During the course of last week, in talking to a number of sources across all regions in European, Middle Eastern and African, one factor stood out as being the potential driver behind weak demand and lower uptake on base oil sales across all groups, even for Group III, which of course holds its own position in the base oil slate.
The consensus was that prices have seen enormous increases since the start of the Iran war, due to rising feedstock levels, shortages of availabilities, and an initial panic and demand surge which drove prices to all-time highs.
Because base oil and additive prices soared, finished lubricant numbers had to increase exponentially to absorb the raw material cost increases imposed on blenders across the regions, and indeed, even globally. This in turn has caused a ‘resistance; or ‘reluctance’ for end users to purchase lubricating oils due to very high prices. The frequency of buying lubricating oils has plunged with users extending oil change periods, using lower priced products, and generally exerting the marketplace.
This does not just apply to automotive products but includes industrial applications where hydraulic, heat transfer, and electrical oils have all seen extended use over and above normal timely oil changes. This has depressed demand for finished lubes, which in turn has diminished demand for base oils and additives to produce ‘normal’ quantities of lubricating oil.
The blenders interviewed almost all confirmed that they were producing and selling considerably less volumes than prior to the war in Iran and the escalation in prices. Some added to the basic scenario by adding that operating costs had also added to final prices for finished lubes. This “perfect storm” has resulted in declining demand for all types of lubricants, and is impinging badly on base oil demand.
Refiners commented that they had little option other than to increase base oil prices due to raw material numbers soaring, blenders had to suddenly pay huge increases to purchase the same base oils which they had only bought during January and February of this year. The result being that many buyers could no longer afford to purchase large quantities of finished lubricants, without totally re-evaluating their business plans, logistics and economics involved.
The conclusion to draw from the above is that when forced into major financial decisions re purchasing lubricating oils, many players opted to reduce (or in some cases cease) production cutting blending runs to take account of lower demand. The domino, or snowball effect has overtaken base oil markets, with only a small number of regions showing growth in base oil usage and sales over the past eight months.
At the same time, based oil margins have been squeezed with raised distillate prices narrowing the premiums normally held over diesel levels, with base oil sellers having to drastically cut prices for Group I and Group II grades to promote the chance of sales.
Some cynics say that reduced prices were merely pulling base oil levels back to acceptable levels, since starting points were very high.
Following the midterms last week, Donald Trump is going into action with meetings in Abu Dhabi to try to bring an end to the Ukrainian war, whilst simultaneously moving to a negotiated settlement with Tehran.
Resolution of either conflict appears unlikely in the short term, but Trump has to come up with some positive vibes to bail him out of the hole he now finds himself after the drubbing from the Democrats last week.
There was some positive news from the Persian Gulf Monday insofar that Iraq signed a deal with one or more U.S. majors to arrange safe passage through the Strait of Hormuz, using a channel close to Oman to move cargoes of crude into a new facility in Duqm, an Iraqi port nominated to have new massive crude storage, with the added promise of a pipeline to be built from Basra to Duqm in the next few years.
Details are not yet published, but it will be interesting to see if the pipeline could be used for other petroleum products such as base oil. The project could take between three to five years to complete. The longterm plan is obviously to bypass Hormuz, with the future holding further potential problems with Iran and its Gulf neighbors.
Crude and Gas Oil Prices
Crude prices remained high until the result of the midterms was announced, thereafter prices fell and have remained lower than the recent highs. With Trump effectively ruling out renewed military strikes against Iran, the outlook looks calmer, but with Ukraine negotiations about to take place in the United Arab Emirates between the U.S., Ukraine and the Kremlin, there remain potential flash points for almost anything to happen.
President Trump has also announced that he will meet with Presidents Putin and Xi at a summit in China later this month.
Hormuz remains closed to marine traffic, but with the Iraqi-U.S. news today, there may be hope for some improvement.
Brent crude values fell around $10 per barrel the past week while low-sulfur gas oil prices slid to nearly $200 per metric ton below their peak.
Dated deliveries of Brent: $95.10/bbl, January front month
West Texas Intermediate: $88.50 per barrel, December front month
Low-sulfur gas oil: $1,347/t, November front month
These prices were obtained from London ICE trading late Monday, Nov. 9.
