Israel’s defense forces have taken swift action to counter this activity, amidst rumors that Iran could be preparing a major attack on Israel, using proxies in Iraq, Lebanon, Gaza and Yemen to hit Israeli targets. Israel intelligence appears to have taken steps to limit any such action from whatever quarter.

Crude and Gas Oil Prices

Crude prices firmed following the weekend exchanges between U.S. and Iran, although reports are not clear as what targets were hit by both sides. Damage assessments are awaited from the region. The U.S. blockade of Iranian ports continues, with further news of sanctions to be implemented against Iran and also nations supporting the regime.

Hormuz remains closed with no reported attempts by any vessels to enter or exit the Gulf. Donald Trump meanwhile claims on social media that vessels are progressing through the strait, and that the war with Iran will “soon be over”. All these comments are denied by Iranian sources.

Dated deliveries of Brent crude were up $7 per barrel over the past week, while European gas oil values climbed more than $120 per metric ton to the highest level since the war in Iran started.

Dated Brent crude: $97.65/bbl, November front month
WTI posts at $92.80/bbl, October front month
Low-sulfur gas oil: $1,465/t, September front month

These prices were obtained from London ICE trading late Monday, Sept. 7.

Europe

European markets returned to business as usual during last week, and this week is expected to yield a raft of information as to where prices are going to settle. There are a number of factors at work in the API Group l base oil market right now, some of these acting as counters to others.

For example, the expectations were that Group l prices would come under pressure from producers’ high inventory levels, and a desire to move material into a market where many buyers had left a vacuum by not replenishing stocks prior to the holiday period in August.

However, with many refiners diverting production into distillates, rather than base oils, there does not appear to be such a large “surplus” as anticipated, with some sellers reporting limited quantities of some grades such as light neutrals.

On the other hand there have been a number of imported cargoes from Saudi Arabia which have improved availability cross the market.

At the same time, crude and feedstock price levels have firmed dramatically, and with rising diesel and jet zero prices, pressure may be starting for sellers to resist discounting base oil prices.

So, there are various pressures at work, some of which are contrary to where expectations for prices were formed prior to the start of September.

September forecasts were also that demand would rise through this month, peaking in October and November, prior to the year end slowdown.

The Group l market is surprisingly tight, with a number of imported cargoes making up part of the shortfall, particularly for light neutrals, where fuels production has depleted quantities produced during August.

Spanish producers announced problems in refineries at St Roque and Cartagena, limiting the quantities of each Group l grade available.

Barge traffic is returning to normal with further downpours of heavy rain across the Alps during the first part of September. This has improved draft concerns about the river systems, and whilst there is vast improvements from August, more precipitation is required to allow barges to transit fully laden.

One major supplier in Europe announced price reductions across the range of Group l grades. Light neutrals down $60/t, heavy neutrals down by $65, and bright stock reduced by $50/t.

This producer may have acted too early and may have to reverse this discounting, although the starting points for the prices were particularly high, hence there may be some leeway to absorb the discounting.

Availabilities dictate that there is no possibility for a European export market at this time. Prices are maintained, but all eyes are on the market for guides and reactions as to where buyers envisage the prices to lie, whilst producers will be keeping tabs on distillate levels versus Group l base oil numbers.

Group l

European exports, FOB
No current market

Northwestern Europe, FCA basis Amsterdam-Rotterdam-Antwerp
SN 150: $1,945/t-$1,970/t
SN 500: $2,050/t-$2,090/t
Bright stock 150: $2,345/t-$2,375/t

Eastern Europe, FCA
SN 85: $1,910/t
SN 150: $1,923/t
SN 350: $1,955/t
SN 500: $2,100/t
Bright stock 150: $2,228/t

Mediterranean, FCA Spain, Greece, Italy
SN 150: $1,975/t
SN 600/500: $2,085/t
Bright stock: $2,325/t

Pan-European, FOB/FCA
SN 150: €1,800/t-€1,865/t
SN 500/600: €2,005/t-€2,045/t
Bright stock 150: €2,215/t-€2,270/t

Pan-European prices are assessed on an aggregate basis using 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 $1.16303 Monday.

