Castrol is a globally recognized brand, based in the United Kingdom, marketing industrial and automotive lubricants. The company offers a wide range of oil, greases and similar products for most lubrication applications.

The company was originally named CC Wakefield and used Castrol as the brand name for its motor oils, but it later renamed itself when Castrol became better-known than the company name. BP acquired Castrol Ltd. In 2000 for $4.73 billion.

There is much interest in the industry about what companies will bid for the finished lube giant and which will actually acquire it. A number of potential bidders have been suggested, some of which might fit the ownership bill and that seem potentially problematic.

Among the names suggested are giants such as Saudi Aramco and Reliance from India, both of which have the resources to take over Castrol, although there could be issues to overcome. Aramco, for example, already controls a number of downstream lubricant producers and marketers, including Valvoline.

Aramco also has operations that could serve as impediments or at least require exit from something if it acquired Castrol. These include letters of memorandum with other lubricant producers such as Apar, a private company based in Mumbai.

Reliance is engaged primarily in the exploration and production of oil and chemicals and is a large fuels refiner from large investments in India. It is less involved in retail markets, but could transition to take this opportunity. Castrol India is one of the major affiliates of Castrol Ltd., and this could influence a bidder such as Reliance.

There are other interested parties financially in position to make an offer, but there is more to this takeover than just money. The organizational structure of Castrol could be overhauled, modifying the current model for the company.

Currently, Castrol companies are regionalized with an umbrella provided by BP, but the new owners of Castrol may try to reorganize the company, whilst maintaining its strong identity, marketing and advertising strengths.

The sale of Castrol could cause a number of changes in base oil supply chains as the company is one of the largest procurers in the global market. Existing patterns could evolve if, for example, new ownership is associated with a supplier or suppliers that Castrol does not currently utilize. Under BP, each Castrol exercises autonomy for base oil purchasing, but international oil majors are leaned on heavily.

This report will keep an eye on events as they unfold over the next few weeks and months and will update readers as the direction for Castrol becomes clearer.

Expectations had developed in recent weeks that base oil demand might rise, butt so far the opposite has happened. Markets throughout Europe, the Middle East and Africa have lackluster so far this month – to the point of some players suggesting that the summer period, when sales typically slow, may have already started.

There are pockets of demand for all base oil groups. For example in Europe, the Mediterraneaniterranean markets are busy for domestic supplies, whilst demand for all grades is strong in Southern Africa.

Prices have not changed much over the past couple of weeks, with sellers reluctant to try to generate sales by offering discounts and total volume allowances, whilst buyers remain cautious in light of relatively weak crude and feedstock prices, plus ample availabilities of most base oils.

The only grades that appear tight are API Group III oils, which are snug across Europe, the Middle East and Africa. Even in the UAE there are reports that availability is tight, which some blame on a number of maintenance turnarounds in the region.

Crude oil and feedstocks prices have moved slightly upward but are basically in line with levels of the past three weeks. Dated deliveries of Brent crude posted at $66.90 per barrel Monday, for August front month settlement, a couple of dollars higher than last week. West Texas Intermediate rose a similar amount to $65.05/bbl, still for July front month.

The crack between the two benchmarks has narrowed to less than $2.

European low-sulfur gasoil prices rallied a bit to $642 per metric ton, still for June front month. All of these prices were obtained from London ICE trading late June 9.

Europe

Availabilities of most Group I base oils remain more than adequate to satisfy demand, but availability of bright stock remains extremely tight. European refineries have all but completed their rounds of maintenance, so the expectation is that supply will return to normal.

Prices remain in the ballpark established over the last few weeks, with few reports of any significant price moves. Buyers appear content to support the market at prices being offered from most Group I suppliers.

There are reports of a further cargo being imported into Rotterdam from USAC, but from news received, this cargo comprises of two lots of 3,000 tons each of solvent neutral 500 and bright stock.

Prices in respect of the grades available are heard around $1,035/t for SN500, with bright stock offered at $1,565/t. Prices are slightly higher than for the respective grades in the last cargo.

Pan-European prices are assessed between €825/t-€875/t for SN150, €885/t/t-€925/t for SN500 and €1,320/t-€1,375/t for bright stock. Sellers are commenting that exchange rate fluctuations have required euro prices to be adjusted downwards. The euro’s exchange rate to the U.S. dollar was at $1.14195 Monday.

Posts

There was scuttlebutt at an industry event last week that European Group II prices were coming under pressure from sellers offering “special” rates to nominated customers in the face of slack demand.

Availabilities of Group II base stocks are more than adequate for June and July, which seem primed to be the busiest period of this year the holiday swoon of August. Prices are unchanged at €1,095/t-€1,135/t for 110 neutral and 150N, at €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, though smaller quantities are bought in flexi-tanks.

The river systems in Europe remain a headache for both sellers and customers because no significant rain fell during the spring, leading to low water levels on main routes. In some cases, barges can only be loaded to about 50% of capacity. Some players have turned to taking deliveries by truck, which can affect costs and seller margins.

Group III prices around Europe are firmer with availabilities still remaining tight. Loading delays, rather than shipping problems, have been the root cause of the frugal supply scene. Cargo quantities from Middle East Gulf have been subject to turnarounds, limiting availabilities to be loaded.

