The drops in base oil exports from the countries could also be an indirect effect of the prospect of sanctions being applied by Europe and the United States on countries buying large quantities of Russian and Iranian crude and petroleum products.

It may also be due to increased surveillance on shadow fleet vessels, used by Russia and Iran to transport cargoes prohibited by sanctions to receivers in a number of locations globally. The European Union and its allies have identified and sanctioned 100 named tankers and their owners or operators over the past two weeks, which may have hamstrung availability of ships to lift bulk cargoes of crude and petroleum products from these two countries.

Throughout the regions, base oil prices are trending lower base except for API Group III levels, which have been buoyed by a tighter market in both Europe and the U.S. with less material moving from usual sources in Asia-Pacific and the Middle East Gulf. Both Group I and Group II markets are reacting to lower demand, with producers and sellers going into action to promote sales of these grades. There are signs that inventories in refinery storage are rising around the regions.

As always, there are exceptions to the rule, for example bright stock in Europe has become tighter, and with a number of refinery turnarounds starting or in progress, availability may shorten further. Having counted only eight refiners producing bright stock around Europe, it does not take much for this grade to become scarce when demand is relatively high.

The threat of U.S. tariffs still hangs over the EU, in particular a possible levy of 25% on car and auto parts exports to the U.S. The U.K. has negotiated a Brexit reset with Brussels reached a deal with the U.S. to reduce levies on car and auto parts exports to 10%, while rates on steel and aluminum were eliminated. This is a worse situation what was in place prior to the original tariff announcements, but it seems to be being celebrated by the powers that be in the U.K.

U.S. President Donald Trump has said in passing that the EU is “nasty” and may be subject to the full force of his tariffs. Around half of the 90-day grace period given by Trump, but there do not appear to be any positive signs coming out of Brussels in negotiations with the U.S. administration.

Crude oil prices are relatively static, hovering around the same levels as one week ago. The consensus is that increases in production from Saudi Arabia and other OPEC+ member nations, and with only marginal increases in demand from main markets such as China, crude prices may settle around current levels in the short and medium term.

Dated deliveries of Brent crude are reported at $65.40 per barrel, for July front month settlement, marginally lower than one week ago. West Texas Intermediate reflect a similar picture at $62.60/bbl, still for June front month, only around $0.50 lower than last week.

European low-sulfur gasoil prices are slightly weaker at $618 per metric ton, also now moved to June front month. All of these prices were obtained from London ICE trading late May 19.

Europe

Growing uncertainty with the approaching tariff deadline is affecting many blending operations in Europe, leaving buyers unsure as to which way to move. Do they purchase large quantities of Group I base oils due to forecasts that supply will tighten because of maintenance shutdowns and production issues at a number of European plants, or should they hold off because tariffs would hurt finished lubricant demand in the region?

Availability for Group I base oils has shrunk the past few weeks and suggestions are that this situation will only get worse in the short term.

Imported API Group I base oils are coming into the European market from Saudi Arabia, with another cargo being delivered into Antwerp by S-Oil, under the Saudi Aramco umbrella.

Imported material from Paulsboro on the U.S. Atlantic coast, being resold ex storage in Rotterdam, has almost been exhausted with only a few barrels remaining. Prices had firmed to around $950/t for solvent neutral 150, with SN500 at around $1,020/t and bright stock at $1,550/t. These prices have been maintained for the remainder of the cargo quantity.

It is thought that new inquiries have been made to the same source by this importer, but at this stage it is unclear if the U.S. producer has the quantities and availabilities at the right prices to enable another cargo.

Pan-European prices, mainly in euros, are showing slightly weaker this week despite Group I supply moving tighter. SN150 is assessed between €825/t and €875/t and SN500/600 at €885/t-€940/t. Bright stock is generally assessed in a range between €1,420/t-€1,465/t, but higher numbers have been heard, in a range of $1,485/t-$1,510/t. Prices for bright stock are dependent on quantity and method of delivery.

