Energy prices could stabilize, thus lifting demand for commodities such as base oils and finished lubricants, as economies return to more normal trading patterns. At the same time major European countries seem resolved to spend significantly more on defense, which in turn could boost industry and commercial enterprise across the region. 

Base oil markets could also be affected by a development in another conflict – Israel’s paused war with Hamas. The United States launched airstrikes against Houthi rebels over the ongoing threat that the rebels pose to ships passing through the Red Sea. If the rebels cease attacks on merchant shipping it could yield large savings in freight rates and voyage times for vessels that have stopped using the Suez Canal.

At the moment most ship owners and operators are making the extended voyage around the Cape to avoid the Houthi attacks, causing vessels to take longer to reach destinations in the Middle East and Europe.

Many remain concerned about conditions in the Middle East. Prospects for a long-term resolution between Israel and Hamas appear to be dimming, and confrontation between the United States and Iran may be approaching – causing some to worry that the U.S. and Israel could attack the Islamic Republic. Uncertainty over these situations is causing trade and business development in many Middle East countries to stagnate.

Base oil prices around Europe, the Middle East and Africa show signs of firming. A number of refineries have scheduled temporary shutdowns for maintenance during the next few months, so supply is likely to tighten. As new U.S. tariffs kick in against Mexico, Canada and China, there may be ramifications for base oil exports from the U.S.; some market players are suggesting API Group I and II surpluses in the U.S. could be redirected to Europe.

Likewise, base oil importers in Mexico may look to alternative sourcing for Group I base oils. Russia is a possibility, as traders of exports from that country have started responding to inquiries from markets where tariffs are being applied. Import licenses would have to be altered – a process taking up to two months.

Crude prices continue to languish around levels where they have been for the past couple weeks. OPEC+ members say they will increase crude production over the next few months, which could push prices lower

Dated deliveries of Brent crude were at $70.90 per barrel Monday, around one dollar higher than last week, still for May front month settlement. West Texas Intermediate rose roughly the same amount to $67.45/bbl, for April front month.

Low-sulfur gasoil prices slid around $15 to $652 per metric ton, now for April front month. All of these prices are obtained from London ICE trading late March 17.

Europe

There is no longer what can be called a European Group I export market, since the large cargoes of yesteryear have all but disappeared. Only a few smaller parcels are being shipped to locations such as Turkey and North Africa. 

The European market is being targeted by traders sourcing product from the U.S. and the Middle East, and with the aforementioned European turnarounds looming in Europe, there is ample scope for Group I imports. The heavier neutrals and bright stock are particularly desired as they are in very short supply.

Group I grades are arriving into Europe from the U.S., the Red Sea and Egypt and are in storage in Antwerp-Rotterdam-Amsterdam and the United Kingdom.

Group I base oil prices have maintained acceptable premiums to gasoil. Imports may start to balance the market but probably will not cause prices to slip due to the limited quantities arriving into various ports around the European mainland. Most barrels are being aimed at Antwerp-Rotterdam-Amsterdam and Northwestern Europe, but a couple traders have introduced supplies into the Mediterranean, with imports into Italy and Greece. 

European prices for Group I base oils are steady as tightening availabilities seem to have halted erosion that was occurring earlier in the year. Suppliers are no longer offering discounts to move barrels out of tank.

This report has tried to focus on material being offered out of Antwerp-Rotterdam-Amsterdam. Group I oils offered there on an FCA basis are assessed at €840/t for solvent neutral 150 and €890/t for SN500 or SN600. Bright stock numbers are firmer, now assessed at €1,325/t-€1,375/t, though there have been reports of offers above €1,500/t.

For the broader pan-European market, levels are assessed between €840/t and €880/t for SN150, €885/t-€925/t for SN500 and SN600 and €1,310/t-€1,400/t for bright stock, depending on quantity and availability.

The euro’s exchange rate with the U.S. dollar strengthened to $1.09241 Monday.

European Group II market is seeing some upward movements as a couple importers push numbers higher, particularly for smaller quantities sold on a load-over-load basis. A maintenance shutdown at a large U.S. refinery might normally tighten availabilities from the U.S., but the tariffs against Mexico make the supply scene difficult to read now. Trading patterns could alter over the next few weeks.

Demand is seen to be increasing around Europe, but at the same time many blenders are currently weighing up options between increasing use of Group III or persisting with Group II. Lower prices for Group III grades with partial slates of finished lubricant approvals or without approvals are a driver for such considerations.

European Group II prices are pitched higher at €1,100/t-€1,125/t for 110 neutral or 150N, €1,140/t-€1,155/t for 220N and €1,185/t-€1,225/t for 600N. These values apply to a wide range of Group II oils from Europe the U.S., the Red Sea and Asia-Pacific. For imports the price ranges pertain to bulk shipments, although smaller quantities are bought directly by lube blenders and transported in flexi-tanks.

