Having been through a week where crude and product prices escalated to new recent highs, the base oil scene in Europe, the Middle East and Africa could have been expected to respond with price hikes for API Group I and Group II base oils. As it turned out, however, sellers of those categories lowered values for November sales.
Crude and product prices have since softened in response to news from the Trump administration in the United States that an end to hostilities with Iran may be on the cards, and that some form of peace accord will be struck following the midterm elections in the U.S.
This news may have been released to appease Republican voters ahead of the elections on Nov. 3, but nevertheless the announcement has had the effect of calming oil prices, at least in the short term.
The answer to the declining base oil price conundrum is simply that demand is missing across many parts of the regions, with Europe experiencing civil strife and economic woes, the Middle East still on edge with supply constraints to receivers, leaving Africa as the only region where base oil demand remains strong in a number of different areas. West African buyers are looking to restock depleted inventories, whilst South Africa has a busy summer season ahead. East African base oil trades have adapted to changes necessitated by the Middle East conflict, which has upended supply chains for base oils and finished lubricants.
North African base oil business has been brisk with cargoes arriving into Morocco from the U.S. Gulf of Mexico coast, and the continuing supply of bright stock into Egypt for the EGPC contract. In Algeria Sonatrach announced plans to upgrade base oil production at the refinery in Arzew. This columnist is seeking more information about the types of oil that will be produced.
The exception to the above base oil pricing scenario is the Group III base oil market throughout European, Middle Eastern and African regions, where availability – not price – has become the prime consideration. It remains difficult to obtain quantities of Group III base stocks in Europe and the Middle East to cover all requirements, and this against background where demand for finished lubricants remains depressed.
The resultant prices for Group III grades have reached extraordinary levels, with offers being heard at new highs almost on a weekly basis. Prices for Group III grades with partial and full slates of finished lubricant approvals have melded together with a number of blenders adjusting their purchase slate to accommodate whatever material is available.
New sources for Group III base oils have emerged, with material being exported from Indian ports to receivers in Europe and the U.S. whilst large cargoes are being managed from Middle East Gulf sources. The latter availabilities are having to be assembled in Fujairah port in the United Arab Emirates, then sailed to Antwerp-Rotterdam-Amsterdam and the U.S. Gulf Coast.
Sellers maintain that costs for these operations are much higher than normal and that these costs must be reflected in selling prices in end markets.
Crude and Gas Oil Prices
Crude prices had spiked during last week on the assumption that U.S. forces would strike Iranian targets following the midterm elections.
These suggestions have been dispelled in news from Washington early this week, with the suggestions that a peace accord of sorts will be forthcoming in the days and weeks to follow. The terms of the negotiation are not yet available, but Iran has announced that if the United States accepts its demands “security will be restored to the Strait of Hormuz and the negotiation process will begin in a short period of time.”
Hormuz remains closed to most marine traffic, but there are reports of crude and products making it out of the gulf. Prices for Brent crude oil dropped some $12 per barrel in a matter of hours. Low-sulfur gas oil values fell roughly $150 per ton over the past week.
Dated deliveries of Brent: $105.75/bbl, January front month
West Texas Intermediate: $97.75/bbl, December front month
Low-sulfur gas oil: $1,550/t, November front month
These prices were obtained from London ICE trading late Monday, Nov. 2.
It must be emphasized that crude and gas oil prices are in a state of flux right now, and prices are moving quickly in response to news and events from Washington and Tehran.
Europe
European Group I supplies are adequate and may even be starting to move long, but with missing demand for local sales buyers have options in purchasing, with many opting to only take quantities actually required for specific blends, waiting before committing capital to inventory and stocks.
Many blenders are commenting that the current missing aspect in the business is the sales of finished lubricants, with noticeable downturns in large quantities which would traditionally be supplied at this time of year.
Major economies with a high proportion of manufacturing and heavy industry, such as France, Italy, Spain and Germany are feeling the effects of U.S. tariffs in addition to an overall contraction of business and trade across Europe.
