Weekly EMEA Base Oil Price Report

This pipeline has also come under fire from a drone attack from Iraq, which has not been satisfactorily explained by Iraqi sources. Saudi Aramco has closed the pipeline in the meantime, and with Saudi exports hit dramatically, it is reckoned that within four days, all exports of crude and products will have ceased unless the pipeline can be reopened. 

Even with Yanbu hopefully resuming operations, the problem of the Houthis still remains for all south bound vessels, which of course includes cargoes of base oils moving to India, Pakistan, South Africa and AsiaPac destinations. 

One vessel which loaded from Yanbu with a large quantity of base oils, is currently circumnavigating the African continent to avoid Houthi attacks, while sailing to Fujairah to discharge the cargo. 

The vessel sailed through Suez, the Mediterranean, and around the coast of Africa to enter the Indian Ocean to enable this delivery of Group I and Group II base oils to take place. The cargo will eventually find itself being delivered to receivers in U.A.E., after bridging from Fujairah to Dubai, Sharjah and Abu Dhabi by truck and train. 

This ‘crazy’ voyage is obviously being undertaken for some very good reason, with a freight rate which will be sky high, and voyage time and distance equivalent to four or five times the norm for this cargo movement. 

Asked for comments on this operation, Luberef declined to offer any rational explanation other than that Saudi flagged vessels were being targeted by Houthis in the Bab-al Mandeb Strait. These forces have now taken control of Perim and Mayun islands in the middle of the strait, providing more effective striking power.     

The future looks bleak for supplies of base oils ( and crude and products ) from Red Sea Saudi ports, and unless Saudi Arabia take s action against the Houthis, this situation looks like to continue. 

The Russian/Ukraine war appears to be intensifying with new high powered drones being employed by the Kremlin to inflict awful damage on civilian and communication targets in major Ukrainian cities. Kyiv has used drones to destroy a naval target in Crimea and continues to cause significant damage to Russian refineries and storage terminals, causing shortages of fuels and lubricants across Russia. 

It would appear that Putin might extend the current ban on exports of petroleum products into October, with a widespread dearth of available fuels and lubricants for the Russian population who are being exposed to the realities of Putin’s invasion which has gone massively wrong for the Kremlin. 

A Russian missile also appears to have targeted a train which was returning a group of European dignitaries from Kyiv to Poland. The train was hit after the entourage had disembarked, but the train remained in Ukrainian territory, just, thereby not inciting any strike within a NATO country. 

The two conflicts continue to impinge on base oil supply and availabilities, with cargo flows altering to accommodate new and developing arbitrage opportunities.  

Cargoes from AsiaPac are moving to U.S., predominantly to cover shortages in the Group III market caused by the loss of supplies from Middle East Gulf sources. Group II is being sold into South American receivers from sources in China and South Korea. 

Traders are reacting to these new opportunities, and have adopted novel approaches to business which would have been deemed uneconomic, and less than feasible prior to the Middle East crisis. 

Crude and Gas Oil Prices 

Crude prices continue to firm following exchanges between U.S. and Iran, with trump insisting that Iran wants a ‘deal’ and that the war will be over following the mid-term elections in the U.S. Quite why U.S. elections will have any bearing on the conflict in the Middle East remains vague to say the least. 

Hormuz remains closed with no reported attempts by any known vessels to enter or exit the Gulf. There are rumors of vessels sneaking through the Iranian cordon, but no positive proof has been offered as to vessel names or cargo status. Prices for dated deliveries of Brent crude climbed more than $10 per barrel the past week after rising some $7 the previous week. Low-sulfur gas oil values also made another significant jump. 

Dated deliveries of Brent crude: $108.70/bbl, November front month 
West Texas Intermediate: $103.70/bbl, October front month 
Low-sulfur gas oil: $1,520/t 

These prices were obtained from London ICE trading late Monday, Sept. 14. 

Europe 

There are two opposing views at work in the European API Group I market. On the one hand, buyers looking for lower prices, are commenting that base oil levels had vaulted to dizzy heights following the start of the Iran war. Now that supplies have returned to a form of near normality, prices should reflect this aspect and should be trimmed accordingly. 

However, on the other side is an argument that says crude and feedstock prices have risen sharply over the past few weeks, and that raw material costs are fundamentally linked to eventual selling prices. 