Europe
European Group I availability remains good, but once again demand is lacking in this market. Buyers remain elusive for significant quantities of Group I base oils, with many refineries still prioritizing distillate production over base oils, where margins have been squeezed due to heavy discounting to move any available barrels which are lurking in storage Tanks
Many blenders comment that a missing factor is the sales of finished lubricants, with noticeable downturns in large quantities such as factory fills for motor manufacturers which would typically be required at this time of year.
Major economies with a high proportion of manufacturing and industrial output such as France, Italy, Spain and Germany are under the cost of U.S. tariffs, in addition to an overall downturn in trade across Europe coupled with inflation rising in every economy.
Availabilities of Group I base oils are also being supplemented by imports from Saudi Arabia, where traditional markets in the UAE, India and Asia-Pacific are unavailable due to restrictions on shipping movements. Prices continue to trend lower as each week goes by, with some offers at levels below last week’s diesel prices.
Group I
European exports, FOB
No cargoes confirmed leaving Europe for Nigeria
Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $1,625/t-$1,695/t
SN500: $1,725/t-$1,800/t
Bright stock 150: $2,175/t-$2,245/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 indicated that their refinery may cease producing base oils for an indeterminate length of time.
Mediterranean prices, FCA Spain, Italy, Greece
SN150: $1,790/t
SN600/500: $1,860/t
Bright stock 150: $2,200/t
Pan-European, FOB/FCA
SN150: €1,565/t-€1,640/t
SN500/600: €1,670/t-€1,725/t
Bright stock 150: €2,075/t-€2,170/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 $1.11960 Monday.
The Group II market around Europe sees the resumption of full production from Rotterdam with material satisfactorily on-spec and selling to customers. The hubs in U.K. and Spain have been replenished with Group I and Group I base stocks.
The large South Korean cargo mentioned previously is on the high seas en route to Antwerp-Rotterdam-Amsterdam. The vessel is showing arrival as the second half of December, having chosen the longer route around the Cape.
Following other price adjustments to levels, an importer from U.S. has discounted prices by €100/t across all grades, matching the prices set by another major last month. Levels are now put at around €2,200/t-€2,265/t for 100 neutral and 150N grades, with 600N between €2,310/t-€2,350/t, but these numbers are considered “flexible” and may be discounted. depending on quantity and buyer.
The prices above are akin to posted prices as advised from the U.S. market and can be further adjusted to arrive at net prices. Ranges are wide given that some customers will enjoy lower prices than others.
Group II, FCA basis
110N: €2,100/t-€2,265/t
150N: €2,120/t-€2,275/t
220N: €2,095/t-€2,135/t
600N: €2,155/t-€2,345/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 prices continuing to be seen at all-time highs, with no signs of moving lower. Sellers are maintaining that logistical costs which are necessarily being added to product values are unavoidable if buyers wish to have the option to buy these grades.
With Hormuz still effectively closed there are new developments for getting Group III grades out of the Gulf. The latest involves moving material it is considered to be coming out of Adnoc at Al Ruwais to storage in Fujairah port, but this cannot be confirmed. There was also news last week that the European distributors handing Bapco material from Sitra in Bahrain have access to available barrels and are supplying small quantities to buyers in Europe and U.K.
In Fujairah large quantities are being loaded onto sea-going vessels which can sail to Europe and U.S. The operation has been closely guarded as to which party bears responsibility for each part of the transaction.
The base oils are either trucked across United Arab Emirates 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 U.S. remain around current levels. One cargo is already underway and will discharge a part-cargo of two or three Group III grades, thereafter sailing to the U.S. Gulf of Mexico coast to discharge the remainder of the quantity.
A further vessel enquiry has been made for another 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 the U.S. Gulf Coast. The operation appears to be dependent on the time taken to build the cargo quantity in Fujairah.
Cargoes from India and Indonesia form part of the Group III scene in Europe, substituting for some of the missing barrels from Middle East Gulf. One conversation last week with a large buyer suggested that there could come time when the European market becomes over-supplied with Group III barrels, leading to a price rout should such a situation occur.
