Trump’s administration is currently negotiating trade and possibly other arrangements with a number of countries, but the outcomes are uncertain, and much hangs in the balance. For example, the European automobile industry is at great risk given a tentative U.S. plan to apply a 25% tariff on all European vehicles and automotive parts exported to the country.

As industries such as car manufacturing hold their breath, the knock-on effect on trades such as base oil is tremendous, with finished lubricant blenders holding back from purchasing base oils that may or may not be required in the quantities forecast prior to the Trump bombshells.

Different parts of the EMEA region stand to be affected differently by tariffs. Europe would perhaps feel the biggest impact, while African nations are less affected because they supply less manufactured goods. Middle East countries are almost not affected, facing the lowest duty level of 10% and besides sending fewer goods to the U.S.

The U.S. does import large quantities of Group III base stocks from the Middle East, but these have been exempted – at least so far. This is great news for producers in the United Arab Emirates, Qatar and Bahrain, all of which regularly ship base oil cargoes to America. This trade would only grow if Trump’s actions succeed in attracting manufacturing to the U.S. Economists say, however, that such shifts would take years to materialize.

A number of prominent conflicts remain unresolved and continue to affect base oils trade. Fighting in Ukraine continues unabated, as does Israel’s offensive in Gaza. The U.S. and Iran continue to negotiate containment of Iran’s nuclear program, but Trump’s administration is also hanging the threat of attacks over Iran’s head.

Base oil trade continues in the war zones, but supply chains have been altered, and trading routes have emerged since the conflicts began. Houthi militant attacks on merchant and naval shipping in the Red Sea have changed the routing and the economics of cargoes of all materials, from containerized dry goods to bulk supplies of minerals and oil derivatives, including base oils of all types and groups, moving in both easterly and westerly directions, to and from Middle East Gulf and Asia-Pacific countries.

Global stock markets have recovered some losses, but traders remain nervous and responsive to the slightest negative news. The U.S. dollar continues to decline in value compared to other major currencies, including Russia’s ruble. The other currencies are not strong; the exchange rates merely reflect the dollar’s weakness.

Energy prices have made a moderate recovery, but crude and gas prices remain much lower than three weeks ago. There does not appear to be real momentum to higher levels.

Prices for dated deliveries of Brent crude were at $66.20 per barrel Monday, for June front month settlement, around $2 higher than last week. West Texas Intermediate climbed around $2.5 to $63.10/bbl, still for May front month.

European low-sulfur gasoil values rose around $15 to $620 per metric ton, for May front month. All of these prices were obtained from London ICE trading late April 21.

Europe

Uncertainty is the word on everyone’s lips at the moment with few players venturing to purchase large quantities of any type of base oil for fear that the market could fall apart should American tariffs hit industries such as auto manufacturing and ancillary businesses.

Forecasts have been ripped up, and base oil producers are trying regroup, considering a range of scenarios from “total disaster” to one where tariffs are avoided and trade returns to where it was before then were announced.

The question of timing is a problem in addition to the duties themselves. At the end of the 90-day period, will tariffs suddenly be applied, or will ongoing negotiations cause them to be pushed back again?

Some sources contacted last week indicated that they were fighting in the dark, not knowing which way to turn to protect and defend their businesses. With little guidance from industry representatives, politicians and central bankers, the situation is grim and may only get worse. They intimated that it would be financially foolhardy to replenish large swathes of inventory if their customers will be forced to cut back or cancel orders for finished lubricants. A number of sources are involved with factory fills for major vehicle manufacturers and are very concerned since those industries have significant sales in the U.S. If those sales fall amounts of finished lubricants required would, too.

The European market for API Group I base oils – along with other types – is on hold, with players counting the days until clarification comes regarding tariffs.

Scheduled maintenance is still programmed for a number of refineries that make Group I oils. This will reduce supply, but demand has also faltered. Nevertheless, European prices for Group I base oils remain steady for the moment.

At the moment, FCA levels ex Rotterdam are at $925/t (€805/t) for solvent neutral 150, $995/t (€867/t) for SN500 and $1,450/t (€1263/t) for bright stock.

Pan-European euro prices for Group I are in widening ranges of €805/t-€895/t for SN150, €867/t-€965/t for SN500 or SN600 and €1,263/t-€1,425/t for bright stock, depending on quantity purchased and availability. The differences from last report are due to exchange rate moves during the past few days. The euro’s exchange rate with the dollar declined to $1.14831 Monday.

Reduced demand has also hit Europe’s Group II market and could well cause downward pressure on prices. Previously Group II demand was said to be increasing around Europe, but without clarification as to the future, that trend may have been halted.

European Group II prices are down this week at €1,075/t-€1,110/t for 110 neutral and 150N, €1,125/t-€1,150/t for 220N and €1,155/t-€1,200/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 shipments, but smaller quantities are transported in flexi-tanks directly to lubricant blenders.