The other aspect is that distillate price levels have seen substantial increases, when looking at the premium over diesel prices, base oils are probably in a normal range of around $300/t on average. There are varying attitudes to pricing going forward, with some producers having moved prices downwards a couple of weeks ago and others waiting to see where prices may eventually gravitate. 

With many refiners diverting production into distillates, there is not a large ‘surplus’ of Group I base stocks around Europe, with the market steadily moving tighter, with some sellers reporting limited quantities of light neutrals.  

imported cargoes from Saudi Arabia are playing a new part in the Group I market, and with Saudi producers unable to place large quantities of base oils into the Middle East Gulf markets, Europe is attractive with relatively higher prices than other possible export destinations. 

Demand is rising for the final push of the year, and with this added factor, some availability is becoming tight. there have been a few outages caused by heat during the summer, and this combined with turnarounds is helping to maintain pressure on supplies  

Spanish producers experienced problems at St. Roque and Cartagena, limiting quantities of Group I grades available. 

A major supplier in Europe announced price reductions across the range of Group I grades. Light neutrals down $60/t, heavy neutrals down by $65, and bright stock reduced by $50/t, but these discounts are being applied to numbers which were akin to ‘Posted Prices’ , and were exceptionally high. So from a high levels starting point, the discounting only brought levels back into line with market expectations. 

Availabilities do not allow for any possibility of a European export market, and with Europe becoming a net importer, this pattern is established. 

Prices are mostly maintained, with a few tweaks to some numbers, but eyes are on the market for producers keeping tabs on distillate levels versus Group I base oil numbers, especially with diesel now showing above $1500/t. 

Group I 

European exports, FOB 
No market 

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam 
SN150: $1,945/t-$1,970/t 
SN500: $2,050/t-$2,090/t 
Bright stock 150: $2,325/t-$2,350/t 

Eastern Europe, FCA 
SN85: $1,910/t 
SN150: $2,045/t 
SN350: $1,955 /t 
SN500: $2,100/t 
Bright stock 150: $2,300/t 

Mediterranean prices, FCA Spain, Greece and Italy 
SN150: $1,975/t 
SN600/500: $2,085/t 
Bright stock: $2,325/t 

Pan-European, FOB/FCA
SN150: €1,800/t-€1,865/t 
SN500/600: €2,005/t-€2,045/t 
Bright stock 150: €2,215/t-€2,255/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 $1.15432 Monday. 

The European Group II market has been affected by the loss of production at the one ‘native’ production unit in Rotterdam. It was announced that following a large explosion at a nearby complex, damage may have occurred to the Group II base oil train. No Group II base oils will be available from this unit until November. The facility has gone into emergency turnaround to overcome the problem. 

The lack of barrels from Rotterdam has started to tighten the market, but imports from U.S. Gulf Coast suppliers will absorb some of the problems. Prices are maintained at the ‘new’ levels, established over the past few weeks, with levels around €2,175/t-€2,225/t for 100 neutral and 150N, with 600N between €2,210/t-€2,240/t. 

Group II, FCA basis 
110N: €2,175/t-€2,225/t 
150N: €2,180-€2,230/t 
220N: €2,095/t-€2,125/t 
600N: €2,210/t-€2,240/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. 

In Spain, both Repsol and SK Enmove have reported on the supply issue for the Group III 4 centiStoke grade. This grade will not be available until November, and with Cartagena refinery having gone into turnaround this may constrict the European Group III market further. Four centiStoke is the most used grade in Europe, although 2 cSt, 3 cSt and 6 cSt grades will remain available.  

Quantities of 4 cSt material had been shipped to the northwestern European hub prior to the outage, over the last couple of months, thus ensuring that regular buyers will be allocated supplies of the 4 cSt grade during the next couple of months. 

The Indian Group III cargo which was en route to Europe, with Italy nominated for discharge may have been re-routed to receivers in U.S. Gulf Coast. What is not clear is that if this reference to the change of discharge port refers to the first cargo destined for Italy, or if this pertains to a second cargo which was fixed for Antwerp-Rotterdam-Amsterdam.  

A cargo from Indonesia arrived into Antwerp at the end of September, with another cargo due to arrive in Antwerp during first half October. 

