Buyers are very aware that the ceasefire between the two nations is tenuous to say the least and are trying to prepare in case hostilities resume. Buyers in United Arab Emirates, for example, are keen to replenish inventories while they can.

Similarly, Israeli buyers are busy organizing base oil purchases from suppliers in the Mediterranean, given the current window allowing vessels to safely enter Israeli ports. Base oils are much needed in that country following the recent weeks of strikes and counterstrikes. Supply chain logistics are far from normal, but a respite from aerial bombardment will allow quantities of all types of base oil to enter the Israeli market, providing material for the production and manufacture of finished lubricants, without which the Israeli economy could grind to a halt.

Availabilities are ample for all types of base oil being sourced from Europe, the Middle East and the U.S., although Group III remains tight for supplies going into this region, as it does for Europe.

Base oil prices remained surprisingly stable during and after the hostilities, with no signs of any spike from the conflict. Crude oil and petroleum product prices have retreated to levels seen prior to the conflict, and were steady since the U.S. launched its own strikes.

With little upward pressure being brought on base oil prices, and with arbitrage opportunities open from Asia-Pacific and U.S. sources, trade has picked up and may continue up until the holiday season starts in Europe and the Middle East during August.

In Europe, Group II imports have been playing a major role in the supply scene as large cargoes moved from the U.S. Gulf of Mexico coast to Antwerp-Rotterdam-Amsterdam during May and June. With local production of Group II grades running according to plan, the European market is well prepared for any demand spike between now and August. Last week sources suggested that the peak season for base oil demand in Europe may be happening later than normal, with demand on starting to really pick up during the last couple of weeks.

Group I supplies are adequate thanks to an influx of imports from the U.S. and the Red Sea, bolstering local production.

Dated deliveries of Brent crude fell back to $67.55 per barrel Monday, still for August front month settlement. Such levels were last seen during May and early June. The West Texas Intermediate dipped to $65/bbl, also for August front month, once again narrowing the crack between the benchmarks to $2.50/bbl.

European low-sulfur gasoil prices fell around $50 to $674 per metric ton, for July front month. All of these prices were obtained from London ICE trading late June 30.

Europe

Group I demand varies around Europe, with Mediterranean buyers in Spain and Portugal keen to purchase large quantities of Group I base oils from local and slightly more distant sources. Northwestern Europe is balanced, even for bright stock, thanks to imports. Market sources expect this trade may continue as long as the arbitrage is open from sources in the U.S. and the Red Sea.

With a modicum of stability returning to the Middle East, there seems to be little pressure prices except for bright stock, which remains tighter than heavy solvent neutrals. Light neutrals are freely available across Europe.

A cargo from the western Mediterranean has now loaded for a partial discharge in Haifa. A vessel was chartered speedily, and the cargo ss due to load any day now.

It seems likely that the relatively small differential between light-viscosity Group II grades and Group I solvent neutral 100 and SN150, blenders are opting to use Group II grades, which are generally considered of higher quality.

Market players predict the market to remain relatively balanced into the fourth quarter.

Bright stock supply remains tight in Europe, but there appears to be enough availability to satisfy demand, though buyers are paying proportionately higher prices for this grade. The Group I premium over diesel has narrowed, but analysts expect distillate prices to fall.

Prices for Group I sales FCA Rotterdam are unchanged at $1,035/t for SN500 and $1,545/t-$1,565/t for bright stock.

Pan European euro numbers are also unchanged at €825/t-€875/t for SN150 and €885/t-€925/t for SN500 or SN600. Bright stock sells at a significant premium to solvent neutral grades in a range of €1,320/t-€1,375/t.

The euro’s exchange rate with the U.S. dollar rose to $1.17469 Monday.

Group II base oil prices around Europe are steady, having not changed for approximately two months. Margins had been squeezed during the period when distillate price moved higher, but that period appears to be in the past as distillates returned to levels last seen around the end of March. This could relieve any upward pressure on Group II values.

Some sellers are offering “special discounts” to selected customers, whilst maintaining higher levels for others. This two-tier approach seems to appease the “upper echelon” of buyers who expect to benefit from larger purchases. On a weighted basis, larger quantities of material are being sold at the low ends of the ranges, so the mean prices are being eroded by selling larger quantities of Group II base oils.

Group II values in Europe remain assessed at €980/t-€1,045/t for 110 neutral and 150N, while 220N is at €1,055/t-€1,090/t and 600N at €1,135/t-€1,200/t. These rates apply to a wide range of Group II oils from Europe,the U.S., the Red Sea and Asia-Pacific. For imports the prices pertain to bulk shipments, but smaller quantities are transported in flexi-tanks.

The European Group III market is extremely short of material, with 4 centiStoke being a rare commodity. The European market has seen few cargoes arriving over the past few months, contributing to lower availabilities at a time when Group III base oil demand may be rising across Europe.

Available barrels of 4 and 6 centiStoke oils are being supplied to contracted customers only; spot purchases are not possible. This situation will continue until September when new shipments arrive from a Middle East Gulf source.

