In contrast, Africa is showing signs of strong growth, and expanding companies are taking advantage of the southern hemisphere’s summer months to boost production of consumer goods. Southern and West Africa continue to be large users of all types of base oil, with large quantities of API Group I going into West African countries such as Nigeria, Ghana, Cote d’Ivoire and Guinea. Demand for Group II and III continue to grow in South Africa as many blending operations switch to premium base oils.

The Middle East paints a rather mottled picture. Some parts show signs of growth, but Israel’s war with Hamas and its allies is obviously holding back commercial activity in some areas. For example, the United Arab Emirates is seeing demand for finished lubricants expanding, not just for supply into Middle East Gulf regions, but also for foreign markets greater distances away. Blended lubricants from the U.A.E. have found their way into European Union markets and the United Kingdom, whilst some companies are targeting Latin American buyers.

Base oil trade has been brisk in the Middle East Gulf for some time now, with only a brief slowing down over the past month. Forecasts are that trade will continue to show positive growth over the coming months, with imports of Group I and II base oils being prioritized from various sources dotted around the globe.

Fighting continues in the Ukraine and Israeli wars while many wait to see whether Donald Trump’s return to the U.S. presidency helps resolve either conflict. Most Western leaders have stated that they will not lift sanctions against Russia, so it seems unlikely that Russian base oils could begin flowing to the EU again. Instead Russia will probably keep focusing on its new markets in Turkey, the Middle East Gulf, South Asia and West Africa.

Energy markets were quiet over the holidays, but prices for crude oil and petroleum products rose a bit to levels not seen since September. Vacuum gas oil values climbed around $50 per metric ton over the past couple of weeks. Dated deliveries of Brent crude has firmed over last week’s number to reach $77.05 per barrel Monday, now for March front month settlement. West Texas Intermediate increased around $3 to $74.55/bbl, still for February front month.

Low-sulfur gasoil broke through the $700 barrier, reaching $711 per metric ton, still for January front month. All of these prices were obtained from London ICE trading lat Jan. 6.

Europe

Group I cargoes departing Europe consist mainly of large ExxonMobil shipments to West Africa and South Africa to maintaining contracted supplies to affiliates, in addition to deliveries to a number of third-party buyers. With the Group I supply-demand scene more or less balanced within Europe, it is difficult to see how large quantities of material could be accumulated to create an export market for the likes of Nigeria. Prices in Europe remain relatively high compared to other regions, for example the U.S., where refiners have cleared inventories built up as insurance during last year’s hurricane season.

Group I prices within Europe remain unchanged since before the holidays. Buyers have turned out largely correct in their expectations that markets would stay stable, despite the small run-up in crude and feedstocks. Base oil margins remain solid. Bright stock remains firm in price due to restricted availability from producers. There are only around eight sources around the European mainland making this grade.

Prices for Group I oils in Europe remain between €885/t and €910/t for solvent neutral 150, at €920/t-€955/t for SN500 and SN600 and at €1,200/t-€1,255/t for bright stock, all on a FCA basis. Some producers have elected to only sell bright stock on a delivered basis, with wide variations on prices due to distances covered in delivering quantities of this grade.

The euro’s exchange rate against the U.S. dollar was flat, posting at $1.03758 Monday. The average price differential across all grades between Group I sales within Europe and a hypothetical export market is unchanged at €5/t-€15.

Group II prices around Europe have remained stable, with no external factors coming into play to change prices. Markets were quiet over the past three weeks while buyers were away. Prices are once again at €1,085/t-€1,120/t for 110 neutral and 150N, at €1,125/t-€1,150/t for 220N and at €1,175/t-€1,210/t for 600N. These prices apply to a wide range of Group II oils, some produced in European, others imported from the U.S., the Red Sea and Asia-Pacific. For imports these prices pertain to bulk shipments.

European Group III trade was also slow over the holidays, with very little reported activity between buyers and sellers during this time. Large quantities of unsold material still sits in storage in Europe, adding to the global oversupply of this grade. Demand may start to pick up now that markets are functioning again, and some expect a boost from finished lube spec upgrades that should require additional quantities of Group III base oils.

Sellers kept their heads down the past few weeks, trying to avoid further price erosion – a strategy that appears to have succeeded. With recessions looming in major markets in Germany, France and the U.K., one Group III seller is still offering 4 centiStoke material without full slates of finished lubricant approvals at €1,125/t, whilst other suppliers have maintained slightly higher prices of €1,185/t-€1,225/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. Values for the overall market for partly approved Group III oils are therefore pegged at €1,125/t-€1,225/t for 4 and 6 cSt and at €1,195/t-€1,235/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

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

Prices for Group III oils with full slates of approvals remain higher 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 from the refinery source in Spain.