The euro’s exchange rate with the U.S. dollar strengthened slightly during the past week to $1.12545 on Monday.

European demand for Group II base oils is slowing during what should be the peak season for blending finished lubricants. The Group II base oil market in Europe is fickle however, with some blenders expressing surprise that prices are showing lower, whilst others are complaining that levels are still too high and that reductions and discounts are merited.

European Group II prices had firmed on the back of demand and due to exchange rate moves, but now the market is seeing a different scenario, with prices starting to look vulnerable.

Prices are unchanged for the moment at €1,095/t-€1,135/t for 110 neutral and 150N, €1,155/t-€1,175/t for 220N and €1,175/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 ranges refer to bulk shipments, but smaller quantities are being transported in flexi-tanks.

European Group III markets are firmer in sentiment with availabilities tight. There have been various delays to replenishment cargoes from the Middle East Gulf and Asia-Pacific and a turnaround in Bahrain is also limiting availabilities to Europe. The appointed distributor of oils from Bahrain is unable to supply regular large buyers around Europe. There are no spot tenders from this source, hence considerably less material is available.

Prices for Group III 4 centiStoke oils with partial slates of finished lubricant approvals, or without approvals, have firmed and are now assessed at €1,180/t-€1,195/t, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. Offers are subject to arrival of incoming vessels to Rotterdam and Dordrecht. European and U.K. levels for partly-approved 6 cSt are unchanged at €1,175/t-€1,210/t, while 8 cSt is at €1,185/t-€1,200/t, both on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Prices for Group III oils with full slates of approvals are unchanged and seemingly stable 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.

Prices for rerefined Group III grades are taken higher at €1,075/t-€1,125/t for 4 and 6 cSt, FCA Germany.

Baltic and Black Seas

Russian base oil prices have risen substantially over the past few weeks, but what has prompted this action remains a mystery, a little like Russian base oil economics. Increases of $150/t-$200/t in some cases have been heard in relation to delivered prices into Turkey, for example.

There would appear to be a massive reduction on the quantities of material allocated for export, perhaps because of domestic demand shortening availabilities. FOB prices ex St. Petersburg are now estimated to be around $750/t-$775/t for SN150 and $780/t-$795/t for SN500.

These levels may disincentivize traders looking to take Russian base oils into Nigeria, since such FOB values may lift CFR delivered prices to levels that are unacceptable to Nigerian buyers. With SN500 at nearly $800/t FOB, freight for a 10,000-ton cargo at around $155/t and a margin of around $70/t, the delivered price would be around $1,035/t, far above offers heard few weeks back of around $920/t.

This hypothetical example assumes that suitable vessels would be available to transport such a cargo.

There are fewer Lukoil cargoes moving out of the Baltic to Gebze, Turkey, and Singapore. Turnarounds at a number of Russian refineries, including the Lukoil facility in Perm, and Ukrainian strikes on Lukoil’s Volgagrad refinery may also have curbed availabilities at a time of high domestic demand. Bashneft’s plant in Ufa was previously delivering material into Turkey along with Rosneft’s plant in Angarsk, both at exceptionally low prices. This does not appear to be the case now.

Recent reports from Turkey reflect lower volumes of base oils entering that market. Fewer cargoes of Russian base oils are being delivered into ports such as Gebze, Turkey. The reasons for this cessation of trade is put down to domestic demand in Russia spiraling the past month, but why this has happened is not known yet.

Domestic supply may have been prioritized over exports, but reports that prices have risen within Russia suggests that there could be supply problems. Whatever has happened has changed the entire Russian base oil market.

A Turkish base oil trader and lubricant blender offering blends of Russian and Uzbek base oils indicates prices have risen to $865/t – up from $745/t – and $880/t for SN500, but availabilities for prompt supply cannot be confirmed. SN900 was priced at $1,045/t, but is now at $1,210/t, again no assurances on availability. This level could reflect the use of Tupras base oils given ex rack prices in Izmir.

