API Group I prices remain steady, having reached new highs just before summer. With little downward pressure, these base oils are commanding a healthy premium to diesel, which remains weaker than producers would ideally prefer.

In Europe, Group II grades are seeing some downward trends, but whilst these indicate the general direction of the market, the discounting so far is not significant. Comments received last week indicate that Group II prices were still enjoying a substantial premium to distillates, and that differential was perhaps drawing attention to prices and arguments by buyers that they were too high. Small adjustments have been seen, including a $10 per metric ton discount across all grades from one United States importer Others such as a European producer and another major U.S. importer, have maintained slightly higher prices.

Group II values are found in wide ranges, with the major suppliers in Europe setting out levels almost akin to the posted prices used in the U.S. As in America, at least some suppliers offer discounts from those rates, depending on customer profiles, and in this case some large differentials are occurring from bottom of the ranges to the tops.

Group III prices remain weak around European markets thanks to ample availabilities and despite more blenders turning to premium base oils to meet new exacting finished lube specifications.

Group III distributors are trying to manage prices by maintaining levels as high as possible, but it only takes one supplier offering discounts to trigger wider rebates by competitors striving to retain market share. Many new players have come into this sector the past few years, and an international oil major plans to launch another production unit in Germany in 2026.

Some players around the Group III market have questioned the wisdom of increasing production of these grades in an otherwise over-supplied market, but the rationale is that corporate plans would have been hatched some years back, perhaps not envisaging the current Group III supply-demand situation. Back in 2019, demand for Group III grades was forecast to grow exponentially by 2025, and the number of suppliers was totally underestimated.

This crystal ball appears to have malfunctioned, and the market seems headed for a severe oversupply. Supply continues to outstrip demand, although that is hardly surprising in the wake of a historic pandemic.

ExxonMobil announced last week that it will move into a storage facility in Dagenham, in East London, United Kingdom, aiming to streamline supplies of all types of base oil to blenders around the U.K. Logistics will be improved, leading to shorter delivery times and faster service.

The facility, being rented from Stolthaven, will store and sell Group II and II+ base oils from ExxonMobil’s refinery in Rotterdam, augment U.K. production of Group I and Group III at the company’s Fawley refinery. ExxonMobil also have a nearby terminal at Purfleet, where lubricants blending and storage is found.

The wars in the Middle East and Ukraine continue, and the former continues forcing ships carrying cargoes between the Far East and Europe to detour around the southern tip of Africa to avoid attacks by Houthis in the Bab-al-Mandeb Strait in the southern Red Sea.

Crude and feedstock prices have had a rather frantic week as levels for dated deliveries of Brent crude dipped below $70 per barrel. A small rally followed thanks to a tropical storm in the Gulf of Mexico briefly halting offshore production, but normal operations have resumed.

Dated deliveries of Brent settled Monday at $72.20/bbl, still for November front month settlement. West Texas Intermediate crude followed a similar track to reach $69.30/bbl, still for October front month, leaving the crack between the benchmarks at only around $3.

Low-sulfur gasoil prices remain at their lowest for some years — $639 per metric ton, now for October front month. All of these prices were obtained from London ICE trading late Sept. 16.

Europe

Some other price reports continue to show export prices for Group I exports from Europe, but essentially there are no large cargoes moving to third parties in traditional export markets such as Nigeria, the Middle East and India. Small parcels are leaving some Mediterranean suppliers for North African receivers in Morocco, Tunisia and Egypt. ExxonMobil continues to ship large parcels of various base oils to receivers in various parts of Africa. Although some quantities are being delivered to regular or contracted receivers, some are also moving to affiliated companies.

There are talks that the arbitrage from the U.S. to Europe may start to open in coming weeks and months, now that the end of hurricane season is in sight in the U.S., freeing suppliers to draw down on amplified inventories.

Regional markets around Europe are gaining impetus following the summer holiday period, and with no major turnarounds planned for the end part of the year, full production is anticipated to cover demand for Group I. Buyers are starting to see large quantities of Group I base oils being delivered for a fourth quarter upswing in blending activity with forecasts of finished lube demand increasing across the European mainland.

