Since this is a base oil pricing report, we move quickly on to price movements and events of the past week. One main piece of important news was the announcement of a Sept. 18 fire at the Motor Oil Hellas refinery at Aghio Theodori, Greece. The extent of damage is still being assessed but base oil production has ceased for now.

The refinery is the second-largest facility in Greece and is important to the national economy. The good news only three people were injured, and all have been discharged after hospital treatment.

The disruption will further restrict the availability of API Group I solvent neutrals in Greece and regionally. Traditionally the plant was an important supply point for the Turkish market, although European oils have had difficulty recently competing there on price. Lately material from Greece has been moving to Ukraine and Israel, and the fire may curtail availabilities to those markets.

European prices for Group I grades appear to be stable at relatively high levels, with no downward pressures being applied to this market. Availabilities remain tightish, even with imports arriving from a number of sources. Those include Saudi Arabia, Kazakhstan, the United States and Egypt, supplementing regional producers in Poland, Germany, Hungary, the Benelux countries, France, Spain and Italy.

Group II sees some weaker prices, with many buyers countering offers from the main suppliers for these grades. Record quantities of U.S. production moved into the European market during August, perhaps preparing the groundwork for an upturn in demand that is forecast to for the fourth quarter.

Demand is currently steady, but producers are keen to increase off-take quantities, since inventories are running high. The price ranges are wide, with some suppliers pricing material at the top of the ranges but applying discounts depending on customer status and past performance.

Group III levels are still susceptible to price negotiations because the market is swamped with grades carrying partial slates of finished lubricant approvals or no approvals. However, European prices are still pitched higher levels than alternative in markets such as Asia-Pacifi and India, making Europe a popular export destination.

The wars in Ukraine and the Middle East continue, as do their far-reaching disruptions for the global base oil and lubricant industries.

Crude prices rallied the past few days. Dated deliveries of Brent rose to $75.15 per barrel, still for November front month settlement, around $3 higher than last week. West Texas Intermediate firmed to $71.80/bbl, now also for November front month.

Low-sulfur gasoil prices increased but remain lackluster as demand sags following the end of the driving season in Europe. Prices This petroleum product came in at $671 per metric ton, for October front month. All of these prices were obtained from London ICE trading late  Sept. 23.

Europe

There have been reports of Group I cargoes from Europe moving into Middle East Gulf regions, but this reporter can find no trace of that happening with any significant quantities. FOB prices would be too high for such an exercise, and that will become even more true as supply in Europe shortens in the wake of the Greece fire.

ExxonMobil continues to ship large parcels of various base oils to receivers in various parts of Africa. Although some quantities are being delivered regular or contracted receivers, some are also moving to affiliated companies.

A trader has secured a smaller cargo of Group I grades from a U.S. East Coast refinery, and it will come into Antwerp-Rotterdam-Amsterdam and will be resold on an FCA basis to buyers in Northern Europe.

The door is open for sellers to ship cargoes into the Mediterranean regions, due to a predicted shortfall in availabilities after the disruption at Motor Oil Hellas.

Bright stock remains tight as the number of refiners producing this grade is limited. Demand remains high and availability remains elusive, with rumors that a number of traders are looking to import quantities of this grade from U.S. sources.

Prices remain buoyant, with Mol in Hungary issuing  prices of $1,175 per ton for solvent neutral 150 and $1275/t for SN500. Mol prices are always quoted in U.S. dollars.

In the Mediterranean, prices from Spanish producers were heard last week between $1,080/t and $1,090/t for quantities of SN150, $1,126/t for SN500 and SN600 and $1383/t for bright stock. SN500 and SN600 have been in short supply in Spain for a couple of months, but Cepsa announced it will have available barrels of SN600 going into October.

Overall, FCA prices in Europe for Group I base oils are amended to €1,015/t-€1,095/t for SN150, SN500 in a very wide range of €1,020/t-€1,270/t, and bright stock at €1,340/t-€1,485/t.

The euro’s exchange rate to the dollar was little changed at $1.11295 Monday. The average price differential across all grades between Group I sales within Europe and notional exports from the region is unchanged at €10/t-€25/t.

Group II prices appear to be coming under some downward pressure as suppliers offer temporary voluntary allowances to try to move inventories out of tank. August and September saw a raft of material arriving from the U.S., and those cargoes will have flexible pricing due to the market in the U.S. coming in at lower numbers than Europe.