European Group III prices were starting to stabilize until one trader offered extremely low prices – lower even than in markets such as India and China, which is truly eye-catching. Distributors of oils from other suppliers are doing their level best to keep existing business, but price moves like this can cause erosion. Demand is rising, but so are the number of sellers in the European market. A number of sellers are keen for demand to rise during the spring, but there are no signs of that happening yet.

Offers for 4 cSt oils are mostly around $1,025/t (€947/t), but one supplier was confirmed to offer €945/t for the same grade. A distributor is offering 4 cSt for €1,025/t, whilst other suppliers are maintaining prices of €1,065/t-€1,090/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

Overall, European and U.K. values for partly-approved grades are slightly higher this week at the upper end of the range at €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, on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades are unchanged this week at €935/t-€970/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Values for Group III oils with full slates of approvals are unchanged at €1,625/t-€1,695/t for 4 and 6 cSt and €1,720/t-€1,745/t for 8 cSt, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

FOB numbers for Russian base oils loading out of St. Petersburg and Vyborg, Russia, remain the subject of guesswork and can only really be identified when cargoes are discharged, and landed prices are published in custom reports. Producers Lukoil, Gazprom, Bashneft and Rosneft do not share pricing information with Western reporters and do not disclose FOB or refinery gate prices.

Shipping inquiries and fixtures are also non-existent because traders keep operations as confidential as possible. Freight rates can be extremely low but are better than ballasting on the return voyage. The freight rates cover crew and bunker costs and get the vessel back into position for return cargoes that are always available for specialist vessels engaged in easy chemicals or base oils.

One method of estimating FOB prices is to work backwards to estimate netback prices, using landed prices in Lagos and Gebze and informed estimates for freight rates and margins.

FOB prices ex St Petersburg are therefore guesstimated at $580/t-$595/t for SN150, $585/t-$600/t for SN500 and $620/t for SN900 blended for Nigeria using Russian bright stock or SN1200. The refinery gate numbers are way below European raw material costs and suggest Russian refineries work on their own cost allocation processes. Prices for FOB Russian export barrels are indication prices only.

Your columnist continues to receive reports of Russian base oils being used blend finished lubricants in Ukraine, which has not imposed sanctions like those adopted by the European Union and allied nations to penalize Russia for its 2022 invasion. Ukrainian blenders are free to purchase Russian base oils, which are supplied by Turkish and Georgian traders actinh as intermediaries.

What is not disclosed is how payments for these quantities of base oil are accounted for and whether settlements are made in local currency or in dollars.

There are talks between Turkish traders to contact Mexican importers who may be looking for alternative sources for Group I base oil, following the imposition of tariffs on U.S. produced material. Mexico is the largest market for U.S. exported Group I base oils. It is considered that Russian material would be offered to Mexican buyers on a delivered basis from stocks held in Turkey. On checking, Mexico has no sanctions against importation of Russian petroleum products.

A Turkish trader offers blends of Russian and Uzbek base oils at $770/t for SN150 and $785/t for SN500. SN900 is priced higher, at $1,045/t, probably being blended with bright stock from the EU or Saudi Arabia. These prices are “ex works” Gebze with FOB levels a few dollars higher due to handling and loading costs.

Clarification regarding the status of base oil production at the Tupras refinery in Izmir, indicating that production has resumed following a fire. Prices have been hiked, however, and are said to be too high for local buyers to afford.

Those prices are: 38,394 lira/t for spindle oil; Tl 33,587/t for SN150; Tl 37,839/t for SN500; and Tl 47,816/t for bright stock. These are ex rack prices, and sales incur a standard loading charge of Tl 8,199.20/t.

A trader in Turkey offers Group II oils at $880/t for 110N and 220N and 350N at $1,100/t. Group II from Taiwan’s Formosa Petrochemical is offered at $1,500/t for 500N and $1,150/t for 150N. How these products arrived into Gebze is not known, but even if transported in flexies they would have had to pass through the Bab-al Mandeb Strait. Perhaps they were shipped on a Chinese flagged vessel that would be granted safe passage.

The Turkish market also has Group II imported from the Red Sea, the U.S., South Korea and Russia.

The Group III market includes 4 cSt from Tatneft in Russia, offered at around €955/t. Other Group II grades with partial slates of approvals are at €1,095/t-€1,155/t and can be purchased in dollar equivalents. Some volumes have been bridged into Turkey from Antwerp-Rotterdam-Amsterdam, surplus material reloaded on Turkish flagged vessels charging low rates as they return to the Black Sea or East Mediterranean. Some shipments travel the same route in flexies.