Bright stock is still tight, with a limited number of refineries producing this grade. Demand for bright stock remains high, and few substitutes are available.

Some prices remain high, but offers are in wide ranges depending on European location. For example, in Eastern Europe, in Hungary, Mol prices are heard at $1,175/t for solvent neutral 150 and SN500 at $1,275/t. These prices are always quoted in U.S. dollars.

In the Mediterranean, however, prices from a couple of Spanish producers were heard last week between $1,080/t and $1,090/t for SN150, at $1,126/t for SN500 and at $1,383/t for bright stock.

FCA prices for the overall market are at €1,045/t-€1,125/t for SN150, at €1,225/t-€1,270/t for SN500 and at €1,340/t-€1,485/t for bright stock.

The euro’s exchange rate versus the dollar decreased slightly to $1.11212 Monday. The average price differential across all grades, between domestic and a notional export market is maintained at €10/t-€25/t.

A couple of weeks ago there seemed to be upward pressure on move Group II prices in Europe, but values now appear to be ebbing as some sellers start to offer slightly lower rates to encourage buyers to take larger quantities.

Group II prices are revised to reflect these discounts  – to €1,160/t-€1,185/t for 110 neutral and 150N, €1,195/t-€1,225/t for 220N and €1,285/t-€1,320/t for 600N. There are reports of much higher prices, but it is reported that these higher levels are almost always subject to downward adjustment or discounting. These prices apply to a wide range of Group II base oils from European, U.S., Red Sea and Asia-Pacific sources, all imported in bulk.

European Group III markets have become very difficult places for distributors and agents to exist. Some suppliers are consistently breaking ranks to sell at lower prices than the market to try to gain market share.

Some suppliers are starting from scratch, having not been in the European Group III market before now. The market is already saturated with supplies for Group III grades. It is also confusing because some producers are conducting their own sales against appointed distributors in an effort to increase quantities of material moving out of storage at refinery gate – a situation that leads to a number of sellers distributing the same production at varying prices. Four centiStoke material is being offered at €1,145/t from one trader, but it is unclear if this supplier will be in the European market for the long term.

It has been noted that one source in the Middle East Gulf has 8 cSt prices in September at their lowest level for more than two years, and it is assumed that low levels will also apply to 4 and 6 cSt grades. One South Korean supplier imposed markups upon the arrival of a replenishment cargo, although the prices are still very competitive versus other material from the Middle East Gulf and Malaysia. The levels are pitched at €1,230/t-€1,240/t on an FCA basis ex Antwerp-Rotterdam-Amsterdam for 4 cSt material.

European prices for Group III oils with partial slates of finished lubricant approvals or without approvals are assessed in a wide range of €1,145/t-€1,355/t for 4 and 6 cSt and at €1,235/t-€1,275/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe. Prices for rerefined Group III oils are unchanged at €1,155/t-€1,185/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Prices for Group III oils with full slates of approvals are at €1,785/t-€1,820/t for 4 and 6 cSt and at €1,825/t-€1,835/t for 8 cSt, basis FCA ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic & Black Seas

It would appear that one cargo has loaded out of the Baltic Sea for Nigeria. It has been reported that the trader involved in moving this cargo is still awaiting payment for the first tranche of the delivered quantity. It it not known how the cargo is divided, but it is understood that more than two receivers were involved.

Responsible traders are staying away from the Nigerian market at the moment since payments cannot be guaranteed nor can the timing for receipt of monies be arranged and contracted in advance. It is known that one party is still waiting for full payment for a cargo supplied during February.

Another cargo has loaded from St. Petersburg with 5,000 tons of two grades, SN150 and SN500, bound for Gebze, Turkey. Vessels are few and far between to perform these voyages and are normally chartered by the supplier responsible for many cargoes moving into Turkey from refineries in Perm and Volgograd.

