Contrast this with Central and West Africa, where the rainy season will soon begin, slowing commercial activity including base oil trading in markets such as Nigeria, Ghana and Cote d’Ivoire. New shipments of API Group I base oils are not expected to arrive now until around September.

In the Northern Hemisphere, European markets are showing considerable strength, but the specter of U.S. tariffs on European Union exports continues to discourage large base oil purchases.

One condition common across these regions: Supplies of all base oils are positive, with ample material available for all requirements. Margins remain extremely favorable for refiners – to the point that they might be expected to shift more feedstocks into base oil production. Producers are mindful, though, of increasing supply above demand, which could cause downward pricing pressure.

Group I and Group II demand is acceptable across the regions, while Group III supplies are a little tighter in Europe and the Middle East.

Crude and feedstock costs firmed the past week in spite of OPEC+ nations deciding to press ahead with production increases of 411,000 barrels per day from July. Further increases of the same size are expected to each month until October, meaning a targeted total increase to global crude availability of around 2.2 million bpd.

Dated deliveries of Brent crude oil were at $64.65 per barrel Monday, now for August front month settlement, almost exactly in line with one week earlier. West Texas Intermediate crude rose around $1 to $62.55/bbl, still for July front month. The crack between the crude markers has narrowed recently to around $2-$3 per barrel, compared the traditional crack of $5-$6. 

European low-sulfur gasoil prices firmed slightly to $614 per metric ton, for June front month. All of these prices were obtained from London ICE trading late June 2.

Europe

European Group I base oil markets have changed their historic direction – going from sources for many export destinations to routinely importing from sources in the Red Sea and the U.S. Remnants remain of mini export trades of Group I material being supplied to receivers in North Africa, Israel and Turkey, but the more traditional outlets such as Nigeria, the Middle East and India have disappeared. These latter destinations are being supplied from alternative sources in Asia-Pacific and the U.S.

Group I availabilities are adequate for current demand, but bright stock remains tight. Maintenance programs are mostly near ending or have been completed. Production around Europe is therefore returning to full capacity, and with the added supplies from imports, the API Group I market is looking balanced and stable in supply terms.

Prices in respect of one imported cargo being resold FCA Rotterdam were last heard around $950/t for solvent neutral 150, $1,020/t for SN500 and $1,550/t for bright stock. The differential between bright stock and neutrals is purely down to the tight supply scene for bright stock, reflected in the prices for this grade.

Pan-European prices in euros are unchanged over the past week despite opinions in some minds that downward pressure existed. SN150 is currently assessed between €825/t and €875/t, while SN500/SN600 is at €885/t-€940/t. Bright stock is generally placed in a range between €1,420/t-€1,465/t, but higher numbers have been evidenced, in one case, at €1,510/t.

The dollar/euro exchange rate was quoted at $1.14304 Monday.

European Group II base oil prices remain stable, but buyers are unhappy with the differential between Group II prices and diesel or vacuum gasoil after values for the latter have fallen substantially the past six months. Perhaps this week’s rally in crude and product prices will take the sting out of this argument.

Availabilities of Group II base stocks remain adequate due to large imported cargoes having arrived from the U.S. over the past month, tiding suppliers over the summer peak buying season, when most blenders work full-speed to meet contracted supplies for finished lubricants. June and July will be busiest months so far this year before the markets slow going into the vacation month of August.

Prices are assessed 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. Some downward pressure could develop between now and the end of August, but with demand remaining strong, sellers are content to grant small discounts to some buyers, where large quantities of these grades are being purchased.

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 prices refer to bulk shipments, though smaller quantities are bought in flexi-tanks.

One element affecting prices for barrels being delivered by the region’s river systems is that low water in main routes is affecting rates with barges only able to load around 50% of capacity. Rhine and Mosel reports have instances where trucks are being used rather than barges, which is affecting prices, or at least seller margins for Group II grades.

