Against this backdrop, many in the base oil and lubricants industries are struggling for a sense of what the future will bring – in both the short and long terms. Investment in capital projects has faltered as many players review existing projects.

Base oil prices have been hovering, perhaps out of uncertainty of where the market is headed. On one hand, seasonal demand is growing for finished lubricants and therefore for base oils which ought to push the  market to firmer prices. On the other hand, fundamentals are weak, with the U.S. announcing releases of crude inventories, which lead to more availabilities in global markets at a time when Saudi Arabia and Russia have also announced production increases. So crude and feedstock values could may head south.

Inherent weakness has already been creeping into crude and product markets the past few weeks, and this could offset any upward pressure on prices for base oils and other petroleum products prices.

Prices for dated deliveries of Brent crude started the week at $69.70 per barrel, for May front month settlement, down almost $3 from a week earlier. West Texas Intermediate crude fell a similar amount to $66.50/barrel, still for April front month.

Low-sulfur gasoil prices slid some $20 to post at $665 per metric ton, still for March front month. All of these prices were obtained from London ICE trading late March 10.

Europe

The European Group I export market has disappeared because producers and suppliers are unable to assemble quantities required for export destinations at prices to compete in those markets. The region formerly produced significant surpluses of the grade and was a steady exporter, but a number of Group I plants stopped producing the past few years, and the region now imports increasing quantities, particularly heavier Group I solvent neutrals and bright stock.

New grades such as solvent neutral 750 and SN800 are moving to Europe to fill a void created by the drawdown in production capacity.

Group I grades moving to Europe from the U.S. East Coast, the Red Sea and Egypt are going into storage in Antwerp-Rotterdam-Amsterdam and the United Kingdom where they will be bought by finished lubricant blenders that until now relied solely on local or regional availabilities. Some may have used Russian base oils, large quantities of which were exported to Europe until Russia’s 2022 invasion of Ukraine. The European Union, the U.K. and other nations subsequently banned the import of crude, base oils  and other petroleum products from Russia.

Demand and supply of Group I in Europe are probably in balance now, with imported material sustaining a number of buyers and premiums to gas oil acceptable to refiners. In the next few months, however, a number of refineries are scheduled to undergo major maintenance turnarounds that may shorten up availability.

Prices are steady, but availabilities for heavy neutrals and bright stock remain tight in some areas. There have been no reported notices of markups during the fist ten days of March.

Group I prices ex Antwerp-Rotterdam-Amsterdam remain around €840 per metric ton for SN150 and €890/t for SN500, on an FCA basis. Bright stock numbers have steadied after increasing in recent weeks and are generally between €1,320/t and €1,375/t, though offers above €1,500/t are occasionally reported.

Ranges for euro prices across Europe are assessed at €840/t-€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 required and what is available.

The euro’s exchange rate with the U.S. dollar improved to $1.08294 Monday. This report will no longer post an average price differential between prices for Group I exports from Europe and sales within the region since there is no export data to compare against.

European Group II prices remain steady though they but may be facing some upward pressure. Demand is acceptable and seems to be improving with the spring and summer seasons approaching but is still lower than in years gone by, with large supply tenders missing from the markets.

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 prices apply to a wide range of Group II base oils from Europe, the U.S., the Red Sea and Asia-Pacific. For imports the ranges refer to bulk shipment. Some smaller quantities are bought in flexi-tanks directly by blenders from traders or overseas suppliers.

European Group III base oil prices seem relatively stable, but with increased cargoes being targeted at the European market – where prices are more attractive than alternative markets such as India and China – quantities in storage are still rising. The European market is swamped and cannot move extra quantities of Group III base oils. Distributors are doing their level best to promote sales of these grades, but only so much is feasible.

Demand is flat. Sellers are certainly keen to see it rise during spring, but there is little sign of that happening so far. There may be some respite from supplies from one source in Middle East Gulf due to the refinery going into turnaround for a period of around forty five days.

