The EU and U.K. also vowed to step up monitoring of international banking, which could affect financial systems in countries such as Turkey and India, where large amounts of Russian petroleum products and crude are traded. This includes base oils, which are being dumped in large quantities into markets that are still accessible.

In the past two weeks London hosted base oil conferences organized by Independent Commodity Intelligence Services, or ICIS, and Argus, bringing together hundreds of representatives from the base oil and lubricant industries. The events featured interesting and varied presentations, including one at the Argus conference alleging that automotive and hydraulic lubes made with Russian base oils are being dumped in the U.K. and other European markets and prices below the cost of manufacturing.

Also presenting was Yunigreen, a new used lubricant rerefiner in Yanbu. Saudi Arabia, that aims to market its rerefined base oils to the Middle East, Africa and Europe.

Fundamentals were again stable and steady as crude price dipped only around one dollar from a week earlier, continuing a monthlong trend of little movement. Dated deliveries of Brent crude came in at $74.55 per barrel, still for April front month settlement. West Texas Intermediate posted at $70.50/bbl, now for April front month.

Low-sulfur gasoil prices were little changed at $712 per metric ton, for March front month. These prices all were obtained from London ICE trading at the close of Feb. 24.

Europe

This report normally opens the European section with the API Group I export market, which as most are aware has largely been non-existent the past year. This has been due to producers lacking surplus quantities of Group I grades, which has limited the opportunities for traders to assemble parcels of the right size and composition. In addition, European prices have remained higher than other markets, incentivizing refiners to sell within the region.

What appears to be occurring is that the Group I markets in Europe are starting to show a tighter picture, particularly for the heavier grades such as solvent neutral 500 and SN600 and bright stock. Alternative sources that have been covering export destinations such as West Africa and Middle East Gulf, are now offering surplus material for import into the European market. FOB prices from some U.S. producers allow for this arbitrage, with a couple of traders and an oil major purchasing Group I oils with a view to importing into Europe.

It is suggested that one major bought a composite 6,000-ton cargo of SN150, SN500 and bright stock from a source on the United States Atlantic Coast, along with a quantity of SN700 from another location. The prices heard for the first three grades would yield in-tank levels at Antwerp-Rotterdam-Amsterdam of around $870/t, $920/t and $1,300/t, respectively for the SN150, SN500 and bright stock, on an FCA basis.

With gas oil prices remaining stable, premiums for Group I oils remain acceptable, and erosion has slowed as availabilities tighten.

The export market from Europe is exceptionally limited, with only one major regularly moving large quantities of all types of base oils to markets in South Africa. Group I barrels are moving from the United Kingdom to West Africa for the same major, where three receivers in Guinea, Cote D’Ivoire and Ghana take routine supplies on a regular basis.

Markets around Europe for Group I base oils remain stable, though some upward pricing pressure appears to be developing. Availabilities for heavy neutrals and bright stock are starting to tighten.

Very few spot deals are being reported, but with imports possibly on the horizon, quantities may be sold to top up.

FCA prices for Group I sales in the region are between €840/t and €880/t for SN150, €885/t-€925/t for SN500 and SN600 and €1,295/t-€1,400/t for bright stock depending on quantity and the part of Europe where sold.

The euro’s exchange rate with the U.S. dollar has flat-lined and was at $1.04694 Monday. The average price differential across all grades, between Group I sales in Europe and theoretical exports remains at €20/t-€45.

European Group II prices are stable, with no reports of upward movement. The market appears balanced and may not be conducive to price increases.

Demand is still slack in a number of main markets as large purchases of factory fill automotive lubes and other finished products are not happening.

European Group II prices are unchanged this week 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 values 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 these levels pertain to supplies imported in bulk, although some smaller quantities are bought in flexi-tanks directly by blenders.

Group III base oils sold in Europe continue to face extreme downward price pressure as a number of suppliers regularly offer extremely low prices on a short-term basis.

One major South Korean producer is experiencing problems in the vacuum distillation unit of its refinery, causing a lack of availability of the 8 centiStoke grade and tighter availability of 6 cSt oils, since the latter grade can be blended from 4 and 8 cSt oils.

Cargoes of Group III base oils are on the high seas from the United Arab Emirates, Bahrain, Qatar, Malaysia and South Korea, and these will add to the growing inventories in the region.

Four centistoke oil has been heard offered at around $1,040/t (€1,010/t), but offers of €965/t have also been confirmed. Another distributor is offering the same grade at €1,055/t, while other parties continue to maintain higher prices of €1,075/t-€1,100/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

Prices in Europe and the U.K. for Group III oils with partial slates of finished lubricant approvals are therefore assessed in a wide range of €965/t-€1,100/t for 4 and 6 cSt and at €1,065/t-€1,115/t for 8 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades fell to €935/t-€970/t for 4 and 6 cSt grades, on an FCA basis ex rerefinery in Germany.