Group III markets around Europe are re-establishing firmer price levels as availabilities remain tight. Shipping delays to replenishment cargoes from the Middle East Gulf and Asia-Pacific and the turnaround at Sitra, Bahrain, are limiting availability of material to be loaded and hence shorting material destined for the European market.

The European distributor for Sitra Group III grades has been finding difficulties in meeting demand from regular large buyers around Europe. Bapco have not held any sell tenders for Group III base oils from Sitra, meaning considerably less material coming onto the European market. Sale tenders may be reintroduced in the future, but production will first have to come up to previous levels.

Prices for 4 centiStoke material from Porvoo, Finland, were heard at around €1,150/t, FCA Antwerp-Rotterdam-Amsterdam. This discounted rate may be due to the material lacking full slates of finished lubricant approvals.

Prices for 4 cSt material with partial slates of approvals firmed during the past week and are now assessed at €1,195/t-€1,225/t, FCA Antwerp-Rotterdam-Amsterdam, with offers subject to arrival of incoming vessels to Rotterdam and Dordrecht. European and the United Kingdom values for partly-approved 6 cSt are placed in a range of €1,190/t-€1,230/t, while 8 cSt is at €1,220/t-€1,245/t, on an

FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for Group III oils with full slates of approvals may face some upward pressure from the increases in rates for partially approved material. For now, values for fully approve material are unchanged 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 were unchanged going into June but may have risen this week and will be updated next week. Prices have been €1,095/t-€1,135/t for 4 and 6 cSt, FCA Germany.

Baltic and Black Seas

Russian export prices for Group I base oils had risen but now appear to have disappeared off the map. There do not appear to be any cargoes loading out of the Baltic according to shipping reports and third-hand reports from within Russia. Domestic demand may have increased, pulling any surplus barrels from the export market.

The Russian market continues to be an enigma, a veritable puzzle with few answers available. Players and trade reports around the base oil markets are making guesses as to what is occurring in base oil markets within Russia. There would appear to be a drastic reduction in the quantities of material allocated for export, with word of price increases, but these price rises may only apply to domestic sales of base oils within Russia.

Hypothetical FOB prices ex St. Petersburg are guesstimated to be around $750/t-$775/t for SN150 and $780/t-$795/t for SN500. If export barrels become available, it is difficult to imagine they would be priced competitive enough to allow offers to be made for, say, deliveries into Nigeria.

FOB prices on the same or similar levels as Russian domestic prices would discourage traders from participating in deals to West Africa, while higher levels would push CFR prices unacceptably high. SN500 at nearly $800/t FOB, plus freight for a 10,000 tons cargo at around $155/t, and a margin of around $50/t-$70/t would yield a delivered level of around $1,025/t – too high for the quality and specification of Russian SN500.

Apparently there are no Lukoil cargoes moving out of the Baltic to Gebze, Turkey, or Singapore. Turnarounds at a number of Russian refineries may have stymied availabilities. Ukrainian drone strikes on refineries and storage complexes including Volgagrad may also reduced availabilities.

Bashneft and Rosneft , ex Ufa and Angarsk refineries, respectively, deliver smaller quantities of base oils into Turkey at CIF prices that have suddenly been hiked.

Reports show lower volumes of Russian base oils arriving into Turkey. Reasons and rationale for the change in activity are not apparent. Some sources comment that Russian domestic demand has surged, but why?

Domestic supplies appear to have been prioritized over exports, but reports that prices have risen within Russia suggest that there could be supply problems. In light of Ukraine’s bombing of Russian air bases, anything seems possible, but finding out the facts may take a long time.

A Turkish trader-blender indicates prices of $885/t for Russian SN150 and $895/t for SN500 but cannot confirm dates, raising questions about the validity of those numbers. SN900 is now “indicated” at $1,210/t, but again with no assurances on availability, timing or validity of offer.