This week was to be a period of assessing where new Group II prices actually lay, with moves to reduce levels during last week and the week previously, but this has all been turned around by the shock announcement at the end of last week that ExxonMobil had a problem in Rotterdam, having produced material that appeared to be off-spec.

It was announced that damage may have occurred following a large explosion last month at a nearby Gunvor complex that includes a pipeline and storage tanks. An Aug. 13 explosion at the facility killed on person and injured several others. It is thought that secondary damage may have spread from this disaster affecting Rotterdam’s Group II production.

The upshot of the problem is that no Group II base oils will be available from this unit during September and October, and the facility will go into emergency turnaround to overcome whatever caused the problem. The lack of barrels from Rotterdam will tighten the market, but fortunately a large cargo will be arriving later this week from the U.S. Gulf of Mexico coast for another major Group II supplier.

Prices are adjusted to around €2,175/t-€2,225/t for 100 neutral and 150N grades and to €2,210/t-€2,240/t for 600N. What is important to take account of is that the discounting in both cases starts from very high levels, almost like posted prices.

Group II, FCA basis
110N: €2,175/t-€2,225/t
150N: €2,180/t-€2,230/t
220N: €2,095/t-€2,145/t
600N: €2,210/t-€2,240/t

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

European Group III supply appears to be holding up, but with no material coming in from Middle East Gulf sources, there is a definite deficit in the market. The Spanish Group III supplier had stocked a hub in Northwestern Europe with as much material as possible, then of course had to announce that in addition to a turnaround starting last week, there were unforeseen problems with production and availability of the 4 centiStoke grade. This grade will not be available until November.

Cartagena has gone into turnaround, with the announcement from Repsol to all customers that 4 cSt product will not be available until November. The 2 cSt, 3 cSt and 6 cSt grades will remain available, with resumption of supplies of 4 cSt in November.

The issue appears to revolve around a “filtration” issue, but this has not yet been fully explained by the producer. What is not clear is if quantities of 4 cSt material had been shipped to the Northwestern European hub prior to the outage.

Indian sources have told this report that a cargo of Group III base oils has loaded and sailed for a receiver in Italy. Discharge is believed to be scheduled for Italy.

Another shipping inquiry has been posted for a second Group lll cargo to load out of a WCI port, with the discharge port listed as Amsterdam-Rotterdam-Antwerp.

A cargo from Indonesia arrived into Antwerp, with reports of another cargo now on the high seas. The vessel is sailing up the west coast of Africa, ultimately to arrive in Amsterdam-Rotterdam-Antwerp.

Incumbent distributors for Middle East Gulf producers in Europe have finally terminated all supplies of material, with little hope that replenishment supplies will be available any time soon.

A South Korean producers Group lll base oils has issued a FOB sale tender for the following: 1,000-2,000 tons of 4 cSt; 3,000-4,000 tons of 6 cSt; and 2,000-3,000 tons of 8 cSt. The tender closed last week, and this report is waiting for any announcement that perhaps a European trader might have pitched for this supply. One stipulation was that the seller would not sell the 4 cSt grade solely, but buyers had to accept quantities of the other available grades in combination.

Group III prices in Europe are unchaged this week. Values for grades with partial slates of finished lubricant approvals remain nearly on par with those carrying full slates of approvals. Prices for rerefined Group III are also unchanged.

Group III

Partly approved, FCA Amsterdam-Rotterdam-Antwerp, Northwestern Europe
4 cSt: €3,285/t-€3,425/t
6 cSt: €3,300/t-€3,440/t
8 cSt: €3,255/t-€3,325/t

Fully approved, FCA Amsterdam-Rotterdam-Antwerp, Spain
4 cSt: €3,395/t-€3,445/t
6 cSt: €3,380/t-€3,420/t
8 cSt: €3,425/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 cSt:  €3,325/t
5 cSt:  €3,295/t
6 cSt:  €3,325/t

Baltic Sea

News that Putin has extended a ban on all diesel exports until the end of September probably means that petroleum products such as gasoline and jet zero are also subject to that ban.