Prices for Group III oils with full slates of approvals are unchanged 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

This report is working to obtain FOB prices for Russian base oils loaded out of Baltic ports such as St. Petersburg and Vyborg, Russia. The difficulty is that no traders are willing to talk numbers. The producers – Lukoil, Gazprom, Rosneft – do not have reporting sites or reliable contacts who can at least indicate levels.

Shipping fixtures are also missing, and new EU sanctions on pirate vessels and shadow tankers – some of which may be used for larger base oil cargoes being despatched to deep-sea locations such as Singapore and India – could make those harder to come by.

On contacting past sources, no information or replies to requests are received. Traders who were engaged in trading Russian base oils are no longer willing to discuss cargoes or trading. Prices are kept private and confidential. The only method of ascertaining price levels is to calculate netbacks starting from landed prices into ports such as Lagos in Nigeria or Gebze, Turkey.

In the case of Russian barrels imported into Gebze, using a low freight rate from the Baltic Sea, costs of storage and handling, and a margin for the traders involved in reselling these base oils, the FOB price ex St. Petersburg would come out around $585/t.

If the costs of rail transport from the refinery to storage in the loadport on the Baltic are then subtracted from the FOB price, then a refinery gate price would come out at around $525/t.

This number is far below – approximately $200/t – European vacuum gasoil costs even without accounting for refining margins and costs.

Nevertheless, on the above basis, FOB prices ex St. Petersburg or Vyborg are estimated to be around $580/t-$595/t for SN150, $585/t-$600/t for SN500 and $625 for SN900 blended specifically for Nigerian receivers. These prices for Russian export barrels are published only as indication prices.

Russian base oils are being openly sold to Ukrainian blenders looking for low-priced Group I oils. No apparent sanctions are in place forbidding their use to blend finished lubricants in Ukraine.

One source contacted during a conference last week said Ukrainian blenders are merely pleased to get their hands on any type of base oil. Prior to Russia’s invasion, blenders there routinely used Russian base oils after the refinery in Kremenchuk, Ukraine, stopped making base oil.

Russian base oils are also being bridged from Black Sea ports such as Taganrog, Russia, to Egypt, where they are re-exported to markets such as Nigeria and even the U.K.

A Turkish lube blender and base oil trader still offers blends of Russian and Uzbek base oil at $770/t for SN150, $785/t for SN500 and $1,045/t for bright stock, on an ex works basis at Gebze.

Tupras has announced it will cease using Russian Urals crude in its refinery at Izmir, Turkey. It is unclear what effect this will have on the production and availability of Group I base oils.

The facility was already not making base oil at the moment, leaving no availability for sales within the country. Despite this the refiner currently sets prices at 33,553 lira/t 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.

Group II FCA prices from a Turkish trader/blender are offered at $880/t for 110N and 220N and at $880/t for 350N. Group II oils from Formosa Petrochemical in Taiwan, which meet Western standards, are offered at $1,500/t for 500N and $1,150/t for 150N. Group II base oils are also imported to Turkey from the Red Sea, the U.S., South Korea and Russia.

Partly-approved 4 cSt Group III from Tatneft in Russia is heard priced at around €955/t. Other partly-approved grades are priced higher at €1,095/t-€1,155/t.

Group III grades with full slates of approvals are delivered into Gemlik from Cartagena, Spain, and are estimated priced at €1,825/t-€1,855/t for 4, 6 and 8 cSt, on an FCA basis.

Middle East

Cargoes loading out of Yanbu, Saudi Arabia, discharging in Mumbai anchorage are mainly Group II base oils. Group I and Group II cargoes are being delivered to receivers in the UAE and Pakistan. Ramadan starts on Feb. 28, so activity from Yanbu and Jeddah, Saudi Arabia, may slow down until after the Eid al Fitr holiday at the end of Ramadan.

The refinery at Yanbu is scheduled to perform maintenance around mid-year, and this will involve a major turnaround since it is reckoned overdue. The work will affect not base oils since the whole distillation unit is being serviced.

There is conflicting news emanating from Yemen on the latest Houthi intentions regarding vessels sailing through the Bab-al-Mandeb Strait and the Gulf of Aden. One source told this report that no vessels are being attacked, given that the ceasefire between Israel and Hamas continues, although the peace has reached the end of its first phase and is about to move into the second. Other comments suggested that vessels under Israeli, U.S. and U.K. flags will still be targeted.

