As the ceasefire between Israel and Hamas continues to hold, some businesses in Israel and Lebanon – including lubricant producers – are trying to resume some sort of normal operations, but there are many hurdles on the way back to the way things were.
There are reports of former blending operations restarting and making inquiries for various types of base oil and additives to be delivered into Israeli ports. The quantities involved will be small at first, but players are positive. Market sources remarked that at least a restart is being made.
Meanwhile, base oil prices across Europe, the Middle East and Africa are seen to be generally softer, with the premium over distillate fuels dipping as values trend lower. The movements are not severe, and the market has adopted a rather gentler approach to pricing as demand is still missing from main markets.
Europe remains in the doldrums, with Germany, France and the United Kingdom all struggling to stimulate growth. The Benelux countries not much better, experiencing depressed demand at time when base oil purchasing normally ramps up due to inventory replenishing.
Some buyers said last week that flagging finished lubricant demand combined with excellent availabilities of all types of base oil remove incentives to purchase large quantities of base oils. Better, they contended, that stocks of base oils remain on producers’ inventories until needed for future blending programs.
This mindset is disincentivizing refiners from increasing base oil output. So far available do not appear affected, and there are few signs of upward pricing pressure. The scenario seems likely to continue until economic growth returns to Europe’s major nations.
Prices for dated deliveries of Brent crude oil dropped again the past week, defying forecasts that crude could climb above $90 per barrel. It should be noted that there were have also been forecasts of crude crashing to $30-$35/bbl.
The actual outcome may be somewhere in the middle. Demand in many major economies is sluggish, though India and the United States buck the trend.
Dated Brent prices dipped $2.5 over the week to $77.40, still for March front month settlement. West Texas Intermediate also fell to $73.45/bbl, also for March front month. Low-sulfur gasoil slid almost $50 to $704 per metric ton, still for February front month. All of these prices were taken from London ICE trading late Jan. 27.
Europe
Demand around Europe for API Group I base oils remains muted, and with ample availabilities for the region, some producers are being tempted to explore potential export sales. A Spanish refiner sold a relatively small parcel of solvent neutral 150 and bright stock to receivers in Turkey.
This cargo of around 2,000 tons was reckoned to be slightly off-spec, though it was unclear what parameters were lacking. Suffice to say both grades were discounted, with numbers heard at $750/t for SN150 and $1,100/t for bright stock, on an FOB basis. This refiner has been lacking availabilities for SN500/600 but expects availability during February.
There are further possibilities for Mediterranean material to go into Turkey, where some blenders are desperate to lay hands on any lower-priced availabilities of European quality base stocks. Russian exports continue to dominate the Turkish market, but blenders require higher spec oils to produce certain grades of finished lubes required in Turkish markets. This report is unsure if the barrels from Spain will fit that bill.
West Africa, and Nigeria in particular remain possibilities for export sales, but no European supplier has the availabilities to accommodate a large Group I base oil cargo in excess of 10,000 tons. Prices are crucial when looking at Nigerian trades, and the continuing offers of Russian material are not helping. European suppliers do not appear ready to discount that much just to make an export deal work.
Prices for Group I sales within Europe are weakening moving towards February. Sellers are trying to kick-start the market by offering “special deals,” but buyers are taking their time and are in no real hurry to commit to large purchases. Group I solvent neutrals are being offered at €850/t for SN150 and €880/t for SN500, basis FCA.
Vacuum gasoil price levels have come off the past week, maintaining the premium for base oils over distillate grades. The premium is fundamental to refiners producing base oils providing added value to the slate.
Bright stock maintains a firm position in pricing due to limited availability of this grade.
FCA euro prices for Group I sales within Europe are lower this week at €835/t-€875/t for SN150, €865/t-€900/t for SN500 and SN600 and €1,175/t-€1,220/t for bright stock.
The euro’s exchange rate with the United States dollar moved up to $1.05028 Jan. 27. The average price differential across all grades for Group I exports from Europe and Group I sales within the region is unchanged at €20/t-€45.
Group II prices around Europe remain steady but are certainly coming under pressure from a number of buyers who are pointing to weaker Group I values and suggesting that the differential should between the grades should remain constant.
European Group II prices are reassessed at €1,055/t-€1,075/t for 110N and 150N and at €1,080/t-€1,100/t for 220N, while 600N remains at €1,155/t-€1,195/t. These levels apply to a wide range of Group II base oils, some produced in Europe and others imported from the U.S., the Red Sea and Asia-Pacific. For imports the price ranges quoted apply to bulk shipments.
Europe’s Group III market is experiencing turbulence as established distributors are being pushed to compete with newer players offering lower rates. Some Group III oils are now being offered at prices lower than Group II.
Exceptionally low prices are being offered from a trader who won a sale tender for Group III base oils from a Middle East Gulf producer. Another tender has been announced but full details are not available to the market.
The lowest numbers heard for 4 centiStoke oils are $1,050/t (€1,000/t at current exchange rates), while other suppliers of Group III oils with partial slates of finished lube approvals are in a range of €1,120/t-€1,135/t for 4 and 6 cSt.