An anomalous situation is occurring within the Group III base oil market: Prices around Europe are stablizing, if not firming. There is a shortage of material available on a prompt basis, and this is causing upward pressure. The snugness was caused by a combination of delays to shipments meant to replenish supplier inventories and a slowdown in sale tenders. Distributors are selling forward on the basis of cargoes arriving during May, with prices that are substantially higher than seen previously.

The supply scene is moving to a more balanced market, but tariff impositions on key industries could weigh heavily in coming months. This segment also stands to be affected by temporary maintenance shutdowns. Some refiners are already laying away in preparation, and the number of cargoes arriving from Asia-Pacific has lessened.

One supplier was offering 4 centiStoke for May delivery for around $1,085/t (€945/t). FCA prices ex Antwerp-Rotterdam-Amsterdam otherwise climbed to new recent highs of €1,095/t-€1,125/t for 4 and 6 cSt.

Pan-European and United Kingdom prices for partly-approved grades are in a wide range of €945/t-€1,125/t for 4 and 6 cSt and €1,085/t-€1,140/t for 8 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Prices for Group III oils with full slates of approvals seem stable and 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, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Prices for rerefined Group III grades rose slightly since last week to €955/t-€985/t for 4 and 6 cSt, basis FCA ex rerefinery in Germany.

Baltic and Black Seas

FOB prices ex St. Petersburg for Russian grades are guesstimated at around $495/t-$520/t for SN150 and $500/t-$530/t for SN500. If blended for Nigerian receivers, SN900 is estimated to be priced around $565/t, presumably made using Russian bright stock or SN1200 as a high-viscosity blend agent.

Obviously these levels are exceptionally low when compared to European Group I levels, but it appears that Russian refineries have their own cost allocation methods. Using state-supplied, low-priced Urals crude and assuming low labor costs and negligible refinery operating expenses, refining units could arrive at such prices and still glean positive contributions.

Russian base oils are predominantly produced for the domestic market, but the nation’s central government is encouraging exports wherever possible to earn foreign currency.

Prices for FOB Russian export barrels are published as indications only, since no reliable information can be obtained. In the past suppliers such as Lukoil and Gazprom published pricing information and engaged in open discussions with reports such as this one, but such communications have ceased for now.

Russian origin base oils and additives are regularly being utilized by blenders in Ukraine. This practise appears to be allowed and approved by authorities and is seen as the only method of producing finished lubricants that civilian and military end-users require to maintain vehicles and equipment.

Negotiations and deliveries are expedited through traders or distributors based outside Ukraine. How payments are made is not known. Russian banks have no access to the Swift international payment system, so Ukraine banks are not supposed to be able to transfer funds to Russian sellers. Foreign banks in Turkey and Ukraine would also be unable to use the Swift system to transfer funds to Russian banks.

The whole Russian trading system is mysterious. For example, how do buyers in the United Arab Emirates transfer funds to Russian sellers unless accounts are held outside of Russia to accommodate currencies such as U.S. dollars. The same applies to Turkish buyers who frequently receive cargoes of Russian base oils in Gebze, Turkey.

There were rumors last week that supply of Russian base oils were becoming tighter in Turkish markets, hard as that is to believe given the quantities of material that have got into this market the past couple years. However, there have been fewer cargoes arriving from the Baltic, so there may be some truth in the rumor. More investigation will take place this week.

Turkish traders offer blends of Russian and Uzbek base oils for $745/t for SN150 and $765/t for SN500. SN900 included in an inquiry for Nigeria was priced significantly higher at $1,045/t, suggesting it was blended with bright stock from an EU seller or from Yanbu, Saudi Arabia. 

An offer by Greek sellers for a 3,500-ton shipment of Group I neutrals to Derince in Turkey is still be evaluated by Turkish buyers.

According to a source in Istanbul, Group I base oils from the Tupras refinery in Izmir, Turkey, are availiable but are priced too high for local buyers. Those 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. These values are ex rack Izmir refinery and incur an additional standard loading charge of Tl 8,199.20/t.

Imported Group II is being offered ex works by a Turkish blender at $865/t for 110N and 220N and at $1,110/t for 350N. The low prices for the light-vis grades suggest they are of Russian origin.

Group II oils from Taiwan are imported and offered at $1,500/t for 500N and $1,150/t for 150N. The source refinery has now completed a major maintenance program.

Group III from Tatneft in Russia is offered at €995/t for 4 cSt, while other Group III oils with partial slates of approvals are priced at €1,125/t-€1,155/t. Fully-approved Group III grades ex Cartagena, Spain, are delivered into Gemlik and estimated to be priced at €1,825/t-€1,855/t FCA.

Middle East

Base oil shipments coming out of Yanbu and Jeddah, Saudi Arabia, have rebounded from a slowdown during February and March, when fewer cargoes left for the West Coast of India and presumably also the UAE and Pakistan. April has seen a resumption of large vessels loading 15,000-20,000 tons.