Major shipping companies are not rushing to resume the Suez transit and the passage through the Bab-al-Mandeb Strait. This report contacted three major shipping lines last week to reconfirm intentions. All three confirmed that they will not resume the passage at least for the next few months.

The ceasefire between Israel and Hamas appears to be continuing after its initial phase. There are reports of Hamas regrouping in northern Gaza and Israeli defense forces being recalled after standing down at the start of the ceasefire.

Sepahan Oil continues to export base oils from Iran, and prices reported are moving upwards after a number of discounts were applied during December and January. The increases are not substantial and are reported at around $30/t on SN500 and bright stock.

Prices for imported Group I material arriving into the UAE from various sources are confirmed at $895/t-$925/t for SN150, $940/t-$955/t for SN500 and $1,225/t-$1,260/t for bright stock, all on a CIF or CFR basis ex UAE ports.

Russian base oil cargoes continue to discharge in the UAE port of Hamriyah, but there is no news yet of another ship-to-ship transfer at that location. News did filter down that the trader involved had offered extremely low prices to receivers in Nigeria – values that could only be achieved for Russian base oils.

Russian base oil prices on a CFR basis ex Hamriyah port or on a STS basis are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges pertain to material discharged into storage in Hamriyah, which incurs port costs that a STS cargo would not.

Group III cargoes continue to load out of Al Ruwais, UAE; Sitra, Bahrain; and Ras Laffan, Qatar. Destinations include India, Europe and the U.S., and there are still cargoes moving into China. Netback levels from Al Ruwais and Sitra are unchanged at $1,125/t-$1,200/t for 4, 6 and 8 cSt.

Netbacks for gas-to-liquids Group III+ oils ex Ras Laffan are estimated at $1,265/t-$1,300/t.

FOB netback levels are assessed from distributor selling prices minus estimated marketing, handling and freight costs and trader margins.

Group II base oils imported from the Red Sea, the U.S., South Korea and Singapore are 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. Sales are conducted in UAE dirhams, which are pegged to the U.S. dollar. The highs of the above ranges refer to RTW deliveries to buyers in the UAE and northern Oman.

Africa

A cargo of Group I grades from the U.S. is reportedly moving into receivers in North Africa, possibly into Morocco for Samir. It might instead be going to Egypt, but this is considered unlikely.

Luberef’s refinery in Yanbu regularly delivers bright stock cargoes of 3,000-3,500 tons to ECPC in Alexandria to meet a quarterly tender.

News has reached this report of a large shipment of Group I and III oils discharging into Mombasa, Kenya, consisting of 15,000 tons in total. It is interesting that a stand-alone vessel is delivering this quantity, since normally the requirements for Kenya are co-loaded with a Durban parcel. Perhaps the larger-than-normal cargo dictated such an approach.

Shipping agency sources in Durban confirm another large base oil cargo loading for ExxonMobil from Rotterdam and Fawley, U.K. Agents in Durban have confirmed that the cargo may load during the next month subject to a suitable vessel being chartered. The charterers always use the same shipping company for these voyages.

In West Africa news, traders had an 18,000-ton cargo loaded on the U.S. Gulf of Mexico coast for prompt delivery to Apapa port in Lagos. Given the 21-day voyage time, it should start to discharge this week. This cargo consists of SN150, SN500 and SN900. Another of around 10,000 tons will load around the end of February.

Nigerian buyers are shying away from SN900 from U.S. sources, commenting that the price is becoming too high for sale out of storage. Instead, they will only take SN150 and SN500. It is unclear how this will work since higher-viscosity finished lubes would look and perform very differently without SN900 or bright stock. Formulations would have to be changed.

Trading of SN900 developed because straight bright stock was becoming too expensive.

Russian base oils from the Baltic, Egypt and possibly the UAE are being offered in Nigeria from three traders, all at extremely low prices.

The Nigerian naira’s exchange rate to the U.S. dollar fell NGN 20 the past week to NGN 1,510. A source has informed this report that dollars are becoming more available but not through official channels.

Prices in Apapa for U.S. base oils are confirmed at $965/t-$980/t for SN150, $990/t-$1,010/t for SN500 and $1,050/t-$1,080/t for SN900, all on a CFR basis. There are other offers from alternative traders with lower numbers for SN500, for example $910/t.

Prices for Russian base oils from Egypt and the UAE are unchanged at $905/t for SN150, $910/t for SN500 and $1,030/t for SN900, all on a CFR basis ex Apapa. SN500 is offered higher from other traders at around $965/t.

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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