Delivered prices for Rosneft Group I grades are confirmed around $755/t for SN150 and $775/t for SN500, on a CIF basis ex Turkish ports such as Gebze. It must be noted that these prices refer to material in tank for more than one month, so perhaps prices do not reflect the current status of pricing.

New Rosneft levels are assessed at $845/t for SN150, with SN500 at $860/t.

Group I base oils are available ex Izmir refinery at the following rates: Spindle oil – 44,422 lira/t plus a duty of Tl 8,884/t; SN150 – Tl 40,071/t plus duty Tl 8,014/t; SN500 -Tl 43,203/t plus duty Tl 8,641/t; bright stock -Tl 61,505/t plus duty Tl 12,301/t. Prices are ex rack Izmir refinery, plus a standard loading charge of Tl 8,199.20/t.

On the basis of a current exchange rate of Tl 39 per U.S. dollar, the bright stock price loaded would come to around $1,785/t!

Group II ex works offers from a Turkish trader are now $1,125/t for 110N and 220N, with 350N offered at $1,295/t. The lower price may be for Russian Group II.

Group II imported from Taiwan or Saudi Arabia is offered at $1,645/t for 500N and $1,285/t for 150N.

Tatneft Group III 4 centiStoke is offered at €1,225/t while partly-approved Group III grades from other sources are at €1,375/t-€1,400/t. Some of these grades have been supplied to Turkey by flexies from storage in Rotterdam.

Fully-approved Group III grades ex Cartagena, Spain, delivered into Gemlik have estimated prices of €1,825/t-€1,855/t, basis FCA.

Middle East Gulf

May saw large quantities of Group I and Group II base oils being loaded from Yanbu and Jeddah for delivery mainly into the west coast of Indian ports, and additionally, Chennai. The total quantity loaded would appear to be around 77,000 tons with cargoes also moving to Durban and Singapore. With the imminent start to the monsoon season, weather can delay vessels and discharge and can be difficult with conditions at anchorage and alongside berths.

There are fewer Iranian base oil cargoes being reported loading out of Bandar-e Emam Khomeyni. There are also rumors that Iranian buyers are looking to purchase cargo quantities of Group I and Group II base oils, and it will be interesting to see if Luberef offer availabilities out of Yanbu and Jeddah, given the tensions between Saudi Arabia and Iran.

It is reported that Indian traders may take up the baton to supply Iranian buyers, but how a cargo transaction would be organized and paid for can only be surmised.

Sources in United Arab Emirates have confirmed that there are problems within Iran re availability of critical spares and parts for refinery and plant maintenance, thus possibly limiting base oil production for local blending. This could explain Iran coming to the market to purchase rather than export.

Prices for Iranian Group I base oils have been heard at around $965/t for premium SN500 and $945/t for SN150. These prices are internal price levels, hence prices are offered as indications on an ex refinery basis.

Recent CIF/CFR prices and offers for imported Group I material moving into the UAE are confirmed at $925/t-$945 for SN150, $955/t-$975/t for SN500 and $1,395/t-$1,425/t for bright stock, which is much higher than previously.

Sources for Group I material have been mainly U.S. origin, with a number of recent large cargoes being co-delivered to the west coast of India and UAE. Other cargoes have been sourced out of Singapore and Saudi Arabia.

No Russian base oil cargoes have been reported arriving into the UAE as previously, although one blender-trader based in Sharjah is said to have arranged a Russian cargo loading out of Limas terminal in Turkey. With Russian prices moving upwards and domestic Russian demand rising, suppliers such as Lukoil may not be so eager to offer barrels into this market. Turkish traders are also involved in sending Russian Group I base oils to the UAE.

The last Russian base oil prices CFR Hamriyah port in March were around $785/t for SN150 and $795/t for SN500. These price levels will no longer be valid.

Group III cargoes continue to load out of Al Ruwais, UAE; Ras Laffan, Qatar, and Sitra. A vessel has also been identified loading for mainland China. Two large cargoes of around 25,000 tons have loaded to the west coast of India and Singapore from Qatar.

