Weekly EMEA Base Oil Price Report

Only a matter of hours after the announcement of the pact, which came as a surprise to Ukraine President Volodymyr Zelensky, Russia sent drones, missiles and glide bombs into Kharkiv and Kyiv, taking out vital power plants and killing innocent civilians.

Ukraine has said that it will stop sending drones at Russian energy facilities if Moscow stops targeting Ukrainian power plants. At the time of writing this report, no bulletins or comments have been heard from Washington, and it is not clear whether the ceasefire exists.

The conflicts in Iran and Ukraine may become overshadowed by potential shortages of diesel fuels in major economies, including the U.S., where prices have doubled since the start of the Iran war.

This furor occurred just two days following another Trump “deal” that Russia would sell 300,000mt of diesel fuel to the U.S. market to alleviate rising prices for fuel at the pump in gas stations. This boost to the market is intended to adjust prices downwards, along with a further 1.5 million tonnes of Russian diesel fuel which would be floated on global markets between now and the end of the year, lowering diesel prices further.

The bottom line and rationale behind these measures appears to be the looming spectre of U.S. midterm elections in which Trump is expected to lose control of the Senate, with Republicans taking a hammering in the polls.

Returning to the present day, these “deals” between Trump and Putin will have little or no effect on global distillate prices, and will merely boost Putin’s revenues for his war chest in the conflict with Ukraine.

Trump’s alternative escapade is the war in Iran continues with no negotiations currently taking part between the sides, and with the Strait of Hormuz still largely closed to marine traffic. There are reports of a number of vessels making the transit, some successfully, but with others taking fire from IRGC drones and missiles.

The U.S. blockade on Iranian ports continues and is having severe effects on the Iranian economy, with rampant price inflation for everyday goods and services for the general public in that country. Food and medicines are in extremely scarce, with many in the population now out of work due to companies and businesses closing down. With no social support in Iran, it may only be a question of time before insurrection takes hold and the government could fall.

However, the Islamic Revolutionary Guard Corp still rule the roosts, and any signs of insurgency are quickly and brutally dealt with.

In Middle East Gulf there are increasing numbers of reports where vessels have lifted Group III base oil cargoes from Sitra and Al Ruwais, and have sailed parcels outside the Gulf, or to the west coast of Indian ports. The cargo may then be transferred either by STS, or discharged into storage, awaiting suitable vessels to reload and deliver the material to receivers in traditional markets such as U.S., Europe and Asia-Pacific.

India has been “nominated” as the new hub for base oils in the region due to restrictions in the Gulf, with many owners choosing not to attempt placing vessels and crews in danger by transiting Hormuz. Available vessels are few and far between, with many ships only bridging supplies into Indian waters. 

The methodology behind these operations has not been explicitly disclosed, and quantities are limited. Costs of this exercise will be much higher than normal loading and sailing cargoes to distributors, but with an exceptionally tight supply scene in traditional markets, any increase in availability is welcomed.

The other hot news this week are the reports of Houthi strikes on Saudi Arabian airports, with Riyadh taking major hits from the Iranian proxy’s drones and high powered missiles over the weekend. There were fatalities and many injuries.

Markets await the responses which will undoubtedly follow, perhaps with Saudi and other allied forces attempting to take back control of the Bab-al-Mandeb Strait in the southern Red Sea.

Crude and Gas Oil Prices

With the Iranian economic squeeze starting to really hit home, and the exchanges between Trump, Zelensky and Putin, crude prices are facing a reluctance to weaken in the face of all current news.

What may be heartening for Mr Trump is that dated deliveries of Brent crude currently sits at around $107 per barrel, whilst West Texas Intermediate crude maintains a measured crack at around $94 per barrel. This large differential of around $13 is unusual and may in part be due to the President’s intention to top up diesel supplies during the next few months with Russian imports arriving.

Dated deliveries of Brent crude: $106.65/bbl, December front month
West Texas Intermediate: $93.65/bbl, November front month
Low-sulfur gas oil: $1,450/t, October front month

These prices were obtained from London ICE trading late Monday, Oct. 12.

Europe

European Group I supplies remain tight, but with lower demand, buyers are not participating in purchasing significant quantities. Availabilities are being supported by imports moving from Saudi Arabia, although most cargoes from Yanbu are split between Group I and Group II.

Another composite cargo of Group I and Group II which loaded out of Taiwan in August will be arriving into Northwestern Europe during the next few days. This cargo managed to navigate the Red Sea and transited through Suez, saving voyage time and expense.

Demand for Group I base oils briefly rose following the holiday period in August but has now settled back to an activity level lower than in previous years. Some comments received during last week may have clarified why this lack of buying activity has hit the Group I market. It was mooted that because finished lubricant demand is lacking around Europe, demand for Group I base oils has declined and may decline further in months to come.

