Base oil prices throughout Europe, the Middle East and Africa could follow in line if crude and feedstock prices fall steeply. But these possibilities are in the future, and no one knows exactly what will come of the current talks.

Ukraine’s leaders are expressing concerns that they will be sidelined and maintaining that no deal will be reached without them. European Union member states are also complaining about being shut out and vowing to continue supporting Ukraine and standing up to Russia. The U.S. says Ukraine will have a seat at the table but that the EU will not.

Meanwhile forecasters are putting together a number of models to try to gauge economic prospects depending on what develops both in this conflict and in the Middle East. The range of predicted outcomes is vast and interesting. Without going into too much detail in this report, some foresee a European economic recovery and China losing out to new local manufacturing, while others contemplate a European decline in services and construction.

The ultimate outcome will probably lie somewhere in the middle, with different industries being affected in differing ways.

There have been some major shifts in trading patterns for base oils, with the U.S. supplying API Group II base oils to a greater extent than last year. Temporary maintenance shutdowns could tamp down that activity during the next few months. Europe still lacks the surplus availabilities needed to sustain export trade as demand and supply for European markets are trading in a fine balance.

African markets are showing signs of sustained growth, but with a declining array of sources for base oils, it may become problematic to meet the base oil needs of West Africa, South Africa and East Africa.

Middle East markets are buoyant, even against the backdrop of tensions between Israel and Iran. Saudi Aramco is looking toward European markets for Group I and Group II opportunities. Using the arm of S-Oil, the Saudis have recently exported a number of cargoes to Mediterranean and Antwerp-Rotterdam-Amsterdam hubs to resell into the lucrative European scene where prices and margins for both grades remain higher than in markets such as the United Arab Emirates and India.

Crude oil prices were steady the past week as dated deliveries of Brent came in Monday at $75.10 per barrel, for April front month settlement, similar to the past two weeks. West Texas Intermediate  is also stable, posting at $71.15/bbl, for March front month.

Low-sulfur gasoil were are likewise static, changing just $1 to $714 per metric ton, now for March front month. All of these prices were obtained from London ICE trading late Feb. 17.

Europe

Group I prices are a mixed bag in and around European markets, with some oils heavily discounted for one reason or another. For example, a cargo of off-spec oils consisting of two grades was priced around $200/t below the market to effect a quick sale. These circumstances are unusual, but this 2,000 tons parcel loaded out of Spain for Turkish buyers in Gebze, Turkey.

As costs for gas oil and other distillates remain stable, Group I base oils continue to provide acceptable premiums. Margins had been squeezed, but values have stayed level and price erosion slowed as availabilities tightened.

Traditional European export destinations such as Nigeria are mainly depending on sources in the U.S. for Western quality Group I, and Russian base oils are also playing a major part in the supply scene. Increases in U.S. prices are making sales into Nigeria exceptionally difficult given the competition posed by Russian barrels.

The export market from Europe is exceptionally limited, with only one major regularly moving large quantities to markets in South Africa, in addition to Group I barrels being moved from the United Kingdom to West Africa.

Group I markets around Europe are stable with few signs of prices moving lower. Availabilities for heavy neutrals and bright stock are starting to tighten.

Most buyers are taking regular or contracted quantities, and very few spot deals are being reported. Rather than spot purchasing, buyers are largely contracting a month or quarter ahead.

Prices for Group I solvent neutrals are unchanged from last week at €845/t for solvent neutral 150 and €875/t, for SN500, on an FCA basis. Bright stock prices remain firm, with some resellers demanding  very high prices for small quantities of this grade. Sellers indicating plenty of availabilities, have retreated from the market saying they no longer have any surplus product for sale. The same sellers are now offering at levels €60/t-€75 higher than in January.

Euro prices for Group I oils in Europe are assessed then at €845/t-€880/t for SN150, €875/t-€895/t for SN500 or SN600 and €1,190/t-€1,245/t for bright stock depending on quantity and in which part of Europe it is being sold.

The dollar’s exchange rate to the euro improved slightly to $1.04808 Monday. The average price differential across all grades between Group I sales within Europe and any export market remains at €20/t-€45/t.

Group II prices can be described as stable, with no reports of increases following those in the U.S. The European market is not conducive to prices moving upwards at this time of economic stagnation and dire with industrial and commercial reports.

European Group II prices are unchanged at €1,035/t-€1,065/t for 110 neutral and 150N, €1,050/t-€1,080/t for 220N and €1,125/t-€1,175/t for 600N. These prices apply to a wide range of Group II base oils, some produced in Europe, others imported from the U.S., the Red Sea and Asia-Pacific. For imports these ranges refer to bulk shipments, though some smaller quantities are transported directly to finished lubricant blenders in flexi-tanks.