South America has been raised again, but the same problems remain – those being shipping, voyage time and payment by letter of credit, which is preferred by receivers in Brazil and Argentina. The payment problem stems from the use of Russian banks to process the letters of credit without involving prime European banks as counterparts.

FOB prices for Russian SN150 and SN500 ex St. Petersburg or Vyborg, Russia, are assessed from the latest prices offered into Nigeria after taking account of typical freight and predicted margins. It remains confusing as to how costs such as demurrage, extended credit and late payments are covered. FOB numbers are assessed at around $745/t-$775/t for SN150 and $785/t-$795/t for SN500. Blended SN900 may be priced at around $840/t if made using SN1200 or Russian bright stock. This is based on a typical freight cost of around $175/t-$200/t for a parcel of 7,000-10,000 tons that would include a significant quantity of SN900.

A parcel from Tupras was exported to mainland Europe where prices received were higher than those achievable in Turkey. The cargo of Group I grades loaded from Aliaga, after being bridged from the company refinery in Izmir and was sold into Greece. Turkish blenders cannot afford European produced Group I base oils, since prices are too high.

Questions have been raised by this report regarding the export of more than 60,000 tons of Turkish Group I base oils into Europe and Egypt during the first half of 2024. The Izmir refinery is the only Group I source in the country, so this quantity would have been impossible to produce and ship to receivers in Egypt and Europe. It is assumed that quantities of imported Russian base oils were provided certifications of origin from Turkey and were then re-exported as Turkish material.

Russian imports continue to flood the Turkish market, and prices are estimated to be around $845/t-$860/t for SN150 and $855/t-$875/t for SN500, on a CFR basis ex Gebze. Base oils of European origin cannot compete with these levels.

Tupras has issued prices for the local market effective Sept. 1: 35,957 lira per ton for spindle oil; Tl 31,329/t for SN150; Tl 33,432/t for SN500; –and Tl 45,791/t for bright stock. Prices in lira are offered ex rack, plus a loading charge of Tl 5,150/t.

Group II grades are imported to Turkey and resold on an FCA basis. Prices are unchanged this week following the increases reported here last week. Those prices are €1,425/t-€1,465/t for 100N, 150N and 220N and €1,595/t-€1,625/t for 600N.

Group II base oils can be imported from the Red Sea, the U.S. and South Korea, but now Russian Group II grades are being offered ex tank in Turkey. Russian prices are reported to be around €100/t-€150 lower than those from other regions. It is surprising to see Russian Group II barrels being touted around Turkey, since there are reports that these grades are in high demand in Russia due to the lack of imported Western material entering the country.

The market in Turkey for Group III oils with partial slates of approvals or without approvals includes Russian supplier Tatneft’s 4 cSt grade. The latest price for that product was heard was around €1,290/t, on an FCA basis. Material shipped from Middle East Gulf sources is no longer in storage.

Smaller quantities of fully-approved Group III grades from Cartagena, Spain, continues to be delivered into Gemlik, Turkey, for resale on an FCA basis to local blenders. Prices are unchanged at €1,960/t-€1,995/t, basis FCA. Quite how local blenders can afford these grades remains a mystery, but small quantities of between 800 tons and 1,500 tons still find their way into this market.

Middle East

Base oil cargoes loading out of Yanbu and Jeddah, Saudi Arabia, have slowed both in numbers of vessels and sizes of parcels. United Arab Emirates blenders had limited activity during the summer recess, and were also running down inventories. Indian buyers have been open to taking locally produced Group II base oils from Indian refiners.

Indian, Pakistani and U.A.E. flagged ships supposedly receive safe passage from Houthi rebels in Yemen, but the full process remains shrouded in unknowns, and Saudi Arabia has not enjoyed a friendly relationship with Yemeni authorities during the prolonged war in that country.

Luberef is looking to move Group I and Group II cargoes towards Europe. Further cargoes of Group I are being aimed at the Northwestern European market, whilst deliveries of Group I and Group II are going into Greek and Italian receivers.