Cargoes of Group III base oils are being routinely sailed from Middle East Gulf sources, adding to the growing European inventories of these grades. In a relatively static market there could be problems in the longer term with oversupply.
Altogether then, European prices for partly-approved Group III oils are at €1,000/t-€1,135/t for 4 and 6 cSt and at €1,125/t-€1,175/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.
The 8 cSt prices are odd in the sense that the grade has a limited market in Europe, and distributors try to maintain prices at levels attractive enough for shipments to Europe to continue. This viscosity grade is used mostly by producers of metalworking lubricants.
Prices for rerefined Group III grades are unchanged at €1,085/t-€1,135/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.
Prices for Group III oils with full slates of approvals dipped this week to €1,695/t-€1,755/t for 4 and 6 cSt and are at €1,775/t-€1,790/t for 8 cSt, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.
Baltic and Black Seas
Reports keep hitting this desk that Russian domestic base oil prices continue are rising, but there is little evidence of exports following the same trend.
Checking with receivers in Gebze, Turkey, who take imports from Lukoil and Rosneft, prices actually appear to sunk. Russian export prices appear to be heavily discounted ensuring that these grades remain attractive and super-competitive wherever they are sold. Rosneft barrels loaded in Black Sea and Sea of Azov ports of Taganroc and Temyruk are being sold at extremely low levels into Turkish and Middle East Gulf markets.
Lukoil barrels remain priced slightly higher and sell in markets such as Turkey, the United Arab Emirates and Nigeria. Some buyers have implied that Lukoil quality is more reliable, but past experience was that all Russian exports had similar quality.
FOB prices for Group I oils sold ex St. Petersburg or Vyborg are estimated from prices offered and delivered into receivers in Lagos and Turkey. These levels are estimated at $645/t-$660/t for SN150, $665/t-$680/t for SN500 and around $710/t for SN900 blended specifically for receivers in Nigeria. Prices for Russian export barrels are only published as indication prices, since reliable reporting for cargoes leaving the Baltic is not currently to be found.
Russian Group I base oils continue to dominate the Turkish market, leading to excess quantities of material being offered around the Black Sea regions by a number of traders in Turkey and other countries.
Investigations confirm that Russian base oils are being openly sold into Ukraine to a number of blenders looking for supplies of low priced Group I base oils. Some blenders in Ukraine had been purchasing European material by road from Poland and Hungary, but appear to be supplementing or even replacing these supplies with material that was imported into Turkey, Moldova or Georgia, then shipped to Ukraine by road or by smaller tankers operated by Volganeft.
Russian barrels are being bridged from Black Sea ports such as Taganrog and Turkish ports to Egypt and Limas terminal, then re-exported to markets such as Nigeria. Cargoes of SN150, SN500 and SN900 are being delivered into Nigeria by one trader.
Russian values for SN900 delivered into Nigeria are heard at $1,080/t on a CFR basis. From a Turkish trader Russian and Uzbek SN150 is priced at $775/t and SN500 at $790/t, but the price for SN900 is more than $250/t higher than the previously mentioned Russian alternative, at $1055/t, all ex works in Gebze. The SN900 price probably indicates the use of bright stock in the blend.
Tupras prices for base oils sold in Turkey are at 33,553 lira per ton for spindle oil; Tl 27,405/t for SN150; Tl 32,716/t for SN500; and Tl 42,953/t for bright stock. These prices are ex rack and incur a standard loading charge of Tl 8,199.20/t.
FCA Group II prices advised from a Turkish trader source are unchanged at $890/t for 110N and 220N and at $1,100/t for 350N. Mainstream or European quality 500N is offered at $1,500/t and 150N at $1,150/t. The latter two grades were imported from Taiwan, from Formosa Petrochemical in Taipei. The Group II market in Turkey includes imports from the Red Sea, the U.S., South Korea, Taiwan and Russia.
The market for Group III oils with partial slates of approvals includes 4 cSt from Tatneft in Russia, which is priced around €1,095/t, and alternatives from other sources that are at €1,295/t-€1,325/t, all on an FCA basis.
Fully-approved Group III grades from Cartagena, Spain, are delivered into Gemlik and are priced at €1,865/t-€1,895/t, basis FCA.
Middle East
Cargo sizes and numbers of shipping movements out of the Red Sea have been ramping up, and Group II cargoes are in demand going into the West Coast of India. Parcels of more than 18,000 tons had been moving into Mumbia anchorage for receivers sharing a cargo quantity. Group I and Group II base oils are loading from both Yanbu and Jeddah, Saudi Arabia.
Lower quantities moved into the U.A.E. during December, but cargoes have resurged and are again moving into Fujairah, Ras al Khaimah, Hamriyah and Jebel Ali.
S-Oil, seem to still be assessing Group I and II exports to Europe from the Red Sea facilities of sister company Luberef. S-Oil has been in the Group II market in Europe for many years, and it would save time and cost to source from Yanbu rather than South Korea.