Group II prices still have a healthy premium over diesel, perhaps incentivizing refiners to max out on base oil production. Having a fine balance between rising inventories and attractive pricing is the challenge they face.

Nevertheless, Group II prices are unchanged this week at €1,160/t-€1,185/t for 110N or 150N, €1,195/t-€1,225/t for 220N and €1,285/t-€1,320/t for 600N. 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 are still appealing to producers as prices there are higher than alternative markets in Asia and the Indian subcontinent. The problem however, remains for distributors who purchase quantities of Group III from Asia-Pacific or the Middle East Gulf and then ship cargoes of 7,000-10,000 tons to Europe. The FOB levels are critical in allowing distributors to pitch selling prices that cover shipping costs and allow reasonable margins.

Hence distributors are constantly negotiating with producers to hone FOB prices that allow them some flexibility in the European market. Importers taking material from the Middle East Gulf have seen transportation costs increase substantially the past few months.

One trader is offering 4 centiStoke oil at €1,145/t, but it is unclear if this supplier will be in the European market for the long term, having only just secured supplies from a Middle East Gulf source against the officially appointed distributor for Europe. It has been suggested that this trader will expand the base oil supply portfolio to include Group l, II and III base oils for sale in Europe.

Levels from one South Korean seller are now pitched at €1,230/t-€1,240/t for 4 cSt, with 6 cSt oils in the same ballpark, both on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

Otherwise, European prices for Group III oils with partial slates of finished lubricant approvals or without approvals are at €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 base oils are at €1,155/t-€1,185/t, basis FCA ex rerefinery in Germany.

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

Baltic & Black Seas

Some time in the past few weeks or months, a cargo loaded out of the Baltic Sea for Nigeria. It has been reported that the trader involved with this cargo is negotiating on payment for the first tranche of the delivered quantity. There was more than one receiver involved, making it doubly difficult to collect payments from all concerned. It is not clear what currency will be used to settle the debt, with many receivers looking for extended credit and then paying in naira.

The payment problem stems from the use of Russian banks to process the L/C without involving prime European banks as counterparts.

A cargo loaded from St. Petersburg for Turkey will discharge around 5,000 tons SN150 and SN500 in Gebze.

South American destinations for Russian exports are being discussed again, but problems remain, including the length of voyage time and letters of credit that are required by receivers in Brazil and Argentina to receive import licenses.

Prices for Russian base oil exports ex St Petersburg or Vyborg, Russia, are still estimated based on the latest prices offered into Nigeria, factoring in typical freight and predicted margins. Those prices are at $745/t-$775/t for SN150 and $785/t-$795/t for SN500, while blended SN900 may be priced around $840/t, if made with SN1200 or Russian bright stock. This assumes a freight cost of $185/t-$200/t for a 7,000-10,000 ton parcel which would include as much as 6,000 tons of SN900, the main grade utilized in Nigeria.

When other traders offer cargoes from Europe or the U.S., bright stock is used to produce quantities of SN900. The inclusion of bright stock as a blend agent means that prices are inflated for cargoes originating from Western sources.

Turkish blenders have returned to the market since Tupras exported some base oil to the mainland European market where prices were higher. It is understood that the previously mentioned cargo of various Group I grades was taken in by Greek buyers. There is another inquiry out to Tupras for another cargo, since Greek blenders would be keen, perhaps concerned about availability after the fire at Motor Oil Hellas.

Russian imports from the Baltic and Lukoil’s refinery in Volgograd continue to dominate the Turkish market. 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.

Tupras re-issued prices for the local market, although it is not clear what quantities are available. Perhaps more will become clear when the answer about another export cargo is given. The re-issued prices are 36,465 lira/t for spindle oil; Tl 31,739/t for SN150; Tl 34,258/t for SN500; and Tl 46,246 for bright stock. Prices in lira are offered ex rack, plus a loading charge of Tl 5,150/t.

Group II grades are imported into Turkey and resold on an FCA basis. Prices are unchanged this week at €1,425/t-€1,465/t for 100N, 150N and 220N and at €1,595/t-€1,625/t for 600N. Group II base oils can be imported from Saudi Arabia, the U.S., and South Korea, but it is heard that Russian Group II grades are being offered ex tank in Turkey. Russian prices are reported to be around €100/t-€150 less than those from other sources.