This is down to the general economic and manufacturing downturn affecting most major countries in Europe.

Last week saw news of a major fire in the Motor Oil Hellas’ Corinth refinery causing substantial damage which is currently being assessed. production of Group I base stocks from this facility will be impacted by the accident and more information is expected to be released by the company during this week

Producers continue to prioritize diesel and jet fuel over base oils, with demand for these products continuing to remain high, due to a lack of imports going in from Middle East Gulf and also the EU sanctions on any hydrocarbon derivatives which contain Russian feedstock or crude.

The latter sanctions have prevented gas oil moving from Turkish and some Indian refiners coming into the European arena. With Trump being tempted to ban diesel exports from U.S. refiners, Europe could be facing monumental problems should Hormuz not reopen imminently.

A further cargo 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 FCA and on a delivered basis.

Prices have been taken lower with one major’s realignment, but without any real activity it has been difficult to appraise current levels across Europe. In Eastern Europe, solvent neutral 150 is discounted below the light neutral and substantially below SN500.

Group I

European Exports, FOB
No current market.

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $1,765/t-$1,825/t
SN500: $2,010/t-$2,055/t
Bright stock 150: $2,245/t-$2,280/t

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

Prices have been clarified as being negotiable.

Mediterranean, FCA Spain, Italy
SN150: $1,895/t
SN600/500: $2,025/t
Bright stock: $2,275/t

Pan-European, FOB/FCA
SN150: €1,745/t-€1,795/t
SN500/600: €1,820/t-€1,900/t
Bright stock 150: €2,125/t-€2,180/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 $1.11730 Monday.

European Group II markets are being affected by the temporary loss of production from Rotterdam. Following a large explosion at a nearby complex, damage had been caused to Group II base oil production. Group II base oils are not to be available until November.

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. It is also believed that a cargo has also been loaded from U.S. Gulf Coast, which will bolster supplies of Group II grades during the period when production is interrupted.

The vessel from Singapore will discharge part-cargo in Valencia, replenishing hub storage, and then deliver the remaining cargo in Rotterdam. The cargo will arrive later this month.

Another cargo has loaded out of Taiwan with destination given on shipping reports as “Europe.” This cargo contains a large quantity of Group II base oils and has been purchased by a cohort of two or three Turkish traders. The cargo is due to arrive during the second half of October.

There were more suggestions during last week that European Group II prices may rise, basically in response to the dollar/euro exchange rate dipping the past couple of months. Broaching this subject with an importer, it was suggested that prices would remain around current levels, since demand is weaker than forecast.

Europe will receive cargoes that loaded along the U.S. Gulf of Mexico coast ahead of last week’s arrival of Hurricane Isaias, supplementing arrivals from Asia-Pacific and the Middle East.

Group II prices in Europe weakened slightly to around €2,145/t-€2,190/t for 100 neutral, 110N and 150N grades and €2,195/t-€2,225/t for 600N.

Group II, FCA basis
110N: €2,145/t-€2,170/t
150N: €2,155/t-€2,190/t
220N: €2,125/t-€2,165/t
600N: €2,195/t-€2,225/t

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.

The Group III market in Europe continues to react to new barrels sourced from Middle East Gulf, but arriving from Indian ports, or from STS transfers in the Gulf of Oman. Additionally, cargoes from Indonesia are becoming part of the Group III fabric, replacing some of the barrels from Middle East Gulf which have been sadly missing over the past few months.

Group III cargoes from India are queuing to arrive into Antwerp-Rotterdam-Amsterdam, with at least some of the material having been sourced out of Sitra and other supplies coming from Indian produced grades.

A parcel will arrive into Antwerp-Rotterdam-Amsterdam around end of October. What is not clear as yet is what designation the cert of origin contains, whether the cargo was in transit through an Indian port, or whether the material is designated as “Indian Origin”

Chinese Group III base oils are being offered into European buyers but there are problems under the EU sanctions where no Russian material can be used in the final production of the base oils. This could mean Russian crude, which is obvious, or could imply Russian feedstock, which could be more difficult to determine.

Buyers are requesting that producing refineries make a declaration that no Russian components are employed or are part of theme up of the material being proposed for import into the EU.

A number of refiners are not prepared to issue a document confirming that no Russian material have been involved in the production. This is holding up potential sales and imports of these grades, some of which are excellent specification and quality, particularly those products produced from coal-to-liquids technology.

Another cargo has loaded from Sitra, and appears to have made it out of the Gulf, but whether this will be an STS deal, or an Indian re-load is unknown. It is also difficult to determine which trader is involved in the handling of the cargo.