Group III base oils in Europe remain under extreme price pressures as distributors try to maintain prices in the face of constant deals offered by sellers who have purchased cargoes through tender sales by a producer in the Middle East Gulf. Prices for some Group III oils are lower than corresponding Group II grades.

Prices of around $1,040/t (€1,010/t) have been heard for some 4 centiStoke oils, but confirmation has also been received of €985/t or slightly less for the same viscosity grade. Some players have suggested that the latter value applies to Group III from Tatneft in Russsia, but Russsian oils cannot be imported into EU countries unless certificates of origin have been altered.

More cargoes of Group III base oils are on the high seas from the UAE, Bahrain and Qatar, adding to growing European inventories. One distributor is offering 4 cSt oil with a partial slate of finished lubricant approvals for €1,075/t, whilst other parties are maintaining higher prices of €1,095/t-€1,120/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

European and U.K. price levels for oils with partial slates of approvals are therefore assessed unchanged at €985/t-€1,120/t for 4 and 6 cSt and at €1,085/t-€1,125/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades are unchanged at €1,055/t-€1,090/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 unchanged this week at €1,675/t-€1,725/t for 4 and 6 cSt and at €1,735/t-€1,755/t for 8 cSt, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

Based on prices for Russian barrels imported into Gebze, and assuming the lowest possible freight rates from the Baltic Sea, costs of storage and handling plus a margin for traders, then the netback FOB price ex St. Petersburg would equate to something like $585/t.

If the costs of rail transport from refinery to storage in the Baltic loadport are then subtracted from the FOB price, a refinery gate guesstimate would come out at around $535/t. This final level is approximately $200/t below normal feedstock prices even without not taking into account refinery margins and costs.

This report is somewhat bemused as to how Russian barrel economics and cost allocations are worked out. It would appear that Russian refiners are desperate to move base oils into any market that will accept these grades. Economics seem to go out the window.

Prices for FOB sales ex St. Petersburg or Vyborg, Russia, are estimated from prices offered and delivered into receivers in Lagos and are at $580/t-$595/t for SN150, $585/t-$600/t for SN500 and $625/t for SN900 blended specifically for the Nigerian market. Prices for Russian export barrels are only published as indication prices.

Every week there are new reports of more Russian Group I base oils dominating the Turkish market, leading to excess quantities of material being offered and sold around the Black Sea regions by traders in Turkey and elsewhere – sometimes to receivers based in the EU.

Confirmation has again been received that Russian base oils are being openly sold to lube blenders in Ukraine. Russian barrels are also being bridged from Black Sea ports such as Taganrog, Russia, and Turkish ports to Egyptian ports such as El Dekheila, then re-exported to markets such as Nigeria and even the U.K. In the latter case, the certificate of origin will say Egypt, helping to skirt EU and U.K. bans on imports of Russian oil products.

Russian levels for SN900 delivered into Nigeria are heard at $1,080/t, on a CFR basis. A Turkish trader is still offering blends of Russian and Uzbek base oil at $775/t for SN150 and $790/t for SN500 and $1,055/t for SN900, all on an ex works basis Gebze. The SN900 is made with bright stock, which explains its higher price.

Tupras’ prices for base oil sales in Turkey remain as below, although local sources say there are no availabilities. Spindle oil – 33,553 lira/t; SN150 – Tl 27,405/t; SN500 – Tl 32,716/t; bright stock – Tl 42,953/t. Prices are ex rack and incur a standard loading charge of Tl 8,199.20/t.

Group II prices advised by a Turkish trader and lube blender are unchanged at $890/t for 110N and 220N and $1,100/t for 350N. Group II oils from Formosa Petrochemical in Taiwan are offered at $1,500/t for 500N and $1,150/t for 150N. The market also has Group II oils imported from the Red Sea, the U.S. and Russia.

Turkey’s market for Group III oils with partial approvals includes 4 cSt from Tatneft in Russsia, now priced around €955/t on an FCA basis. Partly-approved grades from other sources are priced higher, at €1,095/t-€1,170/t for 4 and 6 cSt, which is lower than previously noted.

Group III oils with full slates of approvals are imported from Cartagena, Spain, and priced at €1,845/t-€1,865/t, on an FCA basis ex Gemlik.