If available, Group III oils with partial slates of finished lubricant approvals would be priced at €1,085/t-€1,120/t for 4 and 6 cSt grades, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. Eight cSt, also where available, is assessed at €1,135/t-€1,150/t, on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

There are no signs of Group III grades being dispatched from Sitra, Bahrain, exacerbating Europe’s shortage of partly-approved Group III oils. The European distributor of those oils may have access to a some amount of gas-to-liquids Group III from Qatar, which will be much higher priced, but this availability is believed to be limited and cannot replace a cargo of material from Sitra.

Other suppliers sourcing material from Asia-Pacific continue to experience shipping delays, with no news of cargoes arriving into Antwerp-Rotterdam-Amsterdam.

Prices for Group III oils with full slates of approvals have risen, perhaps due to tighter supplies of partly-approved grades. Prices for the former are now at €1,685/t-€1,720/t for 4 and 6 cSt and €1,740/t-€1,755/t for 8 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Group III buyers may be turning to available fully-approved Group III base oils due to being unable to purchase regular quantities of partly-approved oils. This may be a short term fix but will cause upward pressure on prices for fully-approved grades.

Prices for rerefined Group III grades are unchanged at $1,035/t-$1,075/t for 4 and 6 cSt, FCA rerefinery in Germany.

Baltic and Black Seas

There are now more doubts about the existence of a previously mentioned cargo that was supposed to have been loaded out of St. Petersburg with around 6,000 tons of Lukoil base oils. The cargo was supposed to load around mid-June and arrive into Gebze, Turkey, at most four weeks later. Local sources in Turkey cannot confirm if any cargoes will be discharged during the next three weeks. Further inquiries will be made to establish if this cargo actually sailed from the Baltic.

Putting numbers on Russian Group I export prices is impossible, but a cargo such as this could shed some light once it discharges in a Turkish port, which triggers disclosure of CIF prices. Without such information your columnist is back to guesstimating.

Hypothetical FOB prices ex St Petersburg are indicated around $750/t-$775/t for SN150 and $780/t-$795/t for SN500.

Russian base oils are moving into Turkey but in lower quantities than previously seen. The Turkish market was swamped with Russian barrels, but now traders are searching for alternative Group I sources. Europe may have material available, for example from Motor Oil Hellas in Greece, but the Greeks recently only had flexie quantities available, and these were deemed too expensive.

Uzbek base oils may be available, but the range of viscosities is limited. Iranian material was arriving cross border from Iraq into eastern Turkey but may no longer be available due to domestic requirements in Iran.

Domestic demand within Russia has been prioritized recently, and third-hand information indicates prices within Russia had risen. There may be problems within Russia’s refining industry. Several sites went through maintenance shutdowns recently, and there is still talk of shortages of spares and replacement parts.

There are indications of Russian base oils being offered in Turkey at $895/t for SN150 and $920/t for SN500, but no information is offered about delivery dates, so the offers are deemed invalid. SN900 is not available.

Delivered prices for Rosneft Group I grades were suggested at $855/t for SN150 and around $875/t for SN500, on a CIF basis ex ports such as Gebze, but these values apply to material that has been in tank for some time and may not reflect present day pricing.

Prices for Group I base oils from the Tupras refinery in Izmir refinery are unchanged: 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. These prices are basis ex rack Izmir refinery and incur an additional loading charge of Tl 8,199.20/t.

Rumors are also floating of a sale tender out of Aliaga, Turkey, but quantities and other details are not yet available. If the above ex rack prices apply but are converted to dollars then prices will be very high given the exchange rate of Tl 38 to the dollar.

Group II sales by Turkish traders on an ex-works basis are offered on a two-tier basis, with the lower prices for Russian imports: $1,125/t for 110N and 220N and $1,315/t for 350N. Higher specification Group II from Taiwan or Saudi Arabia is offered at $1,655/t for 500N and $1,295/t for 150N.

Group III 4 cSt from Tatneft in Russia is offered at €1,275/t but partly-approved Group III from other sources is offered at €1,375/t-€1,400/t. Availability of the latter is low.

Fully-approved Group III grades ex Cartagena, Spain, are delivered into Gemlik in small quantities of 800 tons to 1,200 tons. Prices are estimated at €1,825/t-€1,855/t, on a CIF basis.

Middle East Gulf

Group I and Group II base oil cargoes are loading from Yanbu and Jeddah, Saudi Arabia, including large shipments for receivers on the West Coast of India, mainly Mumbai anchorage and Jawaharlal Nehru Port terminal in the same port. Vessels continue to transit the Bab-al-Mandeb Strait in the Red Sea seemingly without problems from Houthi attacks. The latest status of the Houthi ethos is that they have fired missiles into southern Israel, but missiles were intercepted by Israeli defences.

There are reports that Israel is preparing to launch a massive attack on Houthi positions in Yemen, hoping to wipe out further threats from this quarter.

Other Saudi Arabian cargoes are bound for South Africa and Singapore, Egypt, Jordan and Europe.

