Europe is also experiencing tightness on API Group I and II availabilities because of green shoots of growth in demand, perhaps resulting from huge government increases in defense spending in a number of major economies across the continent. Normally, spring and early summer are prime time for base oil demand, partly because of increased demand for finished lubricants and partly because of lube manufacturers need to replenish spent inventories.

Several members of the OPEC+ cartel have announced they will increase crude oil output. Normally one would expect that to drive down crude prices, but the opposite is happening across markets now. Whether as an result of new United States economic policies or other factors, no one is quite sure.

Dated deliveries of Brent crude rose nearly $2 the past week to $74.60 per barrel, for May front month settlement. West Texas Intermediate also moved upwards to $70.95/bbl, also for May front month.

European low-sulfur gasoil prices climbed by some $15 to $685 per metric ton, still for April front month. All of these prices were obtained from London ICE trading late March 31.

Europe

The European Group I scene is becoming more and more attractive to traders and majors, which are sourcing material from the U.S. and South America. Higher European prices are attracting more imports, and with no import duty on Group I base oils, the market is open for players to engage with buyers who are looking for alternative suppliers, since many traditional sources are either short of availabilities or do not have the whole slate of Group I oils.

The turnaround season is starting, and heavy neutrals and bright stock are being sourced for European markets. Group I grades are arriving into Northwestern Europe from the U.S., the Red Sea and Egypt, though those from the latter country likely originate elsewhere, possibly from in Russia. Repeat cargoes are being planned from these sources for coming months.

Even with distillate prices rising, the differential between those products and Group I oils continues to expand. Tighter availabilities has halted price erosion, and crude and feedstock costs rising, there is no apparent pressure on base oil values. Upward pressure could develop, particularly for heavy neutrals and bright stock.

Demand may be increasing, due to seasonality and reactions to large increases in budgetary spending on a number of national defense initiatives.

European prices for Group I base oils are gauged as stable to firm, with regional availabilities for heavy neutrals and bright stock remaining tight. For example, in Poland suppliers have announced that they are unable to provide Group I quantities to cover all requirements being requested. Buyers are having to look further afield.

FCA offered prices in Antwerp-Rotterdam-Amsterdam remain at $930/t (€860) for solvent neutral 150, $1,000/t (€925) for SN500 and $1,450/t (€1345) for bright stock. From some other bright stock sources around Europe, higher offers are heard in excess of $1,500/t or euro equivalent.

Across Europe as a whole, ranges for euro priced material are assessed between €860/t and €895/t for SN150, at €925/t-€965/t for SN500 or SN600 and at €1,355/t-€1,425/t for bright stock, depending on quantity being purchased and availability.

The euro’s value against the U.S. dollar was about flat the past week, posting at $1.07909 Monday.

Pressure is building on European Group II prices, surprisingly since this region already has higher Group II levels than others. The market is not exactly flush with material at the moment, thanks to a maintenance shutdown currently underway at one major U.S. refinery and shipping delays for another importer from the same region.

There are also rumors of issues at ExxonMobil’s refinery in Rotterdam which may be affecting the availability. Whether this is a feedstock issue or another glitch is not known as yet. More information is being sought during the course of this week.

The longer-term effects of U.S. tariffs and those with which targeted nations retaliate will take time to assess, but the outlook is that tariffs will affect a number of major European economies in a number of negative ways, requiring resets of economic forecasts.

Group II demand is said to be increasing around Europe, whilst some blenders in Europe are looking at options to increase usage of Group III grades rather than blend with higher priced Group II base oils. Prices for Group III oils with partial slates of finished lubricant approvals are currently lower than those for Group II grades.

Adjustments are not feasible in all blends, but switching to Group III oils can yield substantial savings. However, this situation may not last forever, with Group III availabilities starting to tighten.

European Group II prices rose marginally this week to €1,120/t-€1,145/t for 110 neutral and 150N, €1,165/t-€1,190/t for 220N and €1,195/t-€1,240/t for 600N. These prices apply to a wide range of Group II oils from Europe, the U.S., the Red Sea and Asia-Pacific. In the case of imports, the prices given pertain to bulk shipments, although some smaller quantities are delivered directly to blenders in flexi-tanks.