Base oil producers in Iran – Sepahan and Iranol – are exporting small cargoes of Group I SN500 and SN150 through Bandar Bushehr and Bander Khomeini. These exports move into the U.A.E., then are built into a larger parcel for shipping to Pakistan.

The arbitrage between the U.S. and the Middle East Gulf may start to open up if U.S. sellers need to clear inventories built up as buffers against hurricane season. These precautionary quantities of base oils may now have to be moved out, and some U.A.E. buyers could be looking to take quantities of Group I with U.S. quality. Buyers are searching for Group I and Group II supplies from Asia-Pacific and the Red Sea. South Korea, Thailand and Indonesia are being targeted as potential supply points, with Singapore refiners being considered for supplies of Group I and Group II base oils.

Prices in Hamriyah, U.A.E., for imported Russian base oils are unchanged at $845/t for SN150 and $855/t for SN500, basis CFR. No new price levels have been heard the past week from sources in the U.A.E. It is not confirmed how much Russian material is going into that country, but sources close to this report have confirmed that at least three vessels carrying Russian barrels have discharged in Hamriyah during the past three months. The cargo quantities have not been disclosed as yet, but suggestions were that each parcel totaled 6,000-10,000 tons.

Netbacks for partly approved Group III exports from Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged at the recent lower levels, with selling prices in Europe and the U.S. under price pressure. Distributors are in negotiations with producers for FOB prices which will allow flexibility when faced with discounted selling prices. Netbacks are indicated at $1,185/t-$1,240/t for 4, 6 and 8 cSt grades.

Netbacks for Shell gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are unchanged and are assessed at $1,365/t-$1,395/t. Shell cargo economics and cost allocation are not disclosed, so netbacks are presented as indications only.

Netback levels are assessed from distributor selling prices, less estimated marketing, margins, handling and freight costs.

Group II base oils being resold ex tank in U.A.E., or on a truck delivered basis around U.A.E. and Oman, have prices maintained this week at $1,685/t-$1,725/t for 100N, 150N and 220N and at $1,775/t-$1,825/t for 600N. These grades are mainly sold in local U.A.E. dirhams, since the U.A.E. currency is based on and linked to the U.S. dollar. High ends of the ranges refer to RTW deliveries to buyers in remote locations in U.A.E. and northern Oman.

Africa

South African shipping agency sources in Durban, South Africa, inform this report that another large cargo of base oils will load toward the end of this month from Rotterdam and Fawley. It is believed that subsequent to shipping inquiries, a vessel has been fixed and will start to load in Rotterdam later this week. The cargo size is reported to be around 19,000 tons, consisting of multiple grades.

West Africa remains subdued, but with a number of buyers starting to become concerned that no traders will offer for supplies of Group I base oils from a reliable source. The issue has been raised with state-owned NNPC, which apparently is looking to one or more traders to take cargoes of base oils with guaranteed payments being authorized by government departments. The accuracy of this information cannot confirmed, but sources close to this market will be contacted this week, hopefully to shed light on this development.

The Russian cargo from the Baltic had discharged in Apapa, leaving material available in tank, but it remains a mystery how the shipment was paid for. Nigeria has ever-growing problems, with finance remaining the primary concern along with exchange rates and access to dollars. Other than the low-cost Russian barrels sitting in tank, which some blenders will not use on quality grounds, there are no alternative stocks of base oil available to the market at this time. Sources said potential buyers are looking for crazy prices that are unattainable but are in line with those for Russian oils in tank.

It is impossible for experienced traders to compete with Russian prices, whilst at the same time being faced with requests for open credit from receivers. These traders are staying out of the Nigerian base oil market, not just for the moment but until finance and payments are sorted out.

Prices for potential future trades, as indications only, are estimated around $1,175/t-$1,195/t for SN150, $1,245/t-$1,270/t for SN500 and $1,320/t-$1,355/t for bright stock, basis CFR ex Apapa port in Lagos. Russian delivered prices were much lower, last indicated at $995/t for SN150, $1,035/t for SN500 and $1,075/t for SN900, basis CFR Apapa.