Delivered values for Lukoil Group I grades shipped from the Baltic are confirmed around $835/t for SN150 and $850/t for SN500, CIF Turkish ports such as Gebze. The same grades from Rosneft and Bashneft are around $100/t lower, but it is thought that the latter values refer to material put into tank some six weeks ago, when prices were lower.

Group I base oils are said to be available ex the Izmir refinery, but prices are too high for local buyers, who therefore are preferring to stick with Russian barrels if available. Prices from Izmir are unchanged this week at 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. Prices are ex rack and incur a standard loading charge of Tl 8,199.20/t.

Group II ex works prices from a Turkish trader are offered now at $1,065/t  for 110N and 220N and $1,265/t for 350N. These base oils may be from Russia. Group II grades of higher specification, possibly imported from Taiwan or Saudi Arabia, are offered at $1,285/t for 150N and $1,645/t for 500N.

Group III from Tatneft in Russia is offered at €1,100/t for 4 cSt, while other Group III oils with partial slates of approvals are at €1,325/t-€1,360/t. Some of the latter have been supplied in flexies from storage in Rotterdam.

Group III from Cartagena, Spain, which carry full slates of approvals, are delivered into Gemlik and still estimated to be priced at €1,825/t-€1,855/t, basis FCA.

Middle East

The month of May has seen Luberef stepping up quantities delivered and to be delivered into the Indian market. Most cargoes, which contain Group I and II base oils, will go to the West Coast of India, into Haldia, Mumbai anchorage and Jawaharlal Nehru Port, though some are also delivered into receivers in Chennai and Kolkata.

Deliveries into India are up an estimated 110% increase from last year over the same period, but it is believed that cargoes will start to slow after this month due to the onset of the monsoon season. Luberef’s refinery in Yanbu has undergone work this year to replace a catalytic cracker, and more maintenance is scheduled for November, completing the five-year cycle.

Base oils have been exempted from U.S. tariffs, hence Group III material from the Middle East Gulf will continue flowing as usual to the U.S. from the United Arab Emirates, Bahrain and Qatar. Distributors in the U.S. purchase on an FOB basis from Al Ruwais, UAE and Sitra, Bahrain, bringing material into storage along the U.S. Gulf of Mexico coast, subsequently distributing across much of the nation.

In addition, Shell in the U.S. imports gas-to-liquids base oils from its joint venture in Ras Laffan, Qatar, at least mostly for internal use.

As mentioned at the beginning, fewer Iranian cargoes are reported loading out of Bandar-e Emam Khomeyni, where normally Sepahan Group I base oils are exported to the UAE or the West Coast of India. Sources in the UAE have suggested that there may be internal problems in Iran meeting demand for local lube blending. This could explain recent prices increases.

Prices for exports from BIK are adjusted, now being heard at $965/t for premium SN500 and $945/t for SN150, on an FOB basis. With few cargoes actually loading, prices are offered as indications for ex refinery levels.

Prices for imported Group I material discharging in the UAE are reconfirmed at $915/t-$930 for SN150, $940/t-$955/t for SN500 and $1,275/t-$1,300/t for bright stock, on a CIF or CFR basis ex Hamriyah, Fujairah and Jebel Ali ports. Sources are cargoes from the U.S., some of which get split between the UAE and West Coast of India. Smaller Group I cargoes arrive into Hamriyah and Fujairah from Rayong, Thailand.

Russian cargoes do not appear to be arriving into the UAE as they were previously, although one blender in Sharjah is negotiating a cargo of Russian base oils to load out of Limas terminal in Turkey. Given the situation discussed above, suppliers such as Lukoil may not be so eager apply discounts to make sales into this market. This report is keeping close tabs on the latest Russian shipping movements into the UAE.

The last Russian base oil prices CFR Hamriyah port in March were heard at around $785/t for SN150 and $795/t for SN500. Nothing appears to have discharged since then.

