With many companies having closed their doors from the end of last week, it has been difficult to contact a number of usual sources for industry information, but those still at their desks were more than pleased to their expectations for the upcoming year ahead. Some players believe lube demand has reached a nadir and that an upswing may be coming in spring – inflation may fall and consumer confidence return. Others are more pessimistic and anticipate that conditions may not improve for quite a few more months or for years. Some in the former camp described markets asEuropean, Middle Eastern and African encouraging, whilst some in the latter are almost despondent and fear for the continuance of their businesses. This stark contrast is not dependent on region or types of lubricants supplied, but rather appears to hinge on management attitude and morale within each organization.

Crude prices are marginally weaker across all markets, perhaps due to slowing activity prior to the holidays. Dated deliveries of Brent dipped around $1 since last week to $72.05 per barrel, still for February front month settlement. West Texas Intermediate fell a couple of dollars to $68.70/bbl, now for February front month.

Low-sulfur gasoil continues to trade in a narrow range, at $670 per metric ton Monday, for January front month. All of these prices were obtained from London ICE late Dec, 23.

Europe

European exports of API Group I might have resumed the past couple weeks had refiners chosen to move surplus stocks out of inventory before the end of the year, as they often do. But this has not happened, and after making tour of various producers, the reason was simply that stocks of Group I base oils were not in sufficient quantities to entice traders. In addition, sellers wished to remain committed to the local regional markets where prices remain acceptable versus VGO levels.  

Prices for Group I sales within Europe have remained stable as activity slows. Buyers remain convinced that markets will remain steady over the next few weeks. Availabilities are sufficient to cover requirements, hence there is no incentive to invest in large purchases. Blending operations positioned in the Upper Rhine regions appear to have covered their potential requirements in case water levels rise in January to prevent barges from navigating bridges.

Bright stock as a grade remains scarce, buoying prices for this grade higher than might otherwise be expected.

Prices for Group I sales in Europe are unchanged at between €885/t and €910/t for solvent neutral 150, €920/t-€955/t for SN500 or SN600 and €1,200/t-€1,255/t, for bright stock.

The dollar’s exchange rate with the euro remains strong at $1.04031 Monday. The average price differential across all grades between Group I sales within the region and hypothetical exports is unchanged at €5/t-€15.

European Group II prices are steady following small decreases in late November and early December. Buyers have retired for the holiday period, and activity will possibly not resume until into the New Year. European Group II prices are unchanged at €1,085/t-€1,120/t for 110N neutral and 150N, €1,125/t-€1,150/t for 220N and €1,175/t-€1,210/t for 600N. These prices apply to a wide range of Group II base oils both produced in Europe and imported from the United States, the Red Sea and Asia-Pacific. For the latter prices pertain to bulk shipments.

Suppliers to Europe’s over-saturated Group III market received good news this week that producers from the Middle East Gulf diverted a few cargoes from Europe to the U.S. This is a function of the market and storage in Europe being at tank tops, not that the market has suffered from further price erosion. Demand is poor due to the Christmas holiday period and will not recover until January. Distributors have been able to largely maintain selling levels at November/December prices.

One seller is offering 4 centiStoke oil with a partial slate of finished lubricant approvals at €1,125/t, whilst others are maintaining values at €1,185/t-€1,225/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. Hence the overall market for 4 and 6 cSt is pegged at €1,135/t-€1,225/t, while 8 cSt is at €1,195/t-€1,225/t,on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Prices for rerefined Group III grades are unchanged fat €1,135/t-€1,175/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Prices in Europe for Group III oils with full slates of approvals are at €1,775/t-€1,810/t for 4 and 6 cSt and at €1,820/t-€1,835/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

There are reports that base oil prices in Russia have firmed yet again by the rouble equivalent of some $30, but FOB values for exports loading out of St. Petersburg and Vyborg, Russia, do not appear to have been affected. Baltic barrels traditionally have been sourced from Lukoil’s refinery in Perm, but Gazprom also supplies large quantities, though to whom is not clear. Gazprom barrels were sold into storage in Riga and Liepaja, but traders had purchased these quantities on a freight on train basis at the refineries and had 3,000-ton lots moved by train to Baltic ports for loading.