Availabilities of Group I base oils are being supplemented by imports from Saudi Arabia, where traditional markets in the U.A.E., India and Asia-Pacific are unavailable or are constrained due to restrictions on shipping movements.
Refiners continue to prioritize middle distillate production over base oils, with continuing demand for products such as diesel and jet remaining high, as a consequence of a lack of imports moving from Middle East Gulf.
The relatively recent EU sanctions and ban on any hydrocarbon derivatives that contain Russian feedstock or crude. This precludes certain imports of gas oil from India and Turkey for example, further limiting the options for supplies.
Prices are tending toward lower numbers with the average Group I premium over diesel moving lower during last week. If diesel prices continue to fall then an acceptable premium may be re-established, as long as Group I base oil prices remain in current ranges.
Group I
European exports, FOB
No Group I cargoes have been verified leaving European sources for Nigeria. in another report there is news of a vessel enquiry to move a cargo of Group I base oils from a “Southern European” source to Nigeria, but this would seem unrealistic given current FOB levels and available barrels.
Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $1,655/t-$1,725/t
SN500: $1,775/t-$1,845/t
Bright stock 150: $2,200/t-$2,255/t
Eastern Europe, FCA
SN85: €1,557/t
SN150: €1,467/t
SN350: €1,583/t
SN500: €1,762/t
Bright stock 150: €1,878/t
One producer has indicated that one refinery may cease producing base oils for an indeterminate length of time.
Mediterranean, FCA Spain, Italy
SN150: $1,865/t
SN600/500: $1,945/t
Bright stock 150: $2,225/t
Pan-European, FOB/FCA
SN150: €1,585/t-€1,670/t
SN500/600: €1,720/t-€1,755/t
Bright stock 150: €2,100/t-€2,155/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 currently available.
The euro’s exchange rate with the U.S. dollar was $1.11981 Monday.
The European Group II market sees the restart of production from Rotterdam refinery with sales getting back to normal during the course of this week.
A large cargo has loaded out of South Korea and is now en route to Antwerp-Rotterdam-Amsterdam. The vessel is giving arrival as second half December, with this vessel taking the longer route around the Cape. The cargo is expected to consist of Group II and Group III base oils.
Following price adjustments to price levels, levels are now at around €2,225/t-€2,275/t for 100 neutral, 110N and 150N grades and €2,325/t-€2,360/t for 600N, but these numbers are considered to be “flexible” and may be discounted depending on buyer, hence the ranges reflecting the numbers below.
Group II, FCA
110N: €2,125/t-€2,275/t
150N: €2,135- €2,275/t
220N: €2,100/t-€2,145/t
600N: €2,175/t-€2,360/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 market in Europe is responding to various sources for material, with considerable ease although prices are being seen at all-time highs, with little signs of moving lower, mostly due to higher and increasing logistical costs attached to making cargoes of Group III base oils work.
With Hormuz still effectively closed there are new developments for getting Group III grades out of the Gulf. The latest venture involves moving material from Adnoc at Al Ruwais to storage in Fujairah port, where quantities can be loaded in large quantities onto vessels which can sail to Europe and U.S.
It may also be possible to access material from Sitra in Bahrain.
The base oils are either trucked across the UAE or are placed in flexi-tanks in containers and shipped by rail from Abu Dhabi to Fujairah. Both methods of transportation are possibly employed.
Whilst this operation gets around the problems of Hormuz, the operation is believed to be very expensive and can only be justified and maintained if selling prices in Europe and the U.S. remain around current levels.
One such shipment is already underway and will discharge part of its cargo of two or three Group III grades, thereafter sailing to the U.S. Gulf Coast to discharge the remainder of the quantity.
Another vessel enquiry has been placed for a further cargo to load sometime this month. It is believed that the voyage will be similar to the first vessel, calling at Antwerp-Rotterdam-Amsterdam and then to the U.S. Gulf Coast.