Prices for Group III oils with partial slates of finished lubricant approvals are adjusted in some cases, but the market is fluid, with prices being offered one week, then being withdrawn the next. Prices for partly approved grades are currently being priced almost on par with fully approved material. One producer of rerefined Group III oils lowered values the past week – to €2,855/t for 4 cSt – though the rates listed here are unchanged. 

Group III 

Partly approve, FCA Antwerp-Rotterdam-Amsterdam and northwestern Europe 
4 cSt: €3,145/t-€3,275/t 
6 cSt : €3,125/t-€3,260/t 
8 cSt: €3,255/t-€3,325/t 

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain 
4 cSt: €3,245/t-€3,445/t 
6 cSt: €3,225/t-€3,400/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 

Russian President Vladimir Putin will probably decree that the ban on all diesel exports until the end of September, will be extended to the end of October. It will mean that all petroleum products such as gasoline and jet kerosene are also subject to a ban. Base oils will also fall under the same edict, since there are growing shortages of base oils across the Russian domestic market. Sources last week confirmed that base oils from Gazprom are not currently available and that supplies from Lukoil and Rosneft are on allocation and rationing. 

Ukraine maintains repeated strikes on a number of refineries, so if repairs are actually implemented, further strikes damage the facilities further, increasing the pressure on production of base oils. 

Base oil prices in Russia will have risen dramatically during the Ukrainian strikes with some reports claiming that levels are up by 85% year on year, but other suggestions are that numbers could have risen by more than 300%, which seems more likely given the shortages being reported.  

Ukraine drone attacks continue deeper into Russia, depriving the population of fuels and lubricants. The base oil producers have all seen hits on their refineries, with some such as Lukoil having repeated attacks on Volgograd, and Bashneft being hit at Ufa refinery. Refineries are being damaged, but with repairs nigh impossible to organize with a shortage of labor, and spares unavailable. 

Russia is importing fuels from neighboring ex-Soviet countries such as Kazakhstan and Uzbekistan, along with imports from North Korea. A lack of diesel is affecting power generation, with blackouts and power outages now a regular feature across Russia.  

Black Sea & Turkey 

Since Russian supplies were withdrawn to cover the domestic market in that country, and the Iran conflict then stopped the supplies of trucked Group I base oils from Sepahan and Iranol, which were moved through Iraq and into Turkey, buyers have been struggling to find suitable supplies of Group I base oils. 

Options have been North Africa, with Egypt supplying regular quantities into Gebze, Turkey, and Derince. MOH in Greece have not been able to supply for the past six months or more, with small quantities of 2-3,000 tons sometimes being supplied by ExxonMobil out of the Valencia hub. 

One Turkish blender maintained that they have purchased Iraqi base oils through traders in Baghdad. This report has contacts in that region, but has drawn a blank as to where the supply could be coming from.  

Turkish buyers had been relying on Turkmeni and Uzbek barrels for Group I imports, but news last week suggested that Uzbek material was no longer available, perhaps with available barrels going to Russian traders. 

Domestic prices for Group I oils produced at the Tupras refinery in Izmir are unchanged. 

Group I, FCA Izmir 
Spindle oil: Tl 80,006/t, plus VAT Tl 18,030.50/t  
SN150: Tl 78,825.00/t, plus VAT Tl 17,794.30/t 
SN500: Tl 80,560.00/t, plus VAT Tl 18,141.30/t 
Bright stock: Tl 96,914.00/t, plus VAT Tl 21,412.10/t 

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

The sale tender of Group III and Group II base oils from GS Caltex in South Korea has at least attracted attention with a shipping enquiry to load out of Ulsan with a Turkish discharge port. No fixture has been recorded yet, and the inquiry remains.  

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 is being retained for domestic blending or local sales. 

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

Middle East 

There has been a marked downturn in the number of base oil cargoes loaded out of Yanbu, and although regular markets are not available in Middle East Gulf, the reason suggested from Yanbu is that the Houthi problem has become serious, with no Saudi flagged vessels being permitted to make the transit through the Bab-al-Mandeb Strait in the southern Red Sea. 

The vessel which sailed a couple of weeks back, is circumnavigating the African continent having sailed through Suez and the Mediterranean, making way towards Fujairah to discharge. Should the vessel have to return to Yanbu in ballast, it will be interesting to see what route is taken 

As mentioned, the Houthis have laid claim to two islands in the strait, and are coordinating strikes and attacks on vessels deemed hostile to the rebels and also to their Iranian sponsors in Tehran. 