This report has tried to get a handle on the latest situation from Yemen and Houthi rebel reaction to the ceasefire between Israel and Hamas. From sketchy reports it appears that attacks on U.K. and U.S. vessels are still being considered. Most U.K., European and U.S. vessels continue to detour around Africa’s southern tip.
Base oil exports from Sepahan and Iranol in Iran have been largely unaffected by Israel’s war, but it’s possible that larger quantities of base oils are being kept in country, perhaps stockpiling in case more conflict erupts.
Traders in the U.S. and the Middle East Gulf had loaded cargoes from the U.S. Gulf and Atlantic coasts, and most of these are now arriving in the U.A.E. Some vessels will also discharge on the West Coast of India.
Prices for imported Group I material arriving into the U.A.E. are reassessed at around $875/t-$910/t for SN150, $915/t-$945/t for SN500 and $1,080/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., but lower numbers are heard for smaller cargoes coming in from Thailand, India and Indonesia.
Two Russian base oil cargoes discharged in Hamriyah port during January, and rumors are that a pre-ordered 15,000-ton cargo that includes SN900 has loaded out of the Black Sea and is sailing towards Hamriyah anchorage. This is considered to be another cargo of Russian base oils that will be transferred ship to ship at Hamriyah anchorage onto an as yet unknown vessel that will then travel to Lagos.
Russian base oil prices basis CFR Hamriyah port, or STS anchorage, are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. How these prices are possible after shipping costs from the Black Sea is hard to fathom, but if Russian producers need to move base oils into markets such as West Africa, this would help accomplish that.
Group III cargoes continue loading out of Al Ruwais, U.A.E., and Sitra, Bahrain, destined for India, Europe, the U.S. and mainland China, though shipments to the latter have decreased. New Chinese Group III production came onstream during 2024 and more is due in 2025. Netback levels are unchanged at $1,125/t-$1,200/t for 4, 6 and 8 cSt grades.
Netbacks for gas-to-liquids Group III+ loading ex Ras Laffan, Qatar, are unchanged at $1,295/t-$1,325/t. Cargo economics and cost allocation of supplier Shell are not disclosed, so netbacks are on an indication basis only, using freight rate indications and FOB assumed price levels.
Group II base oils imported from the Red Sea, the U.S. and South Korea are resold ex tank in the U.A.E., or on a truck-delivered basis in the U.A.E. and Oman. Prices for these are unchanged at $1,495/t-$1,535/t for 110N, 150N and 220N and at $1,585/t-$1,620/t for 600N, the high ends of the ranges referring to RTW deliveries in the U.A.E. and northern Oman.
These grades are priced U.A.E. dirhams, the U.A.E. currency which is pegged to the U.S. dollar. Larger buyers using these grades in blends will either buy directly from traders or have a cargo quantity delivered into dedicated storage buying directly from producer sources in the U.S. or the Red Sea.
Africa
There have been a number of smaller cargoes supplied from Italy and Spain for receivers in Morocco, Tunisia and Egypt. Group I base oils for Samir in Casablanca are used to blend finished lubricants. Base oil requirements are imported covering blending needs since the local refinery stopped making base oils some years ago.
Algerian oil company Sonatrach exports base oils from its home country and from Augusta, Italy, where it operates a former ExxonMobil refinery. Operating out of a hub in Valencia, Spain, ExxonMobil supplies a number of parcels into Egypt and Turkey, some directly from Augusta where it reserves drawing rights.
Luberef operating out of Yanbu refinery also supplies bright stock into EGPC in Alexandria, Egypt, and regularly send cargoes of 3,000-3,500 tons.
Shipping agents in Durban have confirmed that another base oil cargo will be sent from Rotterdam and Fawley, U.K., during March or April. Dates are still awaited, and no shipping details have been released, nor are inquiries yet in the market.
There are no further updates regarding the vessel presumed to have loaded out of Fawley with around 9,000-10,000 tons of Group I base oils. This regular cargo will discharge in Guinea, Cote d’Ivoire and Ghan – a supply route that has become regular because it makes economic sense and allows the receivers to vary their respective offtakes depending on demand.
In Nigeria, cargoes are being offered and negotiations are taking place for deliveries during March or April. One trader is possibly looking at two European sources that may have sufficient combined availabilities to make this cargo work. Russian base oils from the Baltic, Egypt and U.A.E. are contained in offers with extremely low prices.
The Nigerian naira’s exchange rate to the U.S. dollar fell NGN 40 the past week to NGN 1,627.
Prices in Lagos for U.S. base oils are confirmed at $985/t-$1,000/t for SN150, $1,045/t-$1,055/t for SN500 and $1,085/t-$1,120/t for SN900, on a CFR basis ex Apapa port. Other traders have offered lower numbers on the light neutrals at $940/t for SN150 and $995/t for SN500 but higher for bright stock at $1,130/t. This cargo is thought to originate in the U.S., but there may also be a cross trade using the Russian base oils from the U.A.E. Delivered prices for Russian base oils from Russia, Egypt and the U.A.E. are indicated at $980/t for SN150, $995/t for SN500 and $1,080/t for SN900, all on a CFR basis ex Apapa.