Group III cargoes are starting to load again out of Al Ruwais, Ras Laffan and Sitra for India, Europe, the U.S. and Thailand. Chinese cargoes have not been mentioned, and it may be that new local Group III production has usurped cargoes from the Middle East Gulf.

Netbacks Group III from Al Ruwais are unchanged at $1,185/t-$1,240/t for 4, 6 and 8 cSt grades. Netbacks for GTL Group III+ loading ex Ras Laffan are unchanged following recent increases, estimated at $1,255/t-$1,290/t, for cargoes moving into the U.S., Thailand and Singapore. The Ras Laffan numbers are offered as indications only. 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 much in demand in the UAE. These base oils are being imported from the Red Sea, the U.S., South Korea, Europe and Singapore and are either resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman.

Prices are unchanged at $1,425/t-$1,475/t for 110N, 150N and 220N and at $1,510/t-$1,555/t, on an FCA basis. Sales are often conducted in UAE dirhams, which are pegged to the U.S. dollar. The exchange rate is set at AED 3.67. The highs of the ranges refer to RTW deliveries to buyers in locations in the UAE and northern Oman.

Group III base oils from Al Ruwais and Sitra are delivered into the UAE either in small vessels or from Abu Dhabi by road tanker into storage in Sharjah and Dubai.

Prices are confirmed by sources in Sharjah at $1,325/t for 4 cSt, $1,340/t for 6 cSt and $1,385/t for 8 cSt, all basis FCA Hamriyah or plus an RTW delivery charge of $20/t-$55/t added for delivered prices around the UAE and Oman. Prices from producers are not disclosed, therefore prices above include a reseller margin of around $45/t to cover storage, handling and profit.

Africa

A cargo loaded out of Valencia, Spain, apparently prior to the power outage in in that country, and was scheduled to deliver Group I and II base oils into Egypt and Israel.

Traders are investigating the possibilities to reopen trade into Syria, where the Homs refinery once received Group I base oils through Lattakia port. The Homs facility is believed to have been destroyed in the Syrian conflict, but there may be scope to reopen other blending units in the country.

The large 19,000-ton cargo that loaded out of Rotterdam and Fawley, U.K., for a well-known major will discharge in Durban, South Africa, in early June or maybe sooner depending on weather.

A vessel has loaded from the U.K. with 5,000 tons of three Group I grades for receivers in Tema, Ghana. This cargo forms part of the supply under the Ghana tender, which is negotiated annually and has been retained by the same supplier for a number of years now.

The Nigerian market is sated with base oils, and resellers are trying to move as much of the in-tank quantities as possible before the start of the rainy season. During the rainy season some roads become impossible to negotiate, preventing delivery of base oils by road tanker from storage tanks in Apapa.

Demand in Nigeria is good, but locals have not recognized the increase in international prices or the tighter supply scene. At this time there are no export barrels available from the U.S., partly because one usual source is undergoing a turnaround.

In Lagos there is ample material in tank, and a cargo of Russian base oil is due to arrive soon from Egypt. The problem the supply of SN900. If loaded from the U.S. this grade would contain some portion of bright stock and would reach Nigeria at the correct viscosity. At current prices, though, there is no way traders of this product could compete on price with Russian SN900.

There is news of a vessel that was to deliver a quantity of base oils for a new buyer, previously engaged in other parts of petroleum supply in Nigeria. The vessel has been “swinging on the hook” at anchorage for more than a month, with little sign of the cargo being discharged soon. An international trader was involved with shipping this cargo to Nigeria.

The Nigerian naira’s official exchange rate with the U.S. dollar rose marginally the past week to NGN 1,593.

Prices at Lagos’ Apapa port for U.S. base oils are confirmed at $890/t-$910/t for SN150, $920/t-$940/t for SN500 and $1,040/t-$1,070/t for SN900, all on a CFR basis ex Apapa. These levels are in the same neighborhood now as Russian base oils.

Prices for Russian base oils from Russia or Egypt are indicated at $895/t for SN150, $910/t for SN500 and $1,030/t for SN900, 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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