Middle East

January reports show lower quantities of Group I and II base oils being loaded out of Yanbu and Jeddah, Saudi Arabia, for Mumbai anchorage. Most of the cargoes are Group II base oils from Yanbu, discharging in Mumbai anchorage to multiple receivers, although deliveries to receivers in the UAE and Pakistan also appeared in shipping reports.

Shipments of Group I and II slowed in January, but quantities are still seen moving into UAE ports of Fujairah, Ras al Khaimah, Hamriyah and Jebel Ali.

This report contacted major container shipping lines, Hapag-Lloyd and Maersk, and they confirmed that they will not yet resume sending vessels thorough the Red Sea to Suez.

The latest information from a contact in Hodeida, Yemen, is that the Houthis said they would cease attacking Israeli and allied vessels once the final part of the Gaza ceasefire arrangements has been completed.

Sepahan Oil continues to export base oils from Iran but much less than previously. A 2,000-ton cargo of rubber process oil was exported from Iran to Mumbai or Chennai, India, for one of the main blenders there. This quantity may have been stored in Ras Al Khaimah before being shipped, having been accumulated from multiple small quantities.

Cargoes loaded from the U.S. Gulf of Mexico and Atlantic coasts through U.S. or European traders have arrived and discharged into UAE ports.

Prices for Group I imported into from the U.S. are confirmed by local sources at $875/t-$910 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 UAE ports. Lower numbers are heard for smaller cargoes of 3,000-4,000 tons arriving from Thailand, India and Indonesia.

With prices starting to rise in the U.S., the arbitrage may not work much longer for UAE receivers. Availabilities from Asia-Pacific sources are also difficult, though, so Middle East Gulf Group I buyers may have to cast their nets in a wider sphere, perhaps looking at Thailand and Indonesia.

Russian base oil cargoes discharged in Hamriyah port during January, and there is talk of another Russian ship-to-ship cargo. Unconfirmed rumors describe a cargo of around 15,000 tons, including a large quantity of SN900, loaded out of the Black Sea bound for Hamriyah anchorage.

The amount of time required to sail to the UAE and then to Lagos is problematic, though. Receivers will probably cope by negotiating extended credit facilities.

Prices for Russian base oils offered from Hamriyah port or STS anchorage are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges are for material discharged into storage in Hamriyah.

Group III cargoes have loaded out of Al Ruwais, UAE, Sitra, Bahrain, and Ras Laffan, Qatar, destined for India, Europe and the U.S., but fewer cargoes are going into mainland China. Netback levels from the former two locations 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 remain at $1,295/t-$1,325/t. A 10,000-ton cargo from Qatar, discharged into a U.S. Gulf Coast port for Shell. Shell’s cargo economics and cost allocation are not disclosed, so this netback is offered on an indication basis only, using freight rate indications and assumed FOB levels. Netback levels are assessed from distributor selling prices minus estimated marketing, handling and freight costs plus margins.

Group II base oils imported from the Red Sea, the U.S., South Korea and Singapore are being resold ex tank in the UAE, or on a truck-delivered basis in the UAE and Oman. Prices for these are unchanged at $1,455/t-$1,500/t for 110N, 150N and 220N and at $1,535/t-$1,575/t for 600N. These grades are priced and sold in UAE dirhams, the value of which is to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in the UAE and northern Oman.

Africa

There are vague reports coming out of Durban regarding the timing and the quantities involved in the new large base oil cargo that will load for ExxonMobil. Agents provided information previously but then altered it so more information is being sought.

A cargo loading out of Fawley, U.K., will be going to receivers in Ghana, but it appears from the size of the cargo that parts will also go to Conakry, Guinea, and Abidjan, Cote d’Ivoire.

An 18,000-ton cargo has loaded on the U.S. Gulf coast for prompt delivery to Lagos. It consists of SN150, SN500 and SN900. Another cargo of 10,000-12,000 tons will load before the end of February.

European sources have been ruled out for possible Group I cargoes to Nigeria since neither price nor quantities work. Russian base oils imported from the Baltic, Egypt and the UAE are being offered from three traders at extremely low prices.

The Nigerian naira’s exchange rate to the U.S. dollar fell NGN 25 the past week to NGN 1,537. A local source said dollars are more available now but not through official channels such as the Central Bank of Nigeria.

Prices in Nigeria for Group I oils imported from the U.S. 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, all on a CFR basis ex Apapa port in Lagos. There are other offers from alternative traders with lower numbers on neutrals, for example $910/t for SN500.

Russian imports are priced at $905/t for SN150, $910/t for SN500 and $1,050/t for SN900, 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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