Numbers heard in offers for 4 centiStoke product are around $1,025/t (€947/t), with a confirmed price offered at €945/t. One distributor of Group III oils with partial slates of finished lubricant approvals is offering 4 cSt at €1,025/t, and there was also confirmation of an offer for €945/t. Other parties continue to maintain higher prices, between €1,065/t-€1,090/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

European and the United Kingdom price levels for partly-approved grades dipped to €945/t-€1,090/t for 4 and 6 cSt and €1,045/t-€1,100/t for 8 cSt depending on buyer and quantity lifted. These prices are all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III oils are taken lower to €935/t-€970/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 down slightly due to competition from partly-approved grades, now assessed at €1,625/t-€1,695/t for 4 and 6 cSt and €1,720/t-€1,745/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

FOB prices for Russian base oils loaded out of St. Petersburg and sometimes Vyborg, Russia, remain elusive. Suppliers such as producers Lukoil, Gazprom and Rosneft do not communicate with Western reports and therefore do not reveal FOB or refinery gate price levels.

Shipping inquiries and fixtures are also non-existent with most companies trying to keep any trading business as dark and confidential as possible. Most of the vessels employed to carry cargoes to Gebze, Turkey, are Turkish flagged and have delivered cargoes of easy chemicals or clean petroleum products to Northern European receivers and are looking for cargoes to pay for the trip back to Turkey. Freight rates can be extremely low, not really reflecting the market, but owner-operators are assured that they will lift the cargoes, and they might be paid in advance, with adjustments made following issuance of bills of lading.

One method of estimating FOB price levels is to work on a netback basis, taking landed prices in Lagos and Gebze using best estimates on freight rates and margins.

FOB prices ex St. Petersburg are guesstimated to be around $580/t-$595/t for SN150, $585/t-$600/t for SN500 and around $625/t for SN900 blended specifically for Nigeria using Russian bright stock or SN1200 as a blend constituent. Prices for FOB Russian export barrels are published as indication prices only.

Confirmation has been received that there are no sanctions in place in Ukraine against imports of Russian base oils for use in manufacturing finished lubricants. Realistically, Russian base oils are the only available material that can be safely delivered into Ukraine without problems.

Russian base oils are also being bridged from Azov Sea ports Taganrog, Temyruk and Rostov, Russia, with base oils shipped down the River Don and the Volga or delivered by rail to shore storage in those ports. This material is then transferred to Limas terminal in Turkey and El Dekheila in Egypt, and re-exported to markets such as Nigeria and even the U.K.

A Turkish lubricant blender and base oil trader still offers for Russian and Uzbek base oil blend at $770/t for SN150 and $785/t for SN500. This is evidence of the low prices involved in this trade.

An SN900 grade is priced higher at $1045/t, probably blended with bright stock from the EU or the Red Sea. Prices are ex works Gebze, Turkey, hence FOB levels would be a few dollars higher due to handling and loading costs.

Clarification is being sought through sources in Istanbul about the latest status of base oil production at Izmir refinery. Local sources have said there are no availabilities due to lack of production, but Tupras still advertises these rates: 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 are ex rack prices that also incur a standard loading charge of Tl 8,199.20/t.

Group II ex works prices from the Turkish trader/blender are re-offered at $880/t for 110N and 220N and $1,100/t for 350N. The reason for the large difference is unknown, but perhaps the lighter grades are from Russia.

Group II oils from Taiwan are offered at $1,500/t for 500N and $1,150/t for 150N. The market also features Group II oils imported from the Red Sea, the U.S. and South Korea.

Group III Russian Tatneft 4 centiStoke is priced around €955/t. ‘Other’ partly-approved grades are higher, between €1095/t-€1155/t. Dollar equivalent prices are also acceptable. Some grades have been bridged into Turkey from cargoes which have discharged into Antwerp-Rotterdam-Amsterdam and surplus material has been reloaded on low freight Turkish flagged vessels returning to the Black Sea or East Mediterranean. Flexies have also been employed to take material from Antwerp-Rotterdam-Amsterdam to Turkey.

Fully-approved Group III grades ex Cartagena in Spain continue to be delivered into Gemlik. Price levels are estimated to be between €1,825/t-€1,855/t, on an FCA basis.

Middle East

During February, the Luberef refinery in Yanbu, Saudi Arabia, had increased shipments with a number of smaller base oil parcels being loaded for receivers in Jordan, Sudan and Egypt. One might have expected fewer cargoes during Ramadan, but so far in March the pace is steady. Maintenance remains part of the plans for Yanbu starting around mid-year, and this is reckoned to be a major turnaround.