Group III base oil prices around Europe are not only stabilizing but beginning to experience upward pressure. The number of cargoes bought by traders on a one-off basis in sale tenders is decreasing.

Some blenders are trying out using Group III base oil grades in place of some Group II oils, but this practice may be temporary if Group III prices regain their historical premium over Group II.

Over the recent weeks is has become more apparent that availabilities are less than they were during the fourth quarter of last year when a vast oversupply developed. Extended temporary maintenance shutdowns have since led producers to stockpile material, reducing the number of cargoes shipped from Asia-Pacific and the Middle East Gulf.

Producers still consider the European market as one that is expanding, where higher prices are possible and where confidence in distributor operations is still positive.

Prices heard in offers for 4 centiStoke material were around $1,045/t (€969/t). The €945/t offer heard two weeks ago is no longer in the market. One distributor is offering Group III 4 cSt with a partial slate of approvals for €1,025/t, whilst other parties are charging €1,065/t-€1,090/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

Overall, pan-European and U.K. price levels for partly-approved grades remains at €969/t-€1,090/t for 4 and 6 cSt and at €1,045/t-€1,100/t for 8 cSt, depending on buyer’s blending operations. For example, on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe. Exact prices depend on buyer status. For example, if a blender is a specialist in metalworking oils, then a base oil supplier will want to develop a long-term relationship to supply 8 cSt to that customer.

Prices for rerefined Group III grades are maintained at €935/t-€970/t, on an FCA basis ex rerefinery in Germany.

Prices for Group III oils with full slates of approvals are unchanged at €1,625/t-€1,695/t for 4 and 6 cSt and at €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

Estimated FOB prices loading out of St. Petersburg are estimated on a netback basis using landed prices in Gebze, Turkey, and best estimates for freight rates and margins. Prices for Russian SN500 delivered on a CIF basis in are around $595/t, which would give an FOB in St. Petersburg of around $510/t, assuming a freight rate of $85/t, which is a typical rate possible for that voyage and a 5,000 tons cargo. It is quite possible that FOB levels are less than $500/t, which would put the ex refinery gate price at around $450/t!

These levels are incredibly low compared to European Group I levels, and it can only be assumed that Russian refineries have their own cost allocation process, which cannot be compared to Western practices. Low-priced Urals crude, and low-cost refinery operations could yield prices such as these while still allowing profits for refineries.

FOB prices ex St. Petersburg are guesstimated at around $495/t-$520/t for SN150, $500/t-$530/t for SN500 and around $575/t for SN900 blended specifically for the Nigerian market using Russian bright stock or SN1200 as a blend constituent. Prices for FOB Russian export barrels are provided on an indication basis only.

Russian base oils are being used to blend finished lubricants in Ukraine. How payments are made for these supplies is not clear, since bank transfers would be difficult with foreign banks in Turkey and Ukraine unable to use the Swift system to transfer funds to Russian banks. A lifting of sanctions in allowing Russian banks to use the Swift system is one of the demands being made by Russian Vladimir Putin to move forward on a peace deal with Ukraine, along with relinquishing of all sanctions from allied countries.

Russian, Belarusian and Turkish traders are in contact with Mexican buyers looking for alternative sources for Group I base oil after the U.S. imposed tariffs on imports from Mexico. Mexico may respond boycotting supplies of petroleum products including base oils coming from the U.S.

Mexico is the largest export market for U.S. Group I base oils. Russian material could be offered to Mexican buyers on a delivered basis from stocks held in Turkey. There are no sanctions in place in Mexico banning the importation of Russian products. By default, Trump’s tariffs could open up markets not previously accessible to Russian products such as base oils.