European distributors for both Adnoc and Bapco Group III grades are still experiencing delays to vessels arriving. The problems are multiplied since cargoes which are due to arrive are mostly presold, with no surplus availabilities for ‘spot’ deals. The problems then continue with ongoing delays to further cargoes being loaded.

Prices for Group III oils with partial slates of finished lubricant approvals are currently assessed at €1,195/t-€1,225/t for 4 centiStoke, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. The 4 cSt grade is particularly short around European markets after a decline in imports from Asia-Pacific. European and the United Kingdom price levels for partly-approved 6 cSt are at €1,190/t-€1,230/t for 6 cSt and €1,220/t-€1,245/t for 8 cSt. These values

are based on FCA sales ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

There is rumor of changes to prices for Group III oils with full slates of approvals, but details are so far unavailable. For now, prices here 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.

Values for rerefined Group III grades updated this week to $1,035/t-$1,075/t for 4 and 6 cSt, on an FCA basis ex tank in Germany.

Baltic and Black Seas

Prices had moved higher recently for exports of Russian Group I oils sold out of the Baltic Sea port of St. Petersburg, but now they appear to have been withdrawn. There do not seem to be any cargoes loading out of the Baltic according to shipping reports and third hand reports from within Russia.

A theory was postulated to your columnist last week that maintenance turnarounds at a number of Russian refineries may have effectively laid siege to the domestic finished lubricants market, leading to a prohibition of exports. Another possibility is that Ukrainian sabotage at multiple Russian refineries and storage complexes is limiting base oil production.

In any case, there appears to have been a dramatic reduction in the quantities of material available for export sales. Hypothetical prices for exports from St. Petersburg are guesstimated to be around $750/t-$775/t for SN150 and $780/t-$795/t for SN500, on an FOB basis.

Understandably there are no Lukoil cargoes moving out of the Baltic to Gebze, Turkey, or to Singapore. Bashneft  and Rosneft continue to deliver quantities of base oils into Turkey from refineries in Ufa and Angarsk, respectively. CIF prices have suddenly been hiked a lot higher, but cargoes are elusive at this moment.

Reports continue to reflect lower quantities of Russian base oils moving into Turkey. A market that was awash with Russian barrels is now searching for sources of Group I base oils. Europe has scant availabilities for this market, and even if material were available, Turkish blenders generally could not afford European prices.

A Turkish trader-blender is “indicating” prices around $895/t for imported Russian SN150 and $910/t for SN500, but there are no validities and the seller cannot confirm dates. SN900 that was previously offered at $1,045/t is now ‘indicated’ at $1210/t, but again with no assurances on availability, timing or even quantities.

Russian delivered prices for Rosneft Group I grades are higher and are confirmed at $775/t for SN150 and $795/t for SN500, on a CIF basis ex Turkish ports such as Gebze. These prices refer to material that has been in tank for weeks, so these levels cannot be guaranteed as current.

Later Rosneft prices have been placed at $845/t for SN150 and $860/t for SN500.

Group I base oils are available ex Tupras’ Izmir refinery, priced as follows: spindle oil 44,422 lira/t, plus a duty of Tl 8,884/t; SN150 – Tl 40,071/t, plus a duty of Tl 8,014/t; SN500 – Tl 43,203/t, plus a duty of Tl 8,641/t; bright stock – Tl 61,505/t plus duty Tl 12,301/t. All prices are ex rack Izmir refinery and incur a standard loading charge of Tl 8,199.20/t.

Group II ex works offers from a Turkish trader are now $1,145/t for 110N and 220N and at $1,325/t for 350N. The lighter grades may be from Russia. Group II from Taiwan or Saudi Arabia is offered at $1,645/t for 500N and $1,285/t for 150N.

Prices for Group III oils from Tatneft in Russia have been hiked to €1,275/t for 4 cSt, while other partly-approved Group III grades remain at €1,375/t-€1,400/t. Some of the latter oils had been supplied to Turkey in flexies from storage in Rotterdam.

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

Middle East Gulf

Quantities of Group I and Group II base oils loading from Yanbu and Jeddah, Saudi Arabia, appear to have decreased since the end of May. Cargoes are still loading for delivery into the West Coast of India, but shipments into Chennai and Kolkata are missing from the shipping information. The start to the monsoon season is almost here, and inclement weather can delay vessels and cause difficult conditions at anchorage and alongside berths.

Cargoes are still moving to the UAE, into ports such as Fujairah, Hamriyah and Jebel Ali. Demand for material from Yanbu appears to be rising – possibly because U.S. refiners are stocking up ahead of hurricane season and have less availabilities for export.

The base oil scene is changing in Middle East Gulf regions, with less reliance in United Arab Emirates on Iran for supplies of Group I grades. It is not clear whether this is a matter of choice or whether availabilities are down due to changes in the Iranian market. Iranian barrels were always lower priced than UAE imports from Saudi Arabia and the Far East, but this may also have changed if demand inside Iran is rising.