With the ceasefire between Israel and Hamas in Gaza in tatters, it is more than likely that Houthi rebel attacks on shipping will continue in support of Hamas. Most vessels carrying base oils are not using the Red Sea transit.

Sepahan continues to export Iranian Group I base oils with prices heard at around $890/t for premium SN500, on an FOB basis out of Bandar-e Emam Khomeyni. Exports are moving into the United Arab Emirates and Pakistan.

Prices for imported Group I material discharging in the UAE are confirmed between $895/t-$925 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.

At the same time, Russian base oil cargoes continue to discharge in Hamriyah port. No further news has been heard regarding an STS operation to receive a Russian cargo of around 15,000 tons in Hamriyah anchorage and then re-deliver to Apapa port in Lagos. Reports were received from Lagos that a trader had offered extremely low prices to potential buyers in Nigeria – levels that could only have been based on Russian barrels.

Russian base oil prices on a CFR ex Hamriyah port or ship-to-ship anchorage off Hamriyah are estimated to be around $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges would refer to material actually discharged into storage in Hamriyah.

Group III cargoes loading out of Al Ruwais, UAE, and Ras Laffan, Qatar, are bound for India, Europe, the U.S. and China, with a slowdown from Sitra, Bahrain, perhaps due to a 45-day turnaround taking place this month. Netback levels for Group III base oils moving out of the Middle East Gulf are maintained at $1,075/t-$1,115/t for 4, 6 and 8 cSt grades, on an FOB basis ex refinery.

Netbacks for gas-to-liquids Group III+ base oils loading ex Ras Laffan are estimated at $1,155/t-$1,220/t. These prices are on an indication basis only since cargo economics and cost allocations for the supplier are not disclosed. FOB netback levels are assessed from distributor selling prices minus estimated marketing, margins, handling and freight costs.

Group II base oils are imported from the Red Sea, the U.S., Europe, South Korea and Singapore and resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman. FCA or ex-rack price levels 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 will be priced in dirhams, the UAE currency pegged to the U.S. dollar. The current exchange rate is AED 3.6725 to the dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in UAE and northern Oman.

Africa

The cargo of Group I grades from the U.S. being worked through a trader has not discharged in Morocco, so additional inquiries are being made to ascertain the destination of this cargo. It is possible that this parcel was bound for Egypt, but Luberef/Saudi Aramco regularly supply GroupI base oils including bright stock into EGPC in Alexandria, so the U.S. cargo remains a mystery.

The previously mentioned 15,000-ton base oil cargo discharging into Mombasa, Kenya, is too large to fully discharge in that port. It would appear that the main part will be discharged first in Durban, South Africa, leaving 4,000-6,000 tons of mixed grades to continue on to Mombasa.

Another large cargo will load in the next few weeks out of Rotterdam and Fawley, U.K., with around 19,000 tons of various types and grades of base oils. This cargo will discharge in Durban.

The 18,000-ton cargo ex U.S. Gulf of Mexico coast has arrived in Apapa and has completed discharging SN150, SN500 and SN900. The other previously mentioned cargo of around 10,000 tons will have loaded and sailed for Lagos with the same grades, but obviously a different cargo split.

Nigerian buyers do not want to pay the increased prices for SN900, saying they cannot resell it ex-tank. In the future they will only take SN150 and SN500 using the SN500 as the highest viscosity grade.

Without using bright stock or SN900 in blends, higher-viscosity finished oils are not going to perform satisfactorily. Formulations will have to be adjusted, which raise costs for producing the finished lubricants. The glaring problem is how to push up the viscosity only using a SN500.

Russian base oils from Baltic, Egypt and possibly the U.A.E. (although this last option is doubtful) are being offered from a number of traders with extremely low prices. The exchange rate for naira to dollars rose NGN 60 the past week to NGN 1,554. This is the official exchange rate, and black market rates will be lower.

CFR Apapa prices for U.S.-sourced material 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. There are lower offers from other sources – from traders with lower prices at $910/t CFR for SN500, but this level can only pertain to Russian base oils.

Russian base oils imported from Russia, Egypt and the UAE are priced at $905/t for SN150, $910/t for SN500 and $1,030/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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