Baltic and Black Seas

There has been little information the past few weeks on shipping fixtures or inquiries in the Baltic regions. During this week, the writer of this report will make efforts to establish contacts who can advise on these movements.

Russian export prices have been heavily discounted to ensure these grades remain attractive and super-competitive wherever they are dumped. Output from Gazprom and Rosneft are being sold at very low levels into Turkish and Middle East Gulf markets. For whatever reason, Lukoil barrels seem to be priced slightly higher, but they still sell reasonably well in markets such as Turkey and the U.A.E. Some suggest a quality issue, but this cannot be independently confirmed.

Lukoil exports from the Baltic going into Turkey are being resold on an FCA basis ex Gebze at prices around $40/t higher than Rosneft barrels. Lukoil and its shipping company Litasco are offering into Nigeria on a direct basis, whilst a Belarus trader may take up an offer from Gazprom if payment arrangements are agreed.

FOB prices for exports from St. Petersburg or Vyborg, Russia, are estimated from prices offered and sometimes delivered into receivers in Lagos and Turkey. Levels are currently around $650/t-$660/t for SN150, $675/t-$690/t for SN500 and around $725/t for SN900 blended specifically for Nigeria, all on an FOB basis.

Russian Group I base oils are being advertised and regularly sold around the Black Sea by a few Turkish traders to buyers, some of whom are based in EU countries. Ironically new reports were heard last week that Russian base oils are being sold into Ukraine, to a number of established blenders who have been having problems in obtaining supplies of low priced Group I base oils. Some beers in Ukraine had been purchasing material by road from Poland and Hungary, but now appear to be supplementing these supplies with base oils which have been imported into Turkey and then re-exported to Ukraine by road tank wagons.

Russian barrels are also being bridged from Black Sea ports such as Taganrog, Russia, and Turkish ports to Egypt, stored in tank, and then re-exported to markets such as Nigeria. Cargoes of SN150, SN500 and SN900 are being delivered into Apapa by a trader. Prices for Russian SN900 delivered into Nigeria are heard at $1,080/t, on a CFR basis. From a Turkish trader Russian or Uzbek SN150 is priced at $790/t an SN500 at $800/t, but the price for SN900 is much higher at $1,055/t, suggesting  that the lattr blend may contain bright stock, which is more expensive.

Accounting for estimated costs for handling and storage and a margin for the seller, CFR prices for the solvent neutrals landed into Gebze could be close to $600/t, which suggests that the source could be Rosneft.

Tupras’ prices for the Turkey market are unchanged at 35,285 lira/t for spindle oil; Tl 31,104/t for SN150; Tl 33,253/t for SN500; and Tl 44,962 for bright stock. Sales are in lira and incur a loading charge of Tl 5,150/t.

Group II FCA prices in Turkey are maintained until the next report, kept at $890/t-$1,100/t for 110N, 220N and 350N. The lower end of the range applies to the two lighter grades, the upper to 350N. Mainstream higher spec 500N imported from Formosa Petrochemical in Taiwan is offered at $1,500/t, while 150N is available at $1,150/t. Group II base oils are imported to Turkey from the Red Sea, the U.S., South Korea, and Taiwan.

Group III oils in Turkey with partial slates of approvals or no approvals include Tatneft 4 centiStoke, which is priced at around €1,145/t. Other partly-approved grades are priced higher, at €1,360/t-€1,400/t. Often these base oils are from cargoes that discharged into Antwerp-Rotterdam-Amsterdam and were reloaded in bulk or flexi-tanks for Turkish buyers. Fully-approved Group III grades from Cartagena, Spain, are being delivered into Gemlik, and prices for them are unchanged at €1,960/t-€1,995/t, basis FCA.

Middle East Gulf

More cargoes of Group I and II are loading out of Yanbu and Jeddah,Saudi Arabia, following a slight lull during November. In the case of supplies moving into the U.A.E., these barrels are competing against U.S. exports put together during November and December. Both Group I and Group II cargoes from U.S. Gulf Coast have arrived, and more are due in January.

Sources say Luberef, using sister company S-Oil, may look to increase exports to Europe of Group I and II. S-Oil has been in the Group II market in Europe for many years, and this practice of loading out of Yanbu would save time and cost compared to shipping from South Korea.

Iran has been quiet recently regarding Israel’s war against Hamas, but sources in the U.A.E. say tensions within the country seem to be rising in light of recent government actions in a number of cities, including curfews and curbs against gatherings of crowds. Base oils have been largely unaffected as cargoes, some small, continue to sail from Bandar-e Emam Khomeyni for U.A.E. ports such as Ras al Khaimah and Hamriyah.