The total cargo is believed to be around 20,000 tons, with around 10,000 tons being discharged in each location. This operation is being undertaken as an alternative to finding vessels which will load in Middle East Gulf and run Hormuz. Whilst the assembling of the cargo takes time and the costs are extremely high, there is a certainty in the exercise which makes for reliability.
Cargoes from India and Indonesia now form part of the Group III scene in Europe, substituting for some of the missing barrels from the Middle East Gulf. There is a possibility that with cargoes arriving from South Korea, Indonesia and India, the market may be close to saturation point, but that stage has not been reached as yet.
A parcel from India has is arrived into Antwerp-Rotterdam-Amsterdam during the last few days. Declarations have to be made by producers to permit traders to the import Indian barrels due to a possibility of Russian crude or feedstocks being used in the production.
Chinese Group III base oils continue to be offered into European buyers, but some containers have been returned to sellers in China since documentation was incomplete and the material could not be allowed to enter the EU.
Buyers are requesting producing refineries to issue a written declaration that no Russian materials are employed or are part of the make-up of the material being proposed for import into EU.
A number of Chinese refineries are not prepared to issue such a document preventing potential sales and imports of these grades, some of which have excellent specifications and quality, particularly products produced from coal-to-liquids technology, which would potentially not include any Russian raw materials.
With Cartagena at the end of a turnaround, a large cargo loaded for Antwerp, presumably with the 4 centiStoke grade, which will now be available.
A cargo loaded out of Ulsan in South Korea has sailed around the Cape and is approaching northwestern Europe with ETA second half November.
Prices for partly approved Group III oils are unchanged but are liable to changes depending on demand and uptake.
Group III
Partly approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cSt: €3,850/t-€4,120/t
6 cSt: €3,795/t-€3,825/t
8 cSt: €3,775/t-€3,800/t
Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €3,860/t-€3,875/t
6 cSt: €3,855/t-€3,870/t
8 cSt: €3,880/t-€4,010/t
All the above products sold on a delivered basis are subject to transportation charges, to be 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
There are no reported exports from any Russian ports, and it may be some time before any base oil exports are seen moving out of Baltic ports such as St Petersburg and Vyborg. There are reports of massive increases to domestic prices for Russian base oils, covering Group l, Group II and Group III.
There have been many supply interruptions with Ukrainian drones taking out production for a number of refineries which are known to produce base oils.
There is no way to receive information from any sources as to actual damage caused, hence the reporting is mainly deduction and local rumors which are heard from sources within Russia who cannot be identified.
It is hard to see where the export quantities for Mr. Trump will come from since Russia is extremely short of diesel, continuing to import from Kazakstan and Uzbekistan. Quantities may load from the Eastern seaboard where anything could take place, such as diesel from North Korea supplied on a ship-to-ship basis.
Slavneft had lost Group III and Group II production at Yaroslavl, and it is unknown whether this production has been restarted. Lukoil lost both Perm and Volgograd production.
Black Sea & Turkey
Turkish traders are looking to supply base oils to the Russian market. It was heard that trading companies are considering selling quantities of Group II and Group III base oils to Russian buyers, since there does not appear to be availability of these grades. The quantities will be sold in flexies in containers and may be trucked or railed to the Russian or Georgian border.
More details are being sought from contacts, and the origin of the material would appear to be Taiwanese or South Korean. From conversations with traders involved it would appear that this is an exceptionally lucrative trade, with dollar payments received prior to loading or shipment of the base oils.
A Yanbu cargo from Luberef is arriving in Gebze, Turkey, this week. The cargo consists of Group I and Group II base oils, perhaps the Group II grades could be sold to the Russian receivers?
Producers in Egypt continue to supply FOB cargoes of Group I base oils for Gebze and Derince, with Turkish blenders purchasing the material on an FOB basis, chartering small vessels to carry the cargoes which are 2,000 tons-4,000 tons.