A Turkish trader continues to offer blends of Russian and Uzbek base oils at $765/t for SN150 and $780/t for SN500. An inquiry about SN900 received a quote of $1,045/t, suggesting the latter is blended with bright stock sourced either from the European Union or from Yanbu, Saudi Arabia. These prices are offered ex works in Gebze, with FOB levels higher due to handling and loading costs.

The Tupras refinery in Izmir, Turkey, has resumed base oil production following a fire, but prices have been hiked to such an extent that local buyers cannot afford the Group I grades. The prices are: 42,577 lira/t for spindle oil; Tl 33,552/t for SN150; Tl 38,640/t for SN500; and Tl 54,874/t for bright stock. Note that the bright stock price convert to U.S. $1,444/t. These prices are ex rack Izmir refinery and incur a standard loading charge of Tl 8,199/t.

A Turkish trader offers Group II oils at at $880/t for 110N and 220N and $1,100 for 350N, ex works. The lower price for the two lighter grades suggests they may be of Russian origin.

Group II oils from Formosa Petrochemical in Taiwan are also offered for $1,500/t for 500N and $1,150/t for 150N. It is not known how they arrived in Gebze, but perhaps they were shipped in bulk on a Chinese flagged vessel, which would be granted safe passage through the Bab-al-Mandeb Strait by the Houthis. Group II base oils are also imported regularly to Turkey from the Red Sea, the U.S., South Korea and Russia.

The offered price for Group III 4 cSt from Tatneft in Russia has risen to €975/t. Other Group III oils with partial slates of approvals are priced higher, at €1,095/t-€1,155/t, and purchases can also be made in U.S. dollars. Some Group III grades have been bridged into Turkey from cargoes discharged in Antwerp-Rotterdam-Amsterdam, often in flexies.

A small 800-ton cargo of fully-approved Group III ex Cartagena, Spain, has been delivered into Gemlik. Prices are estimated at €1,825/t-€1,855/t, on an FCA basis.

Middle East Gulf

Ramadan ended yesterday Sunday, and the Eid-al-Fitr holiday has started in Islamic countries throughout the Middle East and beyond. Base oil shipments from Yanbu and Jeddah, Saudi Arabia, were down in February, but the pace appeared to return to normal in March. Cargoes have largely gone to the West coast of India and the United Arab Emirates.

The February slowdown may have resulted from an influx of material from U.S. sources during January and early February. Now inventories require topping up.

Luberef’s refinery in Yanbu is still scheduled for a maintenance turnaround toward the middle of this year.

In light of renewed hostilities between Israel and Hezbollah in southern Lebanon and Israel’s renewed attacks on Hamas in Gaza, it seems likely that Houthi militants in Yemen will remain hostile to merchant vessels designated by Iran as they transit the Bab-al-Mandeb strait in the southern Red Sea. However, the U.S., using planes to strike Houthi locations, has sent stealth bombers to a base on Diego Garcia island, in the British Indian Ocean Territory – within range of Yemen and Iran.

No new cargo movements of Sepahan Oil base oils have been reported moving out of Bander Imam Khomeini port in southern Iran. The last prices heard earlier in March were around $895/t for premium SN500 and $870/t for smaller quantities of SN150, on an FOB basis ex BIK. Exports are sometimes moved to the UAE where larger cargoes are assembled and dispatched to receivers in Pakistan, India or Oman. Some product is also resold by traders to UAE blenders.

Prices for Group I oils imported to the UAE have again been confirmed at $910/t-$935 for SN150, $950/t-$975/t for SN500 and $1,320/t-$1,365/t for bright stock, all on a CIF or CFR basis ex Hamriyah, Fujairah and Jebel Ali ports. The source for Group I base oils is now Luberef from Yanbu and Jeddah. Group II grades are also loaded on the vessels from Yanbu.

Smaller cargoes of Group I base oils are also planned from Thailand and Indonesia, although dates for their arrival are not yet confirmed. A maintenance turnaround is currently under way in at the Thai source in Sriracha.

