Weekly EMEA Base Oil Price Report

Having loaded in mid-August, the vessel has an estimated date of arrival of Oct. 10. The cost of this voyage is unknown and remains private and confidential between charterers and owners but is probably considerably more than the normal voyage, which would have taken the ship via the Bab-al-Mandeb Strait. That passageway is currently closed to Saudi-flagged vessels by the rebel Houthis in Yemen.

This voyage, which will have taken around seven weeks, would normally take a maximum of ten days sailing from Yanbu to Fujairah. This stresses the importance of being able to deliver base oils into Fujairah, from where the product may be transferred by truck and train to other parts of the UAE.

The Iran war continues, although there are chinks appearing in reports where the economic pressures being applied to Iran may have started to squeeze the finances of the country and could lead to some form of concessions from Tehran. The main target is the re-opening of the Strait of Hormuz to all marine traffic, unhindered by threats from the Islamic Revolutionary Guard Corp.

Effectively the strait remains closed, although there are reports of a number of vessels laden with various cargoes from crude to LNG making it through the channel. There are various ways in which this transit can be achieved, with Indian flagged, and crewed tankers being granted safe passage through Hormuz.

Reports received from Indian sources last week indicate that Group III base oils have been delivered into an Indian port, and cargoes are being arranged for receivers in AsiaPac and U.S. from this source.

There is only reported planned movement to Europe at this time, but with distributors for Middle East Gulf producers maintaining that the Gulf situation remains extremely volatile, and to circumvent Hormuz would be uneconomic, and extremely risky for all parties concerned.

One cargo has loaded from an Indian port and will arrive into northwestern Europe towards the end of October. The source of this cargo of API Group III base oils has not been disclosed, but a rumor heard last week was that Middle East Gulf material had been offered to a buyer in Europe at an extremely high number, around €3800 per metric ton. It is suggested that this may be a flake offer merely to test the market.

In Ukraine there have been reports of success on the eastern front, but incessant Russian drone and missile attacks on infrastructure and civilian targets in Kyiv and other western Ukrainian cities are exerting pressure on the population.

Purportedly, Donald Trump is preparing to negotiate a ‘deal’ with Putin to end the conflict, whilst at the same time carve up opportunities for U.S. and Russia in Arctic regions. There is also discussion around the sale of Lukoil assets outwith Russia, and the lifting of sanctions on Russian exports of crude and products.

These discussions follow visits by U.S. envoys Witkoff and Kushner to Moscow and Kyiv, where parallel arrangements may have been discussed with respective leaders.

With midterm elections looming, Trump is perhaps looking for some good news on both Iran and Ukraine to bolster his polling which is requiring a boost right now.

There are shortages of distillates around major markets such as Europe, with producers of base oils maxing out on fuels perhaps ultimately at the expense of base oils. However, with other major supply problems for crude oil on the horizon, should Hormuz remain closed, pressures are building from a number sides on refiners and distributors of fuels and base oils around Europe.

At the ‘behest’ of Donald Trump Europe has agreed to release large swathes of diesel reserves to contain rising prices which could add to inflation in struggling economies. Trump has threatened to impose an export ban on diesel from the U.S. which could have disastrous consequences for some European countries.

This injection to supplies of diesel has yet to curb wholesale and retail prices for the fuel around Europe, and with distillate prices remain higher than preferred, base oil prices may come under pressure.

Availabilities of base oils in Europe have been bolstered by imports from sources such as Saudi Arabia, where traditional markets have been restricted due to shipping problems moving south out of the Red Sea, and also gaining access to Middle East Gulf ports whilst Hormuz is closed.  

Crude and Gas Oil Prices

With the seeming impasse in the Middle East between Iran and the U.S. and the continued closure of Hormuz, crude and petroleum product prices remain high, and with positive feedstock costs starting to filter through base oil production, there are growing conversations around the markets of possible increases to prices. Base oil levels have remained stubbornly high following the Iran war, but are at a premium to diesel which could be set to move upwards.

With no progress being made between Iran and U.S., pressure on crude prices remains a constant.

Dated deliveries of Brent crude: $101.80/bbl, December front month
West Texas Intermediate crude: $90.70/bbl, November front month
Low-sulfur gas oil: $1,387/t, October front month

Prices were obtained from London ICE late Monday, Oct. 5.

Europe

European Group I supplies remain relatively tight, but with reports of lower demand than in previous years, a delicate balance is being achieved.

This balance is being supported by imports moving from Saudi Arabia, although base oil cargoes are being split between Group I and Group II.

A major supplier in northwestern Europe has signalled price cuts of €300/t for all Group I base oils, but one has to take cognisance of the high levels which these discounts are applied to. This reduction in prices merely takes this supplier’s prices back into the frame accepted by others in the market.