Netbacks in respect of Group III base oils from Al Ruwais are increased to $1,225/t-$1,260/t for 4, 6 and 8 cSt. Netbacks for gas-to-liquids Group III+ base oils loading ex Ras Laffan are unchanged at $1,255/t-$1,290/t, with cargoes moving into U.S.A , India and Singapore. These numbers are offered as indications only.

FOB netback levels are assessed from distributors selling prices in various markets minus estimated marketing costs, margins, handling, storage and freight.

Demand is positive for Group II base oils in the UAE, which are imported from the Red Sea, the U.S., South Korea, Europe and Singapore. Group II base oils are either resold ex tank in the UAE, or on a truck-delivered basis in the UAE and Oman.

FCA prices are unchanged this month at $1,425/t-$1,475/t for 110N, 150N and 220N, with 600N at $1,510/t-$1,555/t. Sales are priced either in UAE dirhams, or U.S. dollars. The exchange rate is AED 3.67 per dollar.

The highs of the ranges refer to RTW deliveries to buyers in locations in the UAE and northern Oman.

Group III base oils from both Al Ruwais and Sitra are delivered into the UAE either in small tankers, or from Abu Dhabi by road tanker, moving into Sharjah, Dubai and Fujairah. Prices are confirmed from a local source 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 RTW delivery charge of $20/t-$55/t added for delivered prices around the UAE and Oman. Prices from producers Adnoc and Bapco are not available, so prices offered above include a reseller margin of around $45/t to cover storage, handling and profit.

On making inquiries re possibilities of reopening blending operations in Syria, this report received an email from a Turkish trader outlining their involvement in sending large quantities of finished lubricants into Syria. Apparently this practice has been going on for a number of years, with large quantities of lubes moving into distributors based in Syria.

The implications were that blending within Syria would not restart, that both private and government lubricant requirements were being met from Turkey, and that systems were in place to make this function smoothly and efficiently. The Turkish contact wished to know the traders involved in looking at Lattakia.

Africa

Another large cargo will be sailing to South Africa from Rotterdam and Fawley, U.K. The cargo is primed to load later this month, keeping the frequency of these large parcels moving.

The Group I cargo bound for Ghana will arrive in Tema during the next couple of weeks and will discharge to cover the Ghana tender supply contract.

Nigeria heads towards the rainy season with a great deal of base oils of varying qualities and specifications in tank. There are Russian barrels in addition to U.S. material which is being resold to blenders around the country. Resellers are trying to move as much of the in-tank contents before the rainy season really gets going. With almost all base oil storage in Apapa, delivering during the rainy season can become extremely difficult.

Demand locally in Nigeria is good, but the industry participants have not acknowledged that prices are rising and that availabilities are tighter than before, particularly for premium material from the U.S. Traders are sating that it will be very difficult to compete with Russian base oils, if indeed these quantities are still available.

One cargo of Russian base oils has arrived in Apapa in the past few days and will commence discharging soonest. This cargo was loaded prior to the rumors of shortages and rising prices, hence it will be interesting to see if other Russian cargoes are being considered at the moment.

The vessel which delivered a quantity of base oils for a new buyer remains at sea off Lagos, having arrived at the anchorage on April 10. The vessel has now been around the anchorage for almost 8 weeks, with no sign of the cargo being discharged. There may be financial problems attached to this cargo, and with demurrage increasing by the day, the penalty costs could be disastrous for the transaction.

The Nigerian naira’s exchange rate to dollars is NGN 1,589, marginally lower than one week ago.

CFR Apapa prices for U.S.-sourced material remain at $890/t-$910/t for SN150, $920/t-$940/t for SN500 and $1,040/t-$1070/t for SN900.

Prices for Russian Group I 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. These prices may not remain offered for future cargoes, depending on situation within Russia.

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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