The market in Turkey for Group III oils with partial approvals or no approvals includes 4 cSt produced in Russia by Tatneft. The latest price heard for this product was around €1,290/t. Imports from Middle East Gulf sources is no longer available.

Smaller quantities of fully-approved Group III grades from Cartagena, Spain, continue to be delivered into Gemlik, Turkey, where they are resold on an FCA basis. Prices are unchanged at €1,960/t-€1,995/t.

Middle East

Base oil cargoes loading out of Yanbu and Jeddah, Saudi Arabia, have picked up again following a lull during August. Receivers in United Arab Emirates and India have been taking large parcels of up to 20,000 tons transported in Indian-, Pakistani- and U.A.E.-flagged vessels, which receive safe passage from the Houthi rebels in Yemen.

Luberef is looking to move Group I and Group II cargoes toward Europe.

There could be opportunities to supply Group I barrels into the Greek market, due to the Motor Oil Hellas fire.

Iranian base oil producers Sepahan and Iranol continue to export small cargoes of Group I SN500 and SN150 through Bandar Bushehr and Bander Khomeini. These exports move into the U.A.E. and then are assembled into larger parcels for shipping to Pakistan. It is understood from U.A.E. sources that payment in dollars is important for the two producers, which exchange that currency on the local black market to cover operating costs at their refineries.

The arbitrage between the U.S. and the Middle East Gulf looks likely to open because of U.S. sellers clearing inventories on the back end of hurricane season. Notices are already being issued saying that cargoes from the U.S. are primed for receivers in the U.A.E.

Russian base oils offered on a CFR basis ex Hamriyah, U.A.E., continue to be priced around $845/t for SN150 and $855/t for SN500. It is not confirmed how much Russian material is going into the U.A.E., but sources have confirmed that at least three vessels carrying Russian barrels have discharged in Hamriyah since the beginning of June.

Netbacks for partly approved Group III exports from Al Ruwais, U.A.E., and Sitra, Bahrain, decreased due to severe pressure on selling prices in Europe and the U.S. They are now assessed at $1,145/t-$1,220/t for 4, 6 and 8 cSt.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, also fell to $1,325/t-$1,365/t. Cargo economics and cost allocation for supplier Shell are not disclosed, so netbacks are on an indication only basis. In general, netback levels are assessed from distributor selling prices minus estimated marketing, margins, handling and freight costs.

Prices for Group II base oils resold ex tank in the U.A.E., or often on a truck-delivered basis around the U.A.E. and Oman, are unchanged 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 pegged to the U.S. dollar. The high ends of the ranges refer to RTW deliveries to buyers in remote locations in the U.A.E. and northern Oman.

Africa

Shipping agency sources in Durban, South Africa, said a large cargo of base oils is loading in Northwestern Europe from Rotterdam and Fawley, United Kingdom. The cargo size is reported to be around 19,000 tons, and it is said to include Group l, II and III base oils plus a small quantity of polyalphaolefins or esters to be used for blending aviation lubricants in South Africa.

This report has communicated with a source on their way to Lagos to investigate the chances of putting together a cargo for base oils for receivers in Nigeria. The decision will depend on arriving at satisfactory solutions to the guarantee of payments, hopefully in dollars, and other ancillary financial aspects such as coverage against demurrage, should that be incurred by the vessel delivering the cargo.

West Africa trading remains subdued, but a number of buyers are becoming concerned that few traders will offer supplies of Group I base oils. The rumor that NNPC had approached a trader to investigate purchase of a cargo has been doubted, since part of NNPC can import on its own.

A Russian cargo loaded out of the Baltic and discharged in Apapa port in Lagos, leaving material available in tank, but probably not paid for. When this cargo arrived is not known, but Russian material is available ex tank at very low prices.

Base oil trade in Nigeria still faces massive problems, mainly involved with finance, exchange rates and access to dollars. The naira exchange rate to one dollar is at 1,657, but this rate can change at a moment’s notice and can fluctuate up or down by more than 200 naira.

It is impossible for experienced traders to compete with Russian prices, but local buyers are asking for that and for open and extended credit. Prices in Nigeria for potential future trades are estimated at $1,175/t-$1,195/t for SN150, $1,245/t-$1,270/t for SN500 and $1,320/t-$1,355/t for SN900. Prices for Russian oils have been much lower, last heard at $995/t for SN150, $1,035/t for SN500 and $1,075/t for SN900, basis CFR ex Apapa.