The market is still some way from that scenario as most buyers are still scratching around to balance their requirements
Chinese Group III base oils are offered into European buyers but with some containers already returned to sellers in China. Apparently, from reports, documentation was incomplete and did not allow for the base oils to be permitted entry into the European Union.
With Cartagena nearing the end of the turnaround, another large cargo has loaded for Antwerp, presumably now with the 4 centiStoke grade, which will be available after an issue at the refinery.
A cargo loaded out of Ulsan in South Korea has sailed around the Cape and is approaching Northwestern Europe with an ETA of the second half of November. Seller GS Caltex offered the 4 cSt grade at €4,100/t FCA.
Prices for Group III with partial slates of finished lubricant approvals are unchanged may be susceptible to pressure depending on demand and uptake.
Group III
Partly approved grades, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 cS: €3,850/t-€4,600/t
6 cSt : €3,795/t-€4,100/t
8 cSt: €3,775/t-€3,800/t
Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Spain
4 cSt: €4,175/t-€4,400/t
6 cSt: €4,155/t-€4,380/t
8 cSt: €4,275/t-€4,325/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 or CIF Kalundborg, Denmark
4 cSt: €3,725/t
5 cSt: €3,720/t
6 cSt: €3,710/t
Baltic Sea
No reports of any base oil 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, Russia. There are reports of massive increases to domestic prices for Russian base oils, covering Group l, Group II and Group III.
Supply interruptions continue as Ukrainian drones knock out production from a number of refineries that produce base oils. There is no way to receive information from any sources as to actual damage caused, hence the reporting is based on local rumors which are heard sporadically from sources within Russia who cannot be identified.
Slavneft lost Group III and Group II production at Yaroslavl, and it is unknown whether this production has been restarted. Lukoil has lost both Perm and Volgograd production, but information received last week suggested that repairs had been possible for at least part of the production to restart.
Black Sea & Turkey
Turkish traders have been successful in offering and completing sales of base oils to Russian traders. Payments are made up front in dollars which are paid from banks outside Russia. UAE banks have been used in previous transactions such as these.
The Turkish companies are not breaking any regulations or sanctions, since none are in place from the Turkish government. Traders have supplied quantities of Group II and Group III base oils, since there appear to be shortages of these grades within Russia. Quantities are sold in flexies, in containers, and are trucked to the Turkey/Georgia border.
A Yanbu cargo of Group I and II oils arrived in Gebze, Turkey.
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 between 2,000 tons and 4,000 tons.
Group I, FCA Izmir
Spindle oil: Tl 77,403/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 that is to be added to the prices above.
The small GS Caltex cargo arrived into Antwerp-Rotterdam-Amsterdam and will not be delivered to Turkish receivers.
Fully-approved Group III from Cartagena, Spain, is currently not being supplied to receivers in Gemlik.
Middle East
Houthi rebels has launched another attack on Riyadh, and although the missiles were intercepted shrapnel has caused considerable damage to Aramco Tower and nearby buildings. Saudi responses are awaited and expected with airstrikes on targets in Sanaa possible retaliation for the Riyadh missiles.
Houthis are also threatening to attack refineries in Saudi Arabia but have offered to cease hostilities on payment of an amount of $51 billion that would be used for damage caused by Saudi strikes in Yemen. This payment will not be happening.
Base oil cargoes continue to load for ‘alternative’ destinations in Europe, Turkey and Egypt. Cargoes for India, Asia-Pacific and South Africa have mainly had to be put on hold until the Houthi situation can be sorted out, although one cargo was delivered into an Indian port, but the vessel may have been flagged with an acceptable nationality to the Houthis.
Saudi forces have been attacking targets in Yemen, looking to break the hold the Houthi rebels have established along the coast of the Bab-al-Mandeb Strait. Controlling the strait from the mainland and also using two islands which have been taken by the rebels, give the Houthis enough leverage to deter Saudi flagged vessels from attempting the transit.
Yanbu refinery has started a major turnaround which will include work to be undertaken, preparing for the start-up of Group III production, which remains on track for the year end.