The Saudi East/West pipeline re-opened last week, allowing a restricted flow of crude into Yanbu, where it can be loaded on vessels which can sail north through Suez, unimpeded by the Houthi situation which only affects south bound cargoes.

Demand for Group I base oils initially rose following the holiday period in August but has now settled down to a level described a lower than previous years.

This may be down to the general economic malaise affecting many of major countries in Europe.

Producers are prioritising diesel and jet fuel over base oils, with demand and prices for these products continuing to remain high, and with potential on-going shortages of diesel and jet even after the emergency release of strategic stocks, the next few months may be critical in avoiding price hikes and allocation of fuels.

With refiners diverting production into distillates, there is no ‘surplus’ of Group I base stocks in Europe. Some sellers report having limited quantities of light neutrals, where fuels have been prioritised.

A cargo has just loaded from Yanbu for Antwerp-Rotterdam-Amsterdam, and will arrive towards the end of October. This parcel is a combination of Group I and Group II base oils, and will be resold by S-Oil FCA and also on a delivered basis.

There appears to be no possibilities for a European export market, although one Mediterranean producer offered a quantity of around 6,000 tons of an SN400 which was being offered into Nigeria, but has been declined by buyers.

Prices have been tweaked lower at the high ends of the ranges taking account of one major’s notification of realignment. whilst producers are content to maintain selling levels, halting any further erosion.

Some sellers have made alterations to prices for October. An Eastern European producer discounted solvent neutral 150 and SN500 grades.

Group I

European exports, FOB
No market

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: $1,885/t-$1,930/t
SN500: $2,025/t-$2,075/t
Bright stock 150: $2,295/t-$2,325/t

Eastern Europe, FCA
SN85: $1,875/t
SN150: $1,755/t
SN350: $2,030 /t
SN500: $2,250/t

Mediterranean, FCA Spain, Greece, Italy
SN150: $1,955/t
SN600/500: $2,060/t
Bright stock: $2,295/t

Pan-European, FOB/FCA
SN150: €1,800/t-€1,845/t
SN500/600: €1,945/t-€2,000/t
Bright stock 150: €2,200/t-€2,225/t

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

The euro’s exchange rate with the U.S. dollar was $1.12037 Monday.

European Group II markets are affected by the temporary loss of production in Rotterdam. Following a large explosion at a nearby complex, damage had been caused to Group II base oil production. Group II base oils will not be available until November. The facility has gone into emergency repairs to solve the problem.

At the same time, the producer loaded a very large cargo of Group II base oils from Singapore, reversing a trend which had previously been established for product moving in the opposite direction, from Rotterdam to Singapore. The vessel will discharge part-cargo in Valencia, replenishing hub storage, and then deliver the remaining cargo in Rotterdam. The cargo will arrive in late October.

Another cargo has loaded out of Taiwan with destination given on shipping reports as Europe. This could be a Group II cargo, the last of which was purchased by Turkish traders, and this may be a repeat exercise. The cargo is due to arrive during second half October.

There were suggestions last week that European Group II prices might start to rise, with importers keeping a close watch on the dollar/euro exchange rate amid a tighter market.

Prices are again maintained with no news of any real adjustments, with levels remaining around €2,175/t-€2,225/t for 100 neutral and 150N grades, 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 imported from the U.S., the Red Sea and Asia-Pacific.

The Group III markets around Europe continue to be reactionary with the market reflecting the sporadic nature of cargo arrivals from Asia-Pacific.

With news of another possible cargo from India, in addition to the parcel which will arrive into Antwerp-Rotterdam-Amsterdam around the end of October. The exact source of the production of these barrels is not disclosed, but some suggestions are that material is able to be moved out of the Gulf from one of the sources.

Chinese Group III base oils are being offered into European buyers following problems with samples being refused entry into the EU because no declaration of non-Russian crude accompanied the packages. The EU has now implemented sanctions that no Russian hydrocarbon constituents are used in the production of material being imported into the EU.

The oils from China are produced by coal-to-liquids processes, and the quality and specifications are excellent on paper. Traders have asked that the refinery make a declaration regarding the Russian crude or feedstock input, buy producers are unwilling or not prepared to issue such a statement.

The ongoing saga continues, with traders willing to import few flexies to offer existing customers an option in place of Middle East Gulf barrels.

It was rumored that a Group III cargo had loaded from Sitra, Bahrain, but not left the gulf. Perhaps this is another example of loading and then waiting for a suitable window to attempt a Hormuz transit.

One report commented that a Group III cargo which had come out of the Gulf, had been programmed for receivers in China, but this is yet to be confirmed through shipping and news from sources in United Arab Emirates and Qatar.

Quantities of 4 centiStoke material had been shipped to the SK Antwerp hub prior to the outage at Cartagena, ensuring regular buyers will be allocated supplies of the 4 centiStoke grade during the next couple of months, following the news of the supply interruption from Cartagena which was announced in September.