Group III oils with full slates of approvals are shipped from Cartagena, Spain, into Gemlik, Turkey, and are priced at €1,825/t-€1,855/t, on an  FCA basis.

Middle East

Base oil shipments from Yanbu, Saudi Arabia, have maintained their pace during Ramadan, with base oil cargoes going toward the West coast of India and the United Arab Emirates. Smaller parcels have been loaded for receivers in Jordan, Sudan and Egypt. Luberef plans maintenance at its Yanbu refinery some time in the middle of this year.

Sepahan Oil exports two grades of base oil from Iran, premium SN500 priced around $890/t and SN150 at $875/t, both on an FOB basis ex Bandar-e Emam Khomeyni. These oils are transported first to the UAE and then are assembled in cargo-sized quantities for shipment to Pakistan.

Prices for Group I material imported to the UAE have been confirmed at $895/t-$925/t for SN150, $940/t-$955/t for SN500 and bright stock $1,285/t-$1,345/t for bright stock, all on a CIF or CFR basis ex UAE ports.

Russian base oil cargoes continue to discharge in Hamriyah port, UAE, but no further news is heard regarding another ship-to-ship operation involving a Russian cargo of 15,000 tons at Hamriyah anchorage. The cargo would then be re-delivered to Apapa in Lagos.

Prices for Russian Group I from sold from Hamriyah or from STS anchorage are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The high ends of the ranges are for material being discharged into shore 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, but shipments from Sitra, Bahrain, have slowed due to a turnaround at the refinery there, scheduled to last 45 days. A record quantity has been shipped out of Ras Laffan, the bulk going into the Indian market where demand for gas-to-liquids Group III+ is surging. Most of the quantities moving into India are for Shell blending plants.

Netback levels for the GTL Group III+ from Ras Laffan are at $1,155/t-$1,220/t for all three viscosity grades, but only on an indication basis as Shell’s cargo economics are not disclosed. Netbacks for Group III from Al Ruwais are unchanged at $1,075/t-$1,115/t for  4, 6 and 8 cSt, on an FOB basis.

FOB netbacks are assessed from distributor selling prices minus estimated costs for marketing, handling and freight and margins.

Group II base oils imported from the Red Sea, the U.S., Europe, South Korea and Singapore are resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman. FCA ex-rack prices are unchanged at $1,455/t-$1,500/t for 110N, 150N and 220N, while 600N is at $1,535/t-$1,575/t.

These grades will be priced in UAE dirhams, which are pegged to the U.S. dollar. The current exchange rate is AED 3.67. The highs of the ranges refer to RTW deliveries to buyers in locations in the UAE and northern Oman.

Africa

A small cargo of mixed base oils has sailed from Valencia, Spain, or Augusta, Italy, for receivers in Alexandria and Haifa, Israel. The Haifa delivery is important for blenders in Israel to be able to continue manufacturing finished lubricants for civilian or military use. The cargo will discharge first into Alexandria, leaving around 3,000 tons for Israel. There is thought to be Group I and Group II base oils on board.

A cargo of around 19,000 tons of various types of base oils is being assembled from Rotterdam and Fawley, U.K., and will then be bound for Durban, South Africa.

A cargo of around 10,000 tons will load ex Fawley for three ports in West Africa – first in Conakry, Guinea, then Abidjan, Cote d’Ivoire, and finally Tema, Ghana. The last stop will receive around 5,000 tons of Group I grades.

The 18,000-ton cargo ex U.S. Gulf Coast has arrived and finished discharging in Lagos’ Apapa port. It included SN150, SN500 and SN900. Another cargo assembled for the same trader – this one around 10,000 tons – has loaded and may arrive in Apapa this week.

The second cargo consists mostly of SN900 blended with bright stock. That makes the price higher than receivers would have preferred, but taking Western produced Group I is preferable to using SN900 blended with Russian SN1200 or Russian bright stock, which can have a very dark colour and a low viscosity index.

Russian base oils from the Baltic and Egypt are being  offered from a number of traders at extremely low prices. Some traders are looking to load large cargoes with one discharge port in Lagos and another in Mexico. This is ambitious to say the least and it may not be possible to load a quantity large enough to justify the freight to two ports.

The Nigerian naira’s exchange rate with dollars is NGN 1,562 NGN this week, marginally higher than last week.

Prices in Lagos for U.S.-sourced material have been confirmed at $965/t-$980/t for SN150, $990/t-$1010/t for SN500 and $1,050/t-$1,080/t for SN900, basis CFR ex Apapa. Traders tapping other sources are offering SN500 at $910/t on the same basis, but oils at this level could only be of Russian origin. It is difficult to see how a trader can offer Russian cargoes without it involving the STS operation in the UAE.

Russian base oils imported from Russia and Egypt are indicated at $895/t for SN150, $910/t for SN500 and $975/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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