Russian base oils discharge in Hamriyah port, but there is no further news regarding another ship-to-ship operation for a Russian cargo of 15,000 tons at Hamriyah anchorage. If transferred, the cargo would then travel on a different vessel to Apapa port in Lagos as a previous cargo did earlier this year.

UAE prices for Russian base oils are again estimated at around $655/t-$795/t for SN150 and $655/t-$795/t for SN500, on a CFR basis ex Hamriyah port, or STS anchorage. The high ends of the ranges apply to material being discharged into storage in Hamriyah port, the low ends to STS sales.

Group III cargoes are loading out of Al Ruwais, UAE, and Ras Laffan, Qatar, bound for India, Europe, the U.S. and China, but shipments from Sitra, Bahrain, have slowed due to a 45-day turnaround beginning this month.

Record quantities of gas-to-liquids Group III+ shipped from Ras Laffan during January and February going into receivers in Mumbai anchorage, Jawaharlal Nehru Port in Mumbai and Chennai. There may have been maintenance scheduled for the Qatar refinery, which may account for the large quantities exported earlier this year, and subsequently less material coming out during March.

Netback levels for Group III oils from Al Ruwais are unchanged at $1,075/t-$1,115/t for 4, 6 and 8 cSt grades, on an FOB basis ex refinery. Netbacks for Ras Laffan may be higher, at $1,155/t-$1,220/t, but the supplier’s cargo economics and cost allocation are not disclosed. FOB netback levels are assessed from distributor selling prices in various markets minus estimated marketing costs, margins, handling, storage and freight.

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

The highs of the ranges refer to RTW deliveries to buyers in locations in U.A.E. and northern Oman. Sales are conducted in UAE dirhams, which are pegged to the U.S. dollar. The current exchange rate is AED 3.67.

Africa

Cargoes form Greece, Italy and Spain are all moving cross the Mediterranean to receivers in Morocco, Tunisia and Egypt. Luberef will also send around 3,000 tons of bright stock from Yanbu to Alexandria to cover the EGPC tender requirement.

The next large shipment to Durban, South Africa, may load promptly from Rotterdam and Fawley, U.K., totaling around 19,000 tons of various types of base oils and a small quantity of easy chemicals. The cargo will discharge in Durban sometime in May.

A cargo of around 9,000 tons will load ex Fawley for three ports in West Africa – first in Conakry,Guinea, then Abidjan, Cote d’Ivoire, leaving 5,000 tons SN150, SN500 and bright stock for Tema, Ghana. The rotation of the vessel is not known, hence the ports may not follow the above discharge pattern.

In Nigeria there are considerable quantities of base oils in tank. Blenders are keen to purchase U.S. barrels, but some are not keen to take Russian products due to quality and the length of time some oils have been sitting in tank.

SN150, SN500 and SN900 are still considered to be the best combination of grades to form a cargo, and a 10,000-ton shipment arrived in Apapa last week. The bulk of this cargo will be SN900, but it will have been blended using bright stock, making the price higher than receivers and ex tank buyers would have preferred. SN900 blended with U.S. base oils is still preferred over that blended using Russian SN1200 or bright stock.

However, buyers in Nigeria are objecting to higher prices for SN900. In future they say they may only take SN150 and SN500 from the U.S., using the SN500 as the high-viscosity grade. Without SN900, the viscosity of finished lubricants would drop, preventing them from performing adequately. Automotive engine oils might no longer meet specifications required by warranties, although many vehicles in Nigeria are beyond the age of warranty coverage.

Russian base oils imported from the Baltic and Egypt are being offered by a few traders, all with extremely low prices. The idea of a cargo to be shipped to Lagos and then Mexico port has been discounted due to logistics and costs.

The Nigerian naira’s exchange rate with the U.S. dollar fell the past week to NGN 1,523.

Nigerian prices for Group I base oils from the U.S. are at $965/t-$980/t for SN150, $990/t-$1,010/t for SN500 and $1,080/t for SN900, on a CFR basis ex Apapa.

Russian base oils are priced at $895/t for SN150, $910/t for SN500 and SN900 at $985/t, all basis CFR 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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