Cargoes Group I and II are also currently traveling from those locations to Europe, Egypt and Turkey. A cargo of 4,000 tons for receivers in Aqaba in Jordan has loaded and may have been delivered.

The region mostly unaffected by the threat of U.S. tariffs is the Middle East which exports few goods to the U.S.  Most nations in the Middle East Gulf region are importers of U.S. goods, including automobiles, which could endear these countries to the Trump administration.

The tariffs of 10% for almost all Middle East countries (with the exception of Israel) have been suspended for the 90-day grace period while Trump decides whether or not to impose these levies.

U.S. Group III imports from the UAE, Bahrain and Qatar are exempted from tariffs, so trade of these cargoes should proceed as normal, moving into distributors and resellers in the U.S. Gulf of Mexico coast.

There have been few small cargo movements noted loading out of Bandar-e Emam Khomeyni, Iran. Typically these are base oils produced by Sepahan Oil. Rubber process oil cargoes from Iran are continuing, regularly going into India and South Korea.

The latest prices for Sepahan base oils are $925/t for premium SN500 and $910/t for SN150, on a CIF basis ex West Coast of India.

Group I oils imported and discharging in the UAE have again been confirmed at $915/t-$925 for SN150, $935/t-$955/t for SN500 and $1,225/t-$1,270/t for bright stock, all on a CIF or CFR basis ex Hamriyah, Fujairah and Jebel Ali ports. The origin for most of the latest imported cargoes has been Rayong, Thailand. There have been no reports of new cargoes from the U.S. gulf coast.

Russian base oils still arrive occasionally into Hamriyah port, but these cargoes are fewer than in the past. Previously cargoes were shared between receivers in India and the U.A.E., but Indian buyers have not been taking Russian material.

Russian base oil prices basis CFR Hamriyah port were last heard to be around $785/t in respect of SN150 and $795/t for SN500. These prices are in respect of material discharged into storage in the port.

Group III cargoes are to be loading out of Al Ruwais, UAE, and Ras Laffan, Qatar, bound for India, Europe, and the U.S., but there are delays to a European cargo from the UAE, and the distributor for Sitra material in Europe is not currently in a position to offer material to satellite buyers, for example in the U.K.

Netbacks for Group III base oils from Al Ruwais have risen to $1,120/t-$1,155/t for 4, 6 and 8 cSt grades. Netbacks for gas-to-liquids Group III+ loading ex Ras Laffan are unchanged at $1,155/t-$1,220/t, with large cargoes moving into the U.S., Thailand and Singapore. 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 are being increasingly demanded in the UAE and are being regularly imported from the Red Sea, the U.S., South Korea and Singapore. They are either resold ex tank or on a truck-delivered basis in the UAE and Oman. Some larger buyers have their own storage where they take cargoes or partial cargo quantities for in-house finished lube production.

Prices for these Group II oils are taken lower and are now assessed at $1,425/t-$1,475/t for 110N, 150N and 220N and at $1,510/t-$1,555/t for 600N. They are 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

The previously mentioned large cargo for South Africa presumably has loaded in Rotterdam and Fawley, U.K. It includes around 19,000 tons of multiple types and grades of base oils and a small quantity of easy chemicals, possibly polyalphaolefins. The cargo has sailed to South Africa and will discharge in Durban in late May or early June.

The ExxonMobil cargo destined for three West Africa ports is en route from Fawley. It will discharge 5,000 tons of SN150, SN500 and bright stock in Tema, Ghana, after first stopping in Conakry, Guinea, and Abidjan, Cote d’Ivoire.

The Nigerian market is fully stocked with high-specification base oils from the U.S. gulf and east coasts. There will be no need for further cargoes moving into Apapa for at least the next few months. With the rainy season not far away, it may be that traders will take a break until after the end of that season, which would mean no U.S. cargoes arriving before late August or September.

Some blenders are keen to buy U.S. material but are unhappy with the ex tank prices being offered since they are always comparing to low-priced Russian material. Blenders are not keen to use Russian base oils because they are of lower quality and specification.

Some buyers in Nigeria continue to object to prices for U.S.-sourced SN900, saying they may start using SN500 as their highest viscosity grade.

Russian base oils imported from the Baltic and Egypt are offered by two traders, both at extremely low prices. There is a chance that higher-viscosity base stocks other than SN900 could be offered, too, but this has not happened as yet.

The Nigerian naira’s official exchange to dollars dropped slightly the past week to NGN 1,605.

Nigerian prices for U.S.-sourced Group I oils are unchanged at $965/t-$980/t for SN150, $990/t-$1,010/t for SN500 and $1,080/t for SN900, all on a CFR basis ex Apapa port in Lagos.

Prices for Russian Group I are 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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