Even with Cartagena in turnaround, one cargo has been loaded for Antwerp, whilst another small parcel has loaded for receivers in Naples, Italy.

An unusual cargo will load from Fujairah in United Arab Emirates, and will sail to northwestern Europe, it is assumed that this cargo will comprise of material from either Bapco or Adnoc, but again details are scant, and assumptions can be misleading.

A cargo from Indonesia arrived into Antwerp at the end of September, with a second parcel arriving this week. and yet a further parcel has loaded out of Ulsan in South Korea and will sail around the Cape before proceeding to Antwerp-Rotterdam-Amsterdam to discharge. The estimated time of arrival is being given as the second half of November, date to be confirmed in due course.

Prices for Group III oils with partial slates of finished lubricant approvals are extended, with importers commenting that the new “routing” using feeder vessels to rendezvous for ship-to-ship transfer or discharging into an Indian port, will cost more for freight and insurance. Prices have climbed to around €3,800/t. These levels have now been confirmed. Values for rerefined Group III were hiked the past week.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe

4 cSt: €3,600/t-€3,820/t
6 cSt: €3,595/t-€3,675/t
8 cSt: €3,575/t-€3,600/t

Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €3,765/t-€3,845/t
6 cSt: €3,765/t-€3,825/t
8 cSt: €3,840/t-€3,885/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:  €3,545/t
5 cSt: €3,540/t
6 cSt: €3,525/t

Baltic Sea

Presumably Putin has lifted the current ban on diesel exports, but it becomes very difficult to see where the export quantities will come from since Russia is net short of diesel fuel at this time and is importing from Kazakstan and Uzbekistan.

Base oil supplies are extremely limited due to Ukrainian strikes on various refineries. Whether these strikes will now continue after Trump demanded that Ukraine halt all strikes and attacks on Russian refineries, since the U.S. now wants to purchase large quantities of diesel from Putin.

Lukoil has problems at Perm, whilst Tatneft/Slavneft lost Group III and Group II production at Yaroslavl. Rosneft and Gazprom also are experiencing shortages of base oils from their respective refineries.

Ruble prices for additives and base oils are through the roof, with some sellers demanding dollars for supplies of additives.

Russia continues to import fuels and base oils from Kazakhstan and Uzbekistan, with imports also arriving from North Korea.

Black Sea & Turkey

A cargo from Yanbu has loaded and may be arriving in Gebze, Turkey, during this week or next. The cargo is made up of Group I and Group II base oils. The vessel is around 12,000 tons dwt, hence could load around 10,000 tons of base oils.

Turkish buyers have been struggling to find suitable supplies of Group I base stocks with only a limited number of options available to traders and blenders. Producers in Alexandria have supplied quantities of Group I base oils into Gebze and Derince.

Motor Oil Hellas will presently have problems with the latest explosion and fire, and it will only be after damage assessment that any possibility will exist for supplying any available barrels.

Cargoes from Yanbu and Taipei arriving into Gebze and a number of Turkish traders are back in the market to supply local blenders and fulfil orders that in some cases have been delayed and postponed for months.

Group I, FCA Izmir
Spindle oil: Tl 87,329/t, plus VAT Tl 19,495.10/t
SN150: Tl 86,148.00/t, plus VAT Tl 19, 258.90/t
SN500: Tl 87,883/t, plus VAT Tl 19,605.90/t
Bright stock: Tl 104,237/t, plus VAT Tl 22,876.70/t

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

The GS Caltex tender does not appear to have been processed, with the conditions to lift certain Group II grades to be able to access the Group III base oils perhaps too onerous. GS Caltex will send a small quantity of 4 cSt and 6 cSt Group III base oils to Europe, to be sold to Turkish buyers. They will send 1,000 tons of each grade, but it is not known whether this will be done in flexies or in bulk. Suggestions are that flexies may be a more economic solution.

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

Middle East

Over the weekend, Saudi Arabian civil airports were attacked by Houthi missiles, with fatalities and many injuries reported. Aircraft were damaged and destroyed during the strikes which were mainly carried out on King Khalid International Airport in Riyadh.

The Middle East awaits to see what Saudi forces will undertake to quash the Houthi rebels responsible for the attacks.

Meanwhile the Bab-al-Mandeb Strait is still under the control of the Houthi militia, with Saudi flared vessels forbidden to try to transit the channel.

A maintenance turnaround is due to begin at Yanbu refinery. Operator Luberef has been directing cargoes of Group I and Group II to cover buyers in Antwerp-Rotterdam-Amsterdam and also traders in Turkey, but cargoes are significantly down over the past three months. Few base oil cargoes have passed through the Bab-al-Maneb Strait, but those that did may have been using Indian, Pakistani or Chinese flagged vessels, which will be granted safe passage from the Houthis and from the IRGC in Tehran.