Fewer export cargoes are loading out of Bandar-e Emam Khomeyni, Iran, and reports suggest Iranian traders are looking to purchase cargo quantities of Group I and II. So far no vessels have been indicated from Luberef out of Yanbu or Jeddah. This is most likely a political decision from the Saudis based on the tensions between the Saudi and Iranian governments.

Indian traders have indicated to this report that they will offer to supply Iran and that transactions will be done on a regular basis, with payments in U.S. dollars through UAE banks. Payments will be guaranteed by issuance of letters of credit.

Multiple sources in the UAE have described severe in Iran regarding availability of spares and parts for refinery and plant maintenance. If true, this could be limiting domestic base oil production and explain Iran coming to the market to purchase rather than export.

Iranian Group I prices were last heard at around $965/t for premium SN500 and $945/t for SN150. These values are offered as indications on an FOB basis.

Recent CIF or CFR prices and offers for Group I base oils going into the UAE are reconfirmed at $925/t-$945/t for SN150, $955/t-$975/t for SN500 and $1,395/t-$1,425/t for bright stock. The latter price reflects the strong demand for this grade. The U.S. has been the main source for Group I imports to the UAE, including a number of recent large cargoes that also delivered to the West Coast of India. Other cargoes have been sourced out of Singapore and Saudi Arabia.

A 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 possibly rising, suppliers such as Lukoil may not be so eager to offer barrels into this market. No sources could confirm this cargo, and none were in position to suggest CIF prices.

Prices in the UAE for Russian base oils were last confirmed in March at $785/t for SN150 and $795/t for SN500, basis CIF Hamriyah port. Price levels will now be much higher.

Limited Group III cargoes are loading out of the UAE, Qatar and Bahrain due to delays and hold-ups to availabilities for cargo quantities. Two large cargoes of around 25,000 tons have loaded to the West Coast of India and Singapore from Qatar and Bahrain. Netbacks for Group III base oils from Al Ruwais, UAE, have risen to $1,225/t-$1,260/t for 4, 6 and 8 cSt.

Netbacks for gas-to-liquids Group III+ base oils loaded ex Ras Laffan, Qatar, are unchanged at $1,255/t-$1,290/t, with cargoes moving into the U.S., India and Singapore. These numbers are indications only. FOB netbacks are estimated from distributor selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Group II base oils coming into U.A.E. are arriving in greater quantities and in greater frequency, showing that demand for these grades is increasing. These oils are imported from the Red Sea, the U.S., South Korea, Europe and Singapore and are resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman.

Prices are again unchanged at $1,425/t-$1,475/t for 110N, 150N and 220N and at $1,510/t-$1,555/t for 600N. The highs of the ranges refer to RTW deliveries to buyers in the UAE and northern Oman. Sales are conducted in UAE dirhams or U.S. dollars. The dirham is pegged to the dollar and has an exchange rate of AED 3.67.

Group III base oils from Al Ruwais and Sitra, Bahrain, are being delivered into Sharjah, Dubai and Fujairah, UAE, either in small local vessels or, in the case of Adnoc oils from Abu Dhabi, by road tanker. A source in Sharjah confirmed prices around $1,325/t for 4 cSt, $1,335/t for 6 cSt and $1,365/t for 8 cSt, all on an FCA basis Hamriyah or delivered around the UAE and Oman. Deliveries incur an RTW charge of $20/t-$55/t.

Prices ex works from producers Adnoc and Bapco are not available, hence prices above include a reseller margin of around $45/t to cover storage, handling and profit margin

Africa

In Egypt, the tender for supply of bright stock to EGPC is being renewed by appointing Luberef as the provider. Following the closure of Eni’s refinery in Livorno, Italy, there is a limited list of approved suppliers taking part in offers for this contract. Traders are largely excluded, and regular supply of bright stock is becoming the realm of majors and national suppliers.

Further investigations have reconfirmed that Homs refinery in Syria will not reopen and that the port of Lattakia is being used for the import of Group I base oils to blend finished lubes for the domestic market.

This report is still awaiting shipping news on a new fixture for a vessel to carry a large base oil cargo from Rotterdam and Fawley, U.K., to Durban, South Africa.

All appears quiet for further cargoes to be discharged into Guinea, Cote d’Ivoire or Ghana after the recent delivery into Tema, Ghana, under the Ghana tender contract. One more composite cargo may be arranged before the start of the rainy season, which is now only weeks away.

Reports indicate large quantities of base oils are still in tank in Apapa port in Lagos. The recent arrival of another trader cargo, carrying Russian grades, may be one of the last arrivals until September. Russian and U.S. material is being resold to blenders around the country. Resellers are moving as much of the in-tank material as possible before the rainy season starts.

A previously mentioned cargo of Russian base oils has arrived in Apapa. This cargo was loaded prior to the rumors of shortages and rising prices, so it will be interesting to see if Russian cargoes are still being considered. Nigerian buyers may be facing dilemma – or at least higher prices – if availabilities of Russian material decrease or prices for that material rise to levels of U.S. oils.

The Nigerian naira’s official exchange rate to U.S. dollars fell to NGN 1,560.

Nigerian prices for U.S.-sourced Group I are unchanged 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.

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

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