A very few base oil cargoes have passed through the strait, where the vessels may have been Indian flagged, being permitted safe passage. Cargoes have been delivered into Mumbai anchorage, with another vessel delivering a smaller parcel of around 6,000 tons of Group II base oils into Fujairah. 

Vessels have been loaded from Yanbu for receivers in Europe, sailing through Suez where safe passage is guaranteed. 

The Strait of Hormuz remains closed. Iran has said that any vessel moving through the strait without Iranian permission will be attacked and possibly sunk. There has been exchanges of fire between the U.S. Navy and the IRGC who sent rockets attacking the U.S. vessels. This was swiftly dealt with by U.S. forces, with the sinking of either three or five Iranian oil tankers, part of the ‘shadow fleet’ used by NITC to transport crude oil to recipients. 

The crews evacuated from the vessels prior to the U.S. attacks, which were effective. 

The economic squeeze on the Iranian economy has no details of new sanctions on Iran or countries which are trading with Iran. 

The blockade of Iranian ports continues, but Iran still holds the ace card with control over Hormuz. 

Supplies of Group I and Group II that were held in storage in United Arab Emirates 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 U.A.E. 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 U.A.E., neither of which are subject to a Hormuz transit. The cargo circumventing the African continent is testament to this continuing supply. 

Listing of FCA prices is suspended here until base oils are again discharged into storage.  

There were rumors last week, that one vessel carrying a large cargo of up to 40,000 tons of Group III base oils had managed to escape the Gulf and had made it through Hormuz. The vessel was sailing to U.S. Gulf Coast to make the discharge of this large cargo, but enquiries to establish the credibility of this report are scarce, and no shipping reports have listed such a fixture, or even an enquiry for this vessel. 

The vessel was supposed to have loaded from Adnoc, but on an STS basis, which again sounds highly unlikely. 

Another rumor was that another vessel had loaded out of Sitra terminal at Bapco in Bahrain, but that this vessel had not yet sailed from that port. 

There are many rumors and tales going around the markets of various ships and their exploits, but no party claims to be a charterer of any ships in the Gulf, and without positive proof of vessel, owner and charterers, these stories are discounted. 

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

Listing of UAE Group III prices is also suspended, as are netbacks for Group III base oils ex Al Ruwais, Sitra and Ras Laffan. One vessel did load at Ras Laffan, then anchored in Al Jubail port in Saudi Arabia, and managed to transit Hormuz under the terms of an MOU between Iran and U.S. which subsequently expired after two days. The vessel sailed to Hong Kong and Singapore. 

Africa 

Small cargoes of 2,000-3,000 tons of Group I base oils continue to load out of Alexandria for receivers in Derince and Gebze, Turkey. The vessels appear to be chartered by Turkish traders, who use Turkish flagged vessels which are available on a local basis. 

Another large Group II parcel loaded ex U.S. Gulf Coast during mid July and has completed discharging in Durban. The vessel then proceed to Mumbai anchorage where the balance of the cargo has now been discharged. 

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 of its cargo in Durban and is discharging the balance in Mombasa. 

A Group I cargo of 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. Whilst it is not known if deliveries will be made into Conakry in Guinea, or into Abidjan in Cote d’Ivoire, another parcel of around 5,000 tons in total is believed to be planned for Ghana. The frequency of cargoes going into Tema was around one cargo every six weeks, but that was some years back. 

Nigerian buyers have an offer for an Indian cargo. This follows a previous offer for an Indian cargo of Group I base oils which comprised of Iranian and Russian Group I grades. This offer may be for the same material, offered some six weeks ago. As far as this report is aware, this is the only offered material to buyers in Lagos. There is little availability in the U.S. right now, at least not sufficient material to form a large cargo, and of course at prices which the Nigerians would find much too high. 

Other conditions are still being required by some traders, who are demanding coverage for the cargo quantity under a letter of credit. 

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. 

The official exchange rate for the Nigerian naira was NGN 1,326 to the dollar Monday. 

Prices for the last base oil cargoes to arrive in Apapa – before the Iranian war – were as follows: 

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.