Motor Oil Hellas has been approached to see if there are possibilities for supplies of a Group I cargo into receivers in Derince, since this source may have surplus barrels which may be offered to traders for sale into Nigeria, but FOB prices will have to be exceptionally keen to meet Nigerian receivers expectations on price.
Tupras again lowered domestic prices for Group I oils produced at its Izmir refinery.
Group I
Spindle oil: Tl 77,403.00/t, plus VAT Tl 17,509.90/t
SN150: Tl 76,222/t, plus VAT Tl 17,273.70/t
SN500: Tl 77,957/t, plus VAT Tl 17,620.70/t
Bright stock: Tl 94,311/t, plus VAT Tl 20,891.50/t
Sales incur a standard loading charge of Tl 10,146.50/t which is to be added to the prices above.
GS Caltex will send a small quantity of 4 and 6 cSt Group III base oils to “Europe,” which may be sold to Turkish buyers. The quantity is reckoned to be around 2,000 tons, 1,000 tons of each grade. The quantities will be delivered in flexies in 40-foot equivalent containers, which will be more economic than smaller 20-foot equivalent containers. The quantity in each container would be around 50 tons. These grades could qualify to be sold to Russian traders.
Fully approved Group III from Cartagena, Spain, is currently not being supplied to receivers in Gemlik.
Middle East
Base oil cargoes continue to load for “alternative” destinations in Europe Turkey and Egypt. Cargoes for India, Asia-Pacific and South Africa have had to be put on hold until the Houthi situation can be sorted out.
Saudi forces have been attacking targets in Yemen, looking to erode the hold which the Houthi rebels have established along the coast of the Bab-al-Mandeb Strait. Controlling the strait from the mainland and using two islands that have been taken by the rebels gives the Houthis enough leverage to deter Saudi shipping from making attempts at transiting the channel.
Yanbu refinery has started the maintenance turnaround that will include work to be undertaken in preparation for the start-up of Group III production, which remains on track for the year end.
Luberef sent a number of cargoes of Group I and Group II base oils to Antwerp-Rotterdam-Amsterdam and also to traders in Turkey. The material in Antwerp-Rotterdam-Amsterdam will be resold by S-Oil as part of Saudi Aramco.
One interesting fact is that S-Oil used to supply Group III cargoes of 5,000-6,000 tons into Yanbu from Ulsan, and presumably this practice is not happening at the moment due to the Houthi blockade, the question is how is Yanbu receiving Group III grades at this time?
The shipping inquiry for a vessel to load out of Yanbu and discharge in Lagos remains open, but is being listed as “provisionally fixed,” but this report does not recognize this term and is trying to discover if a cargo will load for Nigeria.
Small quantities of Group I and Group II base oil are getting through blenders in Middle East Gulf locations. Some of the base oils moving into the UAE are moving from Fujairah and Sohar by truck, and in flexies in containers by rail between Fujairah, Dubai and Abu Dhabi.
From UAE ports such as Hamriyah and Ras al Khaimah, small cargoes and flexies are being moved to Bahrain, Kuwait and Qatar, whilst Luberef have been delivering across Saudi Arabia by truck.
Group III base oils were gradually moving out of Middle East Gulf using local vessels to transit STS in the Gulf of Oman or to West Coast of India ports. This operation appears to have been halted with the operations now sending all available barrels to Fujairah, where quantities can be stored until cargo quantity is reached.
The Shell Pearl operation in Ras Laffan, Qatar, has one base oil train running, whilst the other train that was damaged by Iranian missiles is scheduled to be repaired towards the first quarter of 2027.
There are no indications or information on FOB or ex tank prices being paid to Bapco or Adnoc, this element remaining private and confidential. With producers organizing bridging shipments from the refinery to Fujairah storage, the economics will be totally removed from normal FOB sales.