Lukoil export sto destinations in Turkey and Singapore. Reports from Turkey suggest that Lukoil prices are much higher than Rosneft barrels when arriving on a cost and freight or cost, insurance and freight into Gebze. Rosneft prices bear no correlation to either Russian domestic levels or to Lukoil delivered prices into Gebze.

Baltic FOB prices ex St. Petersburg or Vyborg are calculated from prices offered and delivered into receivers in Lagos and Singapore. Levels are assessed around $760/t-$780/t for SN150 and $790/t-$810/t for SN500, while SN900 blended specifically for Nigerian receivers is assessed at around $845/t.

Base oils from Europe and other areas are moving into Klaipeda, Lithuania, and Riga and Liepaja, Latvia.

Russian barrels are still being advertised and sold around the Black Sea by a few traders supplying many receivers. The export offer from a lube blender-trader in Turkey for SN900 remains priced at $1,100/t, ex works Gebze, Turkey. This price is unworkable against Russian SN900 blends, which will use SN1200 rather than bright stock.

Russian barrels are being bridged to Egypt where cargoes including SN150, SN500 and SN900 are put together. These cargoes are being delivered into Nigeria. It is not clear how the SN900 is blended – whether this is done in advance to order, or if the grade is blended on loading. Prices for Russian SN900 delivered into Nigeria are estimated at around $1,080/t, on a CFR basis. It is assumed that the grade offered would be blended using bright stock, hence the high price. SN150 is priced at $790/t and SN500 at $800/t, and both grades are blends of Russian and Uzbek base oils.

Taking estimated costs for handling and storage, plus a margin for the seller, then the CFR prices landed into Gebze for both grades could be close to $640/t. Such a low delivered price suggests their origin is Rosneft.

There has been no update for Tupras base oils sold locally, so the last levels are maintained, but it should be stressed that there is no confirmation of availability for any of the grades. Prices are 35,285 lira/t for spindle oil; Tl 31,104/t for SN150; Tl 33,253/t for SN500; and Tl 44,962/t for bright stock. Prices are in lira ex rack and also incur a loading charge of Tl 5,150/t.

Prices for Group II oils in Turkey are unchanged at $890/t for 110N and 220N and $1,100/t for 350N. Higher spec 500N is offered at $1,500/t and 150N is available at $1,150/t. The last two grades have been imported from Taiwan, possibly from Formosa Petrochemical. Group II base oils in Turkey are imported from the Red Sea, the U.S., South Korea and Taiwan.

Partly-approved or non-approved Group III base oils available on an FCA basis include Tatneft’s 4 cSt grade, which is priced around €1,145/t. Other partly-approved grades are priced higher, at €1,360/t-€1,400/t. Fully-approved Group III grades from Cartagena, Spain, are being delivered into Gemlik, where prices are unchanged at €1,960/t-€1,995/t, on an FCA basis.

Middle East Gulf

Shipments of Group I and II base oils loading out of Yanbu have slowed during November and December, possibly due to lower demand in India and the United Arab Emirates, where a number of U.S. cargoes of both grades have been or are being delivered early in January. Luberef is supplying Group I and Group II base oils into the Turkish market, where the Group I prices are reputed to be more competitive than barrels from ExxonMobil or Moh. Various vessels are also noted loading on a regular basis for other ports such as Aqaba, Jordan, Dar-es-Salaam, Tanzania, or Suakin and Port Sudan, Sudan.

Base oil supply and trading in the Gulf region is ramping up, in particular into U.A.E. ports. Parcels from U.S. sources are also reported moving into Bahrain and Qatar, said to be relatively large quantities of Group I and II. The region has been an important conduit for Group I and II oils being used in large quantities in the U.A.E. and other countries such as Kuwait, Bahrain and Qatar. Group III exports from three terminals in Middle East Gulf are critical to international markets, and the continuance of this supply has been nothing short of remarkable given the Red Sea shipping disruptions caused by Houthi rebels and the extra time and costs incurred as a result on deliveries to the U.S. Lesser quantities are being planned for Europe and China, where large numbers of competitors vie for a share of a future market forecast to expand in coming years.