The region is taking some respite from hostilities between Israel and Iran, with the latter reportedly repairing damage to nuclear sites incurred during U.S. bombing. The fragile peace continues with many players in surrounding countries relieved to have avoided big disruptions like the Strait of Hormuz closing.

News from sources in United Arab Emirates have confirmed that a refinery was damaged in Isfahan. The extent of the damage is unknown, but traders have said that base oil production has been affected.

Iranian sellers have stopped loading base oil cargoes from any of the southern and western ports such as Bandar-e Emam Khomeyni. The Indian source from Haldia has reconfirmed that no cargoes of base oil would be available for the foreseeable future, hinting at damage preventing sellers such as Sepahan from earning foreign currency in the form of dollars.

Iranian Group I prices were last heard at the end of May at around $965/t for premium SN500 and $945/t for SN150. These prices will no longer be valid.

Prices and offers for Group I base oils being delivered into UAE ports have been confirmed at $925/t-$945 for SN150, $955/t-$975/t for SN500 and $1,395/t-$1,425/t for bright stock, on a CIF or CFR basis. These cargoes were purchased from traders based in the U.S., and also a European registered trader with representation in the UAE.

Most vessels that were carrying base oil cargoes for receivers in the UAE have been routed back to original voyage plans, although two vessels were diverted, one discharging in Durban, South Africa, and another proceeding to Singapore to deliver the cargo to an alternative receiver.

Russian base oil cargoes do not appear to have come into Hamriyah, UAE, since March. Why this practice has completely stopped is not clear, but last week one trader confirmed that a cargo was en route from Turkey with a quantity of Group I base oils for Hamriyah and Fujairah. It is assumed that this cargo will be of Russian origin, but quantities and grades were not discussed.

Netbacks for Group III base oils from Al Ruwais, UAE, are higher this week at $1,270/t-$1,300/t for 4, 6 and 8 cSt grades.

During May, large cargoes of GTL Group III were loaded out of Ras Laffan, Qatar, sailing to India and the U.S. Netbacks remain indicated at $1,255/t-$1,290/t. FOB netbacks are estimated using distributor selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Group II base oils are imported to the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore, then are resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman. FCA prices are 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 locations in the UAE and northern Oman. Sales are conducted either in UAE dirhams or U.S. dollars. The former currency’s exchange rate is pegged at AED 3.67/dollar.

Group III base oils from both Al Ruwais and Sitra continue to be delivered into the UAE, but there have been no cargoes moving from Bahrain over the past couple of months, with traders in Sharjah commenting that they are low on availabilities for this supply.

UAE Group III prices are unchanged at $1,335/t for 4 cSt, $1,350/t for 6 cSt and $1,375/t for 8 cSt, all on an FCA basis Hamriyah or for truck delivery around the UAE and Oman, which incurs an RTW delivery charge of $20/t-$55/t. Prices ex refinery in Al Ruwais and Sitra are not available. The prices above include a reseller margin of around $45/t to cover storage, handling and profit margin.

Africa

The next parcel to load for Durban discharge is loading, giving an ETA into Durban around the end July or beginning of August. The vessel will load from Rotterdam and Fawley, U.K., with around 18,500 tons of various base oils and a small quantity of chemicals, which may be polyalphaolefin.

Nigeria reports describe a very quiet market, with not much activity of note at the moment. Base oil prices are continually being discounted for sales ex tank or on a delivered basis, but trade is slowing due to the rains, and no sourcing for new cargoes is taking place.

Prices being talked are way out of touch with buyers looking to be offered U.S. material at extremely low prices. Numbers being quoted are around $900/t-$920/t for SN500 and $1,000/t-$1,025/t for SN900, on a CFR basis ex Apapa. Some say such expectations are out of touch with what is happening and has happened to international price levels.

U.S. sources have no availability right now as refineries are building inventories against hurricane season and in the wake of a number of maintenance turnarounds on the gulf coast. Another limiting factor is that bright stock prices have leapt upwards, making blended SN900 very expensive to concoct. SN900 could eventually become short after he rainy season and could be priced much higher, which will have to be paid if receivers in Nigeria want to take this grade as part of a cargo to resell in the lubricants market.

One trader who tends to operate out of Turkey and Egypt may offer for a cargo to arrive in August. This trader delivered a cargo into Apapa during theplast few weeks.

A vessel that delivered a quantity of base oils into Apapa has left the anchorage at Lagos and has apparently sailed for Luba in Equatorial Guinea. As far as can be established the cargo remains on board and is unlikely to discharge in Luba, but the vessel may be calling that port for victualling and crew change.

The official exchange rate for the Nigerian naira was NGN 1,543 to the dollar this week.

Nigerian prices for the Group I oils most recently sourced from the U.S. gulf coast remain at $890/t-$910/t for SN150, $920/t-$940/t for SN500 and $1,040/t-$1,070/t for SN900, on a CFR basis ex Apapa port, but these levels would not square with current U.S. FOB prices.

Prices have risen for Russian base oils imported from Russia and Egypt, to $885/t for SN150, $929/t for SN500 and $995/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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