Supplies of Group I and Group II in the UAE are being sporadically replenished, but without third-party trading on an ex tank basis. Replenishment stocks are limited and are optimized in blends to maintain availability of finished lubes around the UAE.
Since base oils are only being supplied into the Middle East Gulf on an ad hoc basis, listing here of FCA prices in the UAE are suspended until base oils are discharged into storage from sea-going vessels. Prices established currently would be artificial and would not reflect the normal local market.
Group III base oils, FCA Hamriyah/Sharjah port, or delivered by RTW in the UAE and Oman, may be available from Adnoc at Al Ruwais, and also from Bapco at Sitra. There is no market for FCA or delivered sales at this time.
Group III FCA prices are therefore suspended. Netbacks for Group III base oils ex Al Ruwais are likewise suspended since it has not been possible to ascertain how sales are being accounted.
Africa
In Egypt, at El Dekeila port, a base oil cargo comprising of a number of parcels, amounting to around 6,000 tons in total was loaded and sailed on the 29th of September for Lagos in Nigeria.
Sonatrach announced an expansion of the base oil production unit in Arzew refinery, but it is not known if this will include an upgrade to invest in premium base oils such as Group II or Group III.
Turkish buyers have been purchasing re-refined base oils in flexies from sellers in Yanbu and Suez and are now looking to take bulk rerefined base oils from a rerefiner in Yanbu.
A cargo of Group II base oils has loaded out of South Korea and will sail to South Africa to discharge in Durban. The cargo loaded in late September and should be arriving on a prompt basis.
A large Group II cargo which loaded in U.S. Gulf Coast a couple of weeks back is heading firstly to Durban to discharge part-cargo, thereafter the vessel will proceed to an Indian port to complete the final discharge.
A further large base oil cargo loaded out of Rotterdam and Fawley prior to the supply interruption to Group II base oils. The vessel will discharge the full cargo in Durban this month.
Cargoes of Group I will not be loaded for West Africa during the Fawley turnaround time. Just before the maintenance started, a 5,000 tons cargo of three Group I grades loaded covering the Ghana contract in Tema. Should replenishment cargo be required the sellers has options to load from Rotterdam, or alternatively, from the Valencia hub in Spain.
Ghana cargoes are frequently misreported as going into Nigeria. It is important to distinguish between the two West Africa locations.
Receivers in Nigeria have taken a parcel of 3,000 tons of SN900 from the cargo which loaded out of El Dekeila in Egypt. The cargo loaded on 29th September, arriving in Lagos ten days ago on the 23 October. The vessel is expected to discharge in Lagos for three receivers, sharing SN900 and SN500 base oils on board.
Having had a brief glimpse of the documentation for the cargo, it would appear that the quantities were covered under letters of credit for each receiver. The cargo comprised of 6,000 tons of two grades SN500 and SN900. This can be seen as progress for trading in Nigeria, since many cargoes of late were conducted on open credit, with payments being made both in dollars and naira, which had to be converted locally on the black market.
Opinion of sources is that this cargo was Russian base oils which may have been accumulated in storage over time, and it would appear that blending of the SN900 had been accomplished in shore tanks prior to loading, either using Russian bright stock or a heavier Russian neutral such as SN1200. Landed prices are not yet released.
The NNPC base oil tender was covered from an Indian port arriving in Nigeria, discharging into dedicated NNPC storage.
The shipping inquiry for a vessel to load around 10,000 tons to 12,000 tons out of Yanbu and discharge in Lagos has moved forward to a “provisional fixture.” What this means is unknown, since this report is not familiar with such a term being used in shipping parlance. If the ship has been chartered it will be interesting to see which route is taken by the vessel on the voyage – north via Suez and the Mediterranean, or south via the Bab-al-Mandeb Strait.
Buyers continue to look for levels around $1690/t-$1695/t for SN500, but these levels are too low.
The official exchange rate for the Nigerian naira was NGN 1,342 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.
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