Prices for Group I material imported into Middle East Gulf ports, predominantly the U.A.E., are assessed at around $945/t-$975/t for SN150, $985/t-$1,000/t for SN500 and $1,120/t-$1,165/t for bright stock, all on a CIF or CFR basis ex U.A.E. ports. These prices refer to imports from the U.S., Thailand and India. There had been talks of imports from Europe, but the logistics and economics do not stack up.

Russian base oil cargoes continue to arrive into Hamriyah port in U.A.E., a number being loaded out of Sea of Azov ports off the Black Sea, whilst others are being bridged through Limas terminal in Turkey. Russian prices basis CFR Hamriyah port or ship to ship anchorage are heard from sources in U.A.E. at levels in the mid $600s, on a delivered basis. Prices are assessed at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges refer to barrels being discharged into tank in Hamriyah port. It is considered that these grades must all be Rosneft barrels.

This report is waiting for news on the next sale tender for Group III base oils from Bapco ex Sitra, Bahrain. The previous tenders have been awarded to two European traders who may be cooperating. The last tender was sold on the unusual formula of FOB AG gasoil plus $200/t, basis FOB presumably – a formula that yielded extremely low prices.

Group III netbacks for material loading from Al Ruwais, U.A.E., and Sitra and destined for Europe are unchanged at $1,125/t-$1,200/t for 4, 6 and 8 cSt. Netbacks for gas-to-liquids Group III+ sold by Shell ex Ras Laffan, Qatar, remain at $1,295/t-$1,325/t. Shell cargo economics and cost allocation are not disclosed, so these values are on an indication basis only. Netback levels are assessed from distributor selling prices, minus estimated marketing, margins, handling and freight costs.

Group II base oils imported and resold ex tank in the U.A.E., or sometimes on a truck-delivered basis in the U.A.E. and Oman, have prices unchanged at $1,525/t-$1,575/t for 110N, 150N and 220N and at $1,635/t-$1,685/t for 600N. These grades are sold in U.A.E. dirhams, the U.A.E. currency pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in the U.A.E. and northern Oman.

Africa

Reports from Durban suggest that another large cargo is being considered for delivery into South Africa and Kenya for the first quarter of next year. The last cargo of mixed base oils is on the high seas, having loaded from Rotterdam and Fawley, U.K. Arrival in Durban is estimated during early January. The cargo includes Group l, Group II and Group III base oils and a small quantity of easychems, which may be polyalphaolefin or esters. 

There are reports or more shipments to Nigeria being considered for delivery in the new year, but there are also reports that availabilities from U.S. sources are rapidly drying up. Suppliers may not be willing to move down to the lower prices required for cargoes to be placed in the Nigerian market. Russian barrels from the Baltic and Egypt are figuring in current offers and will be difficult to compete against.

The Nigerian naira’s exchange rate to the dollar has stabilized and was at NGN 1,633 Monday, unchanged over the past week. Local banks are still not bidding for dollars, instead taking buyer deposits of 125% to invest in their own programs. The bank then advises the customer after some time that they have been unsuccessful in buying dollars, but that they will continue to try, retaining the 125% deposit for another term.

Prices for higher spec material from the U.S. are confirmed at $985/t-$1,010/t for SN150, $1,040/t-$1,055/t for SN500 and $1,095/t-$1,125/t for SN900, on a CFR basis ex Apapa port in Lagos. However, other traders have come with lower numbers of $940/t for SN150 and $995/t for SN500, but with SN900 higher at $1,130/t, perhaps reflecting a higher FOB tariff for bright stock. The source of the second offered cargo is from a major on the U.S. Gulf Coast.

Russian barrels are being delivered via Turkey and Egypt and even with the triple handling are price competitive, suggesting Rosneft as their origin. Prices for material shipped from Egypt and the U.A.E. are estimated at around $975/t for SN150, $985/t for SN500 and $1035/t for SN900, all on a CFR basis ex Apapa. Nigerian cargoes have to be offered only on a CFR basis, with the freight and product costs itemized separately on the invoice.