The large cargo which loaded out of Cartagena, is confirmed as moving to the west coast of india, possibly for receivers who must use fully-approved grades in blending. Such blenders could be Castrol or Gulf Oil.

A cargo from Indonesia arrived into Antwerp at the end of September, with another parcel arriving during next week.

Group III prices in respect of partly-approved material, FCA Antwerp-Rotterdam-Amsterdam and northwestern Europe, are maintained, with the exception of the rumored offer for material from an Middle East Gulf source at €3,800/t. This offer is taken with ‘a pinch of salt’ and is not believed to be accurate.

Group III
Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €3,125/t-€3,145
6 cSt : €3,125/t-€3,260/t
8 cSt: €3,255/t-€3,325/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €3,585/t-€3,620/t
6 cSt: €3,565/t-€3,575/t
8 cSt: €3,555/t-€3,580/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

A second supplier from another production location moved levels to €2,855/t for 4 cSt.

Baltic Sea

Russian President Vladimir Putin has extended the ban on diesel exports until Oct. 31, but this ban will probably be extended again since Ukraine maintains the targeting of refineries, storage and transportation systems supplying fuels and lubricants to the Russian domestic markets.

The Kremlin’s announcement said that the ban extension was due to slow completion of turnarounds at a number of refineries and that normality would be restored after this work. The Russian public may be afraid of the authorities, but they are not stupid.

Base oil supplies are extremely short and from sources in Russia, blenders cannot access enough material to produce finished lubricants. Lukoil have problems at Perm, whilst Tatneft/Slavneft have lost Group III and Group II production at Yaroslavl. Rosneft and Gazprom also are experiencing shortages of base oils from their respective refineries, where image has been inflicted by Ukrainian drones

Ruble prices for additives and base oils are extremely high, and when factoring in the ruble’s devaluation, Group I base oil prices in dollar equivalent are estimated to be around $4,000/t FCA.

Russia is importing fuels and base oils from Kazakhstan, Uzbekistan and North Korea, but reports are that government traders conducting this business are being hit with high U.S. dollar prices.

Black Sea & Turkey

A cargo from Yanbu has loads and is en route to Turkey. The cargo is expected to contain Group I base oils, but also may include Group II grades. the vessel is around 12,000 tons dwt, so could possibly load around 10,000 tons of base oils for Turkish receivers. The cargo is expected to arrive in Gebze promptly.

Buyers have been struggling to find suitable supplies of Group I base stocks with a limited number of options available to traders and blenders. Egyptian producers in Alexandria supplied quantities of Group I base oils into Gebze and Derince. Motor Oil Hellas had availability of a strange SN400 grade that could be of interest to Turkish buyers if the price was right. Estimated price based on an offer into Nigeria would be around $1,400/t FOB Aghio.

Some Turkish buyers were relying on Turkmeni and Uzbek barrels for Group I imports, but reports heard last week suggested that no Uzbek barrels were available for import into Turkish ports with material going to Russian traders, who were able to pay higher prices.

Local prices for base oils produced at the Tupras refinery in Izmir have increased after decreasing some weeks ago.

Group I, FCA Izmir
Spindle oil: Tl 84,879/t, plus VAT Tl 19,025.50/t
SN150: Tl 83,698/t, plus VAT Tl 18,768.90/t
SN500: Tl 85,433/t, plus VAT Tl 19,115.90/t
Bright stock: Tl 101,787.50/t, plus VAT Tl 22,386.70/t

Sales incur a standard loading charge of Tl 10,146.50/t which 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 attracted interest from Turkish buyers with shipping inquiries loading out of Ulsan and Gebze as the discharge port. It would appear that it is possible that Turkish traders have been successful in winning the GS Caltex sale tender, although there are other suggestions, which say that the cargo will go into the Chinese market. Shipping lists are being consulted to try to get the solution to this conundrum.

A cargo that loaded out of Taiwan may be another Group II supply for Turkish buyers. The vessel was nominated to discharge in “Europe.” However, traders/blenders have notified this report that no resale offers will be available in respect of Group II base oils.

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

Middle East

News came Monday that a refinery complex, Petro Rabigh, north of Jeddah was hit by a missile or drone that triggered a fire. This refinery is not involved in the production of base oils, but the implications are that Saudi forces will now react to this strike and mount a full-scale attack on Houthi rebels in Yemen, perhaps with the assistance of U.S. intel and support.

Yanbu is about to go into a major turnaround. It is not surprising given the Houthi situation in the Bab-al-Mandeb Strait that cargoes of base oils, among other products and crude oil, are significantly down over the past three months. A cargo moving north is approaching a Turkish port where the vessel will discharge in the next few days

Few base oil cargoes have passed through the strait, but those that did may have been Indian- or Chinese-flagged vessels granted safe passage from the Houthis and from Tehran.