S-Oil used to supply Group III cargoes of around 5-6,000 tons into Yanbu from Ulsan, presumably this practice is not happening at the moment due to the Houthi blockade, the question remains how is Yanbu receiving Group III grades at this time? Maybe using Chinese, Indian or Pakistani flagged ships?
The shipping inquiry for a vessel to load out of Yanbu and discharge in Lagos is being listed as “provisionally fixed,” but this report does not recognize this term.
Group I and Group II base oils are managing to get through receivers in Middle East Gulf locations. Some of the base oils moving into the UAE are moving from Fujairah and Sohar by truck, but it was heard doing last week that unless quantities are already packed in flexies and stored in containers, it is too expensive to decant bulk cargoes into storage tanks and then repack into flexies in containers for transportation by rail between Fujairah/Dubai/Abu Dhabi. The costs would outweigh any advantage of getting base oils into Middle East Gulf.
From the UAE ports such as Hamriyah and Dubai, bulk cargoes and flexies are being moved to Bahrain, Kuwait and Qatar.
Group III base oils were gradually moving out of Middle East Gulf using local vessels to transit to STS in the Gulf of Oman, or to West Coast of Indian ports. This operation appears to have been stalled with the operation now sending available barrels to Fujairah, where quantities are stored until a cargo quantity is available.
There are reports in Europe that Stasco, the distributor for Bapco in Europe, have access to barrels of Group III grades, some of which have been offered to traders and other buyers in Europe. How this availability has come about is unknown, but obviously the material is moving out of the Gulf by one means or another.
The Shell Pearl operation in Ras Laffan near Doha, Qatar has one base oil train running, whilst the other train which was damaged by Iranian missiles will complete repairs towards the end of Q1 2027. It is now known what’s happening to any production at the facility, assuming that storage is at tank tops since material has not been exiting the Gulf, as far as this report is aware. No shipping or STS operations have been identified. Shell has been approached for comment.
There are no indications or information on ex-tank prices from Adnoc or Bapco with this information remaining private and confidential. It is considered that producers are organising bridging shipments from the refinery to Fujairah, then distributors or traders take over responsibility for chartering vessels and sailing the cargo to destination markets.
Supplies of Group I and Group II in the UAE are being sporadically replenished but without third parties trading on an ex tank basis. Replenishment stocks are severely limited.
Prices for FCA base oil sales 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, but 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 suspended since it has not been possible to ascertain how sales are being accounted, or which party is responsible for which part of the operation.
Africa
In Algeria Sonatrach announced an expansion of the base oil production unit in Arzew refinery. This may include an upgrade to invest in premium base oils such as Group II or Group III. The timing of the upgrade is not announced but it may be some time before production starts. More information is being gathered.
A Group II base oil cargo loaded out of South Korea and has sailed 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.
Another large base oil cargo loaded out of Rotterdam and Fawley prior to the supply interruption to Group II base oils during September and has discharged part-cargo in Durban. The vessel is now proceeding to Mombasa to discharge the balance of the cargo.
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. The next parcel moving into Ghana will load and arrive during December, and could load from Rotterdam, Dagenham in the U.K., or from Valencia in Spain.
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 Sept. 29, arriving in Lagos on Oct, 23. The vessel has also discharged another 3,000 tons of SN500.
The quantities were covered under separate letters of credit for each receiver. The cargo comprised of 6,000 tons of 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.
The same trader responsible for the above cargo was to load a quantity of base oils from South Korea during October, and whilst this cargo may not have been earmarked for Nigeria, it is considered that the cargo remains in Korea.
The NNPC base oil tender was covered by a trader from Indian sellers and arrived in Nigeria, having discharged into dedicated NNPC storage.
The shipping inquiry for a vessel to load out of Yanbu and discharge in Lagos remains a “provisional fixture.” What this means is unclear, since this report is not familiar with this term being used in chartering/shipping parlance. As far as this report can clarify, no cargo has been loaded. Further clarification will be sought this week.
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 price levels around $1,690/t-$1,695/t for SN500, but these levels are too low.
The official exchange rate for the Nigerian naira was NGN 1,347 Monday while the black market rate was 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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