Base oils will also fall under the same umbrella, since there has been extensive shortages of base oils across the Russian domestic market for some time. Sources within Russia last week confirmed that base oils from Lukoil and Rosneft are subject to allocation and rationing. That is, base oils are suffering the same dearth as fuels in Russia, with damage mounting to all base oil producing refineries.

Reports have base oil prices in Russia climbing by 85% year on year, but reports are almost always inaccurate with prices having started from a low base. Prices are estimated to have surged to the rouble equivalent of more than $2000 pmt.

Ukraine drone attacks continue deeper into Russia. Ukraine is depriving the population of fuels and lubricants with shortages extended to commercial vehicles and rail transportation. 

The base oil producers have all seen hits on their refineries, with some such as Lukoil having repeated attacks on Volgograd refinery.

The bottom line is that whilst refinery units are being damaged and destroyed, but repairs are nigh impossible to organise with a shortage of skilled manpower and spares unavailable to replacement parts. This is seen to be the case, since Putin put out a bulletin last week announcing that all the damage was being quickly repaired and that no production had been lost.

Russia is importing fuels from neighbouring ex Soviet countries such as Kazakhstan and Uzbekistan, along with imports from North Korea. The lack of diesel is affecting power generation with blackouts and power outages becoming a regular feature of living in Russia.

Black Sea & Turkey

Turkish blenders are returning this week from long summer holidays, with a couple of sources stating that blending operations were stopped for an extended period due to a shortage and lack of availability of base oils.

Since Russian supplies were withdrawn to cover the domestic market in that country, and the Iran conflict stopped the supplies of trucked Group l base oils from Sepahan and Iranol, which were moved through Iraq and into Turkey.

A couple of Turkish blenders have commented that they have purchased Iraqi base oils from traders based in Baghdad. This report has contacts in that region and has tried to check out where the supply could be coming from, but so far none of the existing Iraqi producing refineries has come up as a possible source. More digging to be done this week.

Turkish buyers had been relying on Turkmeni and Uzbek barrels for Group l imports, but news last week suggested that Uzbek material was no longer available, perhaps with available barrels going into the Russian market, where prices will probably be higher. 

Prices for Group I oils from the Tupras refinery in Izmir are unchanged.

Group I, FCA Izmir
Spindle oil: Tl 80,006/t, plus VAT Tl 18,030.50/t
SN 150: Tl 78,825.00/t, plus VAT Tl 17,794.30/t
SN 500: Tl 80,560.00/t, plus VAT Tl 18,141.30/t
Bright stock: Tl 96,914/t, plus VAT Tl 21,412.10/t

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

No resale offers are available for Group II base oils, also understandably, there are no offers out of Turkey for either Group I or Group II base stocks. All available material being retained for domestic blending and local sales.

Group III base oils appeared to have been missing from the Turkish market, but the Group II cargo from GS Caltex contained a small quantity of Group III base oil. Turkish buyers may participate in the GS Caltex tender that closed last week.

Fully approved Group III from Cartagena, Spain, is no longer being supplied to receivers in Gemlik.

Middle East

There are shipping reports of a vessel which has loaded a large cargo of base oils out of Yanbu, with discharge port nominated as Fujairah. The unusual aspect of this cargo is that the vessel sailed north out of Yanbu and transited the Suez canal, will head west and navigate the Med, then southwards around West Africa, the Cape and across the Indian Ocean to Fujairah.

This circuitous voyage was necessary to avoid the Houthi blockade in the Bab-al-Mandeb Strait in the southern Red Sea and the possible attack on the ship that presumably was sailing under a Saudi flag.

Working on charts, the voyage would be around four times the distance of sailing direct from Yanbu to Fujairah, and presumably four times the freight rate to deliver a cargo of around 20,000 tons of Group II base oils which will ultimately move partly or wholly into UAE receivers.

Also the time involved to make the voyage will be almost five weeks.

It will be interesting to see if other Saudi flagged vessels make this detour to deliver crude and other products to Asian receivers, and to see if other base oil cargoes to India also follow this route.