It is difficult to add any further details regarding supplies of base oil to buyers in Middle East Gulf locations. All base oils moving into the Gulf are moving from Fujairah by truck and in containers on the train service which travels up to 20 times a day between Fujairah/Dubai/Abu Dhabi, and return.

From UAE ports small quantities in flexies are moved to Bahrain, Kuwait and Qatar, whilst Luberef has been trying to deliver quantities across the kingdom from Yanbu, but trucking is at a premium with demand outstripping supply.

Group III base oils are reputed to be getting out of the Middle East Gulf perhaps using Indian vessels to transit to the west coast of Indian ports. However this is not a recognised method of moving material from Bahrain or Abu Dhabi, with doubts being cast as to the efficiency and the maintenance of quality.

The operation is reputed to be expensive and is uneconomic for material to move to Europe or the U.S. Donald Trump believes that he is starting to “win the war,” with economic sanctions starting to bite. Iran revenues appear to be drying up, with only a few instances of crude sales using dark vessels to run the gauntlet with the U.S. port blockade remaining in place.

Indian companies are wary taking supplies of Iranian crude, with IOC, Reliance, BPCL and HPCL now chartering their own Indian-flagged vessels and loading heavily discounted crude from Iraq. Buying FOB gives control over the cargo.

With the UAE having severed all diplomatic and economic relations with Tehran, Iran is running out of options with only the Caspian supply route from Russia open now. Inflation is rife in the country, with prices climbing to impossible levels for everyday foodstuffs such as bread and vegetables.

Supplies of Group I and Group II in the UAE are exhausted, and limited replenishment stocks are being used up quickly in small blends to maintain the availability of finished lubes to the retail and government sectors.

With base oils being supplied into the Middle East Gulf on an ad hoc basis FCA prices are suspended until base oils are again discharged into storage from sea-going vessels.

Another vessel is suggested to have loaded out of Sitra terminal at Bapco in Bahrain, but that vessel has not yet sailed from that port.

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 feasible. Group III FCA prices are therefore suspended.

Netbacks for Group III base oils ex Al Ruwais are suspended since it has not been possible to gauge what the FOB prices were for the 40,000 tons of Group III loaded out of that facility. Netbacks from Sitra and Ras Laffan are also suspended for the time being.

Africa

More cargoes of 2,000-3,000 tons of Group I base oils are loading from Alexandria for receivers in Derince and Gebze. The vessels are chartered by Turkish traders, using local Turkish flagged vessels.

Some Turkish buyers have been purchasing rerefined base oils in flexies from sellers in Saudi Arabia and Suez. Greek rerefining operations are also being used for small quantities of base oils.

A large Group II cargo has loaded in U.S. Gulf Coast last week and is now sailing towards Durban to discharge. The vessel is on the high seas, with charterers maintaining ETA of 25th October.

A further large base oil cargo loaded out of Rotterdam and Fawley prior to the supply interruption of available Group II base oils. Fawley refinery is going into turnaround for about ten weeks, with stocks of Group I and Group III base oils being laid down to cover customers’ requirements during the maintenance period.

The large composite cargo will have Group l. Group II and Group III grades on board, in addition to a small quantity of PAO. The vessel will discharge the full cargo in Durban in early November.

A Group I cargo of three grades is en route to West Africa to service contracted buyers in Ghana. The cargo was loaded from Fawley refinery prior to the turnaround starting, and this may be the last cargo before start-up after ten weeks of maintenance.

In Nigeria, prices remain problematic for buyers looking for low priced Group I base oils.

Receivers in Nigeria are no longer looking to take SN900, perhaps because that grade is much more expensive than SN500 which will now be the highest viscosity grade being imported.

When bright stock is used as a blend material for SN900, prices for the blend move sharply upwards due to bright stock FOB numbers.

It is thought that blenders now taking only SN500 will have to supplement blends with VI improvers to make the viscosity for the finished SAE 40 lube.

The NNPC base oil tender has been awarded, to very aggressive pricing. Two other traders offered at around $150/t higher for each of the three grades, SN150, SN500 and bright stock. This supply will come out of India.

One trader is looking to load a cargo from AsiaPac during October and has offered various prices from $1690/t-$1750/t CFR.

Buyers are looking for lower numbers, $1690/t-$1695/t, but these levels are just too low for traders to consider.

The problem for some traders is that without receiving a letter of credit covering the total quantity and freight, they are not in the business of financing Nigerian buyers, especially at the sparse margins which would not cover instances of demurrage or even worse.

The official exchange rate for the Nigerian naira was NGN 1,327 to the dollar Sept. 28t, while the black market rate was NGN 1,370.

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.