There is a shipping inquiry on the market for a vessel to load out of Yanbu and discharge in Lagos, but prices may be a little rich for the Nigerian market. It would be interesting to see if the cargo went ahead, which route the vessel would take. Would the ship sail north through Suez and then transit the Mediterranean, or would the vessel sail through the Red Sea and around South Africa? The answer could depend on the flag under which the vessel sails and relative costs of freight and insurances.

Supplies of base oil are getting through buyers in Middle East Gulf locations. Most of the base oils moving into the Gulf are moving from Fujairah and Sohar by truck, and in containers on the train service which travels between Fujairah/Dubai/Abu Dhabi. From U.A.E. ports quantities in flexies are moved to Bahrain, Kuwait and Qatar, whilst Luberef have been trying to deliver quantities across the Kingdom from Yanbu.

Group III base oils are getting out of the Middle East Gulf using local vessels to transit to STS or to the west coast of Indian ports. This has now quickly become and accepted route to getting material from Al Ruwais and Sitra out of the Gulf, but no quantities appear to be loading from Ras Laffan in Qatar, where Shell are partners in the Pearl project. From local sources it would appear that even with one base oil train functioning, there is some reticence to move material from the terminal.

This report will make an enquiry to Shell to ascertain the latest situations.

The operation to STS and Indian ports is expensive but with little alternative has become the acceptable mode of shipment, with India being christened the new regional hub for base oils.

Traders are having to hike selling prices in local markets in Europe and U.S. but the emphasis is on availability and access to product, with price only being a secondary element.

There are no indications as yet of FOB prices being paid to Bapco or Adnoc, and this element may remain private and confidential.

Supplies of Group I and Group II in the United Arab Emirates are being replenished slowly, but there is little trading on an ex tank basis, hence FCA sales are not recorded. Replenishment stocks are limited, and are being used up quickly in small blends to maintain the availability of finished lubes to 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.

This column has suspended listing of prices for Group II oils sold in the UAE.

Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in U.A.E. and Oman, are available from Adnoc at Al Ruwais. But business is not feasible. There is no market for FCA sales at this time. Group III FCA prices are also therefore suspended.

Netbacks for Group III base oils ex Al Ruwais are suspended since it has not been possible to ascertain selling levels and to whom the sales are bing made. Netbacks from Sitra are also suspended for the time being, and with no loadings from Ras Laffan, no netbacks can be recorded.

Africa

Two cargoes, one of 3,000 tons and another of 4.2,000 tons of Group I base oils loaded ex Alexandria for receivers in Derince and Gebze. Cargoes are bought on an FOB basis, with buyers acting as charterers. Turkish buyers have been purchasing rerefined base oils in flexies from sellers in Yanbu and Suez.

A large Group II cargo has loaded in U.S. Gulf Coast last week and is now enrolee to Durban to discharge. Charterers maintain ETA of Oct. 25.

Another large base oil cargo loaded out of Rotterdam and Fawley prior to the supply interruption of Group II base oils. Fawley refinery will go into turnaround for about ten weeks, with stocks of Group I and Group III base oils being laid down to cover estimated customer requirements during the maintenance period. 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 Tema buyers in Ghana. The cargo loaded from Fawley refinery prior to the turnaround starting, but this may be the last cargo before start-up after around ten weeks.

In Nigeria, prices remain problematic for buyers and sellers looking for low-priced Group I base oils. Receivers in the country have ditched taking SN900 because that grade is much more expensive than SN500 which will now be the highest viscosity grade being imported.

The NNPC base oil tender has been awarded, and the cargo from an Indian port is arriving in Lagos around now.

One trader is looking to load a cargo from South Korea during October and has offered various prices from $1,690/t-$1,750/t CFR. It is thought that the freight element of this cargo will make the prices unacceptable to buyers. At the same time there is a shipping enquiry for a vessel to load around 10,000 tons out of Yanbu and sail to Lagos to discharge. This deal is not yet done, and possible vessels remain open.

The interest in this instance is to see which route the vessel would take, either going through Suez, transiting the Mediterranean and sailing south to Nigeria, or taking the southerly route through the Bab-al-Mandeb Strait, around the Cape and north to Lagos.

Buyers are looking for levels around $1,690/t-$1,695/t, but these levels are a tad too low for some traders to consider.

The problem for traders is that without receiving a letter of credit covering the total quantity and freight, with the higher prices now being applied, they are not going to finance Nigerian buyers, especially at the lean margins, and other associated Nigerian problems which are bound to arise. The risks without letters of credit are just too large to contemplate.

The official exchange rate for Nigeria’s naira was NGN 1,330 Monday while the black market rate was around NGN 1,390.

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.