Other base oil cargoes have passed through the strait, but the vessels may have been Indian flagged, thus being permitted safe passage. Cargoes have been delivered into Mumbai anchorage, with another vessel delivering a smaller parcel of around 6kt of Group ll base oils into Fujairah.

Vessels have been loaded from Yanbu for receivers in Egypt, possibly EGPC, taking a cargo of 3,000 tons of bright stock.

With U.S. and Iran trading hostilities over the weekend, there appears to be no sign of any peace accord between the two enemies. Mr. Trump continues to expound that the war “will soon be over,” but how and when that might happen appears to be guesswork.

The Strait of Hormuz remains closed to maritime traffic in spite of what Trump reports on his Truth media platform. Iran has said that any vessel moving through the strait without Iranian permission will be attacked and possibly sunk.

The economic squeeze on the Iranian economy is progressing at a very slow rate, with no details of new sanctions on Iran or supporting countries which are trading with Iran.

The blockade of Iranian ports continues in addition to new strikes in southern Iran over the weekend. Supplies of Group I and Group II that were held in storage in the UAE prior to the start of the Iran war are now exhausted. Stocks were being routinely resold on an FCA basis or delivered by truck to blenders around the UAE and Oman.

It is not clear what base oil trade is taking place within gulf countries at the moment. Luberef continues to sell base oils “remotely” through ports such as Muscat and Sohar in Oman, and Fujairah in the UAE, neither of which are subject to a Hormuz transit. The cargo circumventing the African continent is testament to this continuing supply.

Reporting here of UAE prices is suspended until base oils are again discharged into storage.

Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, are available from Adnoc at Al Ruwais. But business is not currently feasible, with distributors closing down operations until progress is made on Hormuz.

Group III prices in the UAE are also suspended, as are netbacks for Group III base oils exported from Al Ruwais, Sitra and Ras Laffan. With one production train still running in Al Ruwais, it is an unknown what is being done with gas-to-liquids Group III+ produced from the Pearl project.

Africa

Small cargoes of between 2,000-3,000 tons of Group I base oils have loaded out of Alexandria for receivers in Derince and Gebze in Turkey. It is not clear as to who is the charterer of the vessels, whether the cargoes are sold on an CIF basis, or if Turkish buyers charter the vessel and purchase from the two suppliers in Alexandria on an FOB basis.

A cargo of Group II base oils which loaded out of Ulsan in South Korea during second half June arrived in Durban. Another large Group II parcel loaded ex the U.S. Gulf coast during mid-July and has completed discharging in Durban.

A large base oil cargo loaded out of Rotterdam and Fawley at the end of June and will be supplying distributors and affiliated companies in South Africa. The vessel discharged part-cargo in Durban and is currently beloved to be discharging the balance of the cargo in Mombasa.

A Group l cargo of around 10,000-11,000 tons of three Group I grades has completed delivering into Conakry in Guinea, Abidjan in Cote d’Ivoire and Tema in Ghana.

Nigerian buyers are still looking at the offer for the Indian cargo. This follows a previous offer for an Indian cargo of Group I base oils which apparently comprised of Iranian and Russian Group I grades. It is thought that this offer is for the same material first offered some six weeks ago. Perhaps the Indian sellers have reduced the FOB prices to attract a buyer. This is currently the only offer for base oils in Nigeria, since there is little availability in the U.S. right now, at least not sufficient material to form a large cargo.

The other problems are still around, with traders demanding coverage for the cargo quantity under a letter of credit that is necessary given the prices at which any base lols would be sold into Apapa.

Buyers in Nigeria are beginning to get short on material now and may be considering options to be able to continue supplying blenders and resellers around Nigeria. With prices from elsewhere being maintained at higher levels, it is difficult to see where buyers in Nigeria will turn to take material suitable for resale in the Nigerian market.

A vessel inquiry remains open to load a base oil cargo out of either Mumbai anchorage or Haldia, with discharge of the cargo into a “West African” port.

The official exchange rate for the Nigerian naira was NGN 1,392 to the dollar Monday, while the black market rate was NGN 1,399.

For reference the last cargoes arrived into Apapa sold at prices valid prior to the Iranian war.

Group I, FCA Apapa
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.