A large number of cargoes have been reported imported into receivers in the U.A.E. for receivers in Fujairah, Sharjah and Dubai emirates. Most of these cargoes have loaded out of the U.S. Gulf Coast through international traders active in both the U.S. and the Middle East Gulf. The supplies are heard to be relatively large quantities of Group I and Group II base stocks that are being sold to third parties and going into appointed distributors.

Group I and II oils continue to be imported from other regions into the U.A.E. and countries such as Kuwait, Bahrain and Qatar, although supplies have also been coming from Yanbu and Jeddah by RTW into Kuwait and Bahrain, courtesy of Lubref. Prices for imported Group I material arriving into Middle East Gulf ports, predominantly the U.A.E., are maintained at around $925/t-$945 for SN150, $965/t-$980/t for SN500 and $1,090/t-$1,120/t for bright stock, all on a CIF or CFR basis ex U.A.E. ports. These prices refer to imports loaded from the U.S., although some lower numbers have been heard for supplies from Thailand, India and Indonesia.

Russian base oil cargoes arriving into Hamriyah port in the U.A.E. are being loaded out of Azov ports such as Taganrog and Temyruk, Russia, with others being bridged through Limas terminal in Turkey. The trader who delivered the Russian parcel of 15,000 tons, firstly to Hamriyah and then onwards to Lagos may be looking to repeat this cargo. This information was heard from buyers in Apapa and supported by U.A.E. sources. The original vessel must have loaded out of an Azov port, since draft restrictions at Limas terminal’s berth could not accommodate this size of cargo.

U.A.E. prices for Russian base oils are heard in the mid-$600s per ton, on a CFR basis delivered into Hamriyah port, or ship-to-ship anchorage. Specifically, prices are 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. These grades could be Rosneft or Lukoil barrels.

Group III cargoes continue to load regularly out of Al Ruwais, U.A.E., and Sitra, Bahrain. Netback prices for material loading for receivers in Europe remain assessed at $1,125/t-$1,200/t for 4, 6 and 8 cSt grades. Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, remain at $1,295/t-$1,325/t, on an indication basis only since the supplier’s cargo economics and cost allocation are not disclosed. Netback levels are assessed from distributor selling prices minus estimated marketing, margins, handling and freight costs.

Group II base oils being imported from the Red Sea, the U.S. and South Korea, resold ex tank in the U.A.E. or on a truck-delivered basis in the U.A.E. and Oman remain priced 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 mainly priced and sold in U.A.E. dirhams, the U.A.E. currency being pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in the U.A.E. and northern Oman.

Africa

Durban shipping agency sources have no update on news for another large base oil cargo being considered for a delivery into South Africa and perhaps Kenya during the first three months of next year. The large cargo of mixed base oils is thought to have arrived into Durban to be discharged, but that is not yet confirmed.

There are shipping reports of a vessel loading out of Fawley, U.K., with around 9,000-10,000 tons of Group I base oils. Three grades will be involved in the cargo, which will discharge at Conakry in Guinea, Abidjan in Cote d’Ivoire and Tema in Ghana. The first two ports are contracted regular buyers from the supplier major, while the Ghana delivery of around 5,000 tons of SN150, SN500 and bright stock is part of the annual Ghana tender held by ExxonMobil for some time.

Nigerian reports contain the news that more cargoes are being considered, but with U.S. availabilities under pressure, FOB prices may now be higher, making these cargoes uncompetitive against Russian barrels. Russian base oils from the Baltic and Egypt are being offered and continue to present tough competition. Presumably traders involved with Russian supplies of base oil are making money, but producers in Russia must be selling base oils at or just above breakeven to justify the prices heard, after taking shipping costs and finance into account. Some traders appear to submit to pressure from buyers to reduce prices to the limits, making little financial or commercial sense.

With future cargoes in mind, the vessel that delivered the 15,000 tons of Russian grades from the U.A.E. to Apapa has ballasted to the U.S. Gulf, has called firstly at Bayport and is now sailing to Point Comfort. It would appear that this ship will not sail for Nigeria with a base oil cargo.

The exchange rate of the Nigeria’s naira to the U.S. dollar soared to 1,636 NGN Monday, up 100 NGN over the past week. CFR prices in Apapa for U.S. material are 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. Competitor traders have offered lower numbers on the lighter neutrals at $940/t for SN150, $995/t for SN500, but SN900 higher at $1,130/t. No explanation jumps out.

Russian base oils are being delivered via Turkey and Egypt and even after triple handling are priced competitively at around $980/t for SN150, $995/t for SN500 and $1,080/t for SN900, all on a CFR basis ex Apapa.

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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