The outcome of the deal will become apparent over the next few months, affecting sectors such as automotive and luxury goods, and will rate the EU on a higher tariff base than the U.K. which will ‘enjoy’ an across board tariff of 10% on all goods except steel and aluminium, which are currently subject to 25% tariffs, but which may be negotiated during the next few days according to Mr Trump on Monday this week.

The effects of increased import duties on vehicles will affect the lubricant industry, with a lower number of cars and vehicle parts being imported into the U.S. This will have far-reaching effects in economies such as Germany and France, where a large proportion of exported automotive are produced. Lubricant factory fills will be reduced, requiring less base oils and additives to cover finished lubricants for these end uses.

The boffins in Brussels are calculating impactss now, and these forecast figures may make for some grim reading over the next few weeks, when the realization takes shape of just what the outcomes of these tariffs will be.

A number of blenders were contacted and discussed potential impacts in terms of worst case, middle ground and best case scenarios. Some opined that a 15% levy is a scenario that can be coped with, whilst others were more pessimistic, adopting a view that in the long run it may have serious negative implications for the European export markets. It certainly appears the U.S. Treasury will be a major beneficiary, raking in millions of dollars from the tariffs. Longer term effects such as inflation and a downturn in trade for U.S. importers may also evolve over the coming months should import levels hold up. Time will tell.

From a geopolitical standpoint, two important factors have come out from Mr. Trump’s golfing vacation in Scotland. The first is a new ultimatum to Russia, which was given 10-12 days to come up with a peace solution to the war with Ukraine. Trump announced this time limit on Monday. The second political item is the situation in Gaza, where the U.S. has said that it will take action to set up feeding stations and improve aid supplies.

These may not seem directly relevant to base oil trading, but the Russian-Ukraine situation could impact crude and petroleum products prices, possibly pushing base oil prices higher. The Middle East situation could affect supply chains and may impinge on supplies of base oils and lubricants moving into the regions affected by the conflict.

Across European, the Middle East and Africa, there is a general slowing in most base oil markets with the onset of the holiday season starting in August. Many blending operations in the regions are shortening working times, with some actually closing for two to three weeks during August. This year such actions are seen not only in Europe but also in the Middle East Gulf and Africa. The overall economic malaise is affecting all parts of the regions, with only a number of small pockets of activity where base oil trade is booming.

Busy pockets include Eastern Europe, North Africa and Turkey, where base oil markets are progressive and busy at the moment. Sources have suggested that a number of buyers are trying to lay in stocks for a post-holiday demand spike, which some are predicting for September and October, prior to the winter slowdown.

Crude oil levels were generally flat the past seven days as dated deliveries of Brent remained just below $70 per barrel. Brent posted at $69.85/bbl Monday, for September front month settlement, while West Texas Intermediate was at $66.55/bbl, also for September front month. European low-sulfur gasoil prices are relatively stable weakened slightly to $710 per metric ton, for August front month. These values were obtained from London ICE trading late July 28.

Europe

European API Group I base oil demand has dropped off almost altogether, as many players prepare for holidays and a break from a tumultuous first seven months of this year. Prices have softened a little as each week goes by, with lower numbers appearing from sellers.

Sellers are looking demand to rebound in the third quarter, but many have commented that this forecast is more hopeful than realistic. U.S. tariffs should not have a large impact on Group I base oils, since most the automotive slate has upgraded to using Group II and Group III grades. It is true that some blenders remain committed to using Group I.

The arbitrage remains open to move Group I cargoes from the U.S. to Europe, but with European production again on track following a number of seasonal turnarounds, imported cargoes may not be required unless traders see that there are margins to be made. This assumes that prices will remain approximately in the same ballpark as present, with no economic or geopolitical events causing spikes or troughs in values.

Saudi Arabian producers appear to be committed to setting up regular imports into Europe. This activity could add another supply chain dynamic to the European Group I market. Rumors are circulating that another Group I plant could close. Some industry insiders suggest a Group I plant could be upgraded to Group II, but making such a change can be costly.

Despite the stability of crude and feedstock values, European prices for Group I solvent neutrals are weakening except for bright stock which continues offering substantial premiums over diesel. Prices FCA Rotterdam are taken lower, with solvent neutral 500 at $1,025/t and bright stock between $1,525/t and $1,545/t. These prices refer to the relatively small remaining balance of an imported cargo from the U.S. East Coast.

Pan European euro numbers fell again to €800/t-€825/t for SN150, €860/t-€900/t for SN500/SN600 and €1,285/t-€1,330/t for bright stock. The euro-to-dollar exchange rate was little changed at $1.16105 Monday.

Group II base oil prices within Europe are unchanged this week at €950/t-€995 for 110 neutral and 150N, €1,015/t-€1,045/t for 220N and €1,120/t-€1,150/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. Prices pertain to bulk imports, but smaller quantities are sometimes transported in flexi-tanks.

The Group III market seems on an even keel as two replenishment cargoes from the Middle East Gulf cargoes expected to discharge in Antwerp-Rotterdam-Amsterdam between mid-August and mid-September. Additionally, supplies from South Korea and Malaysia are also programmed to hit around that time.

These shipments may temporarily make supply long, but after very low quantities of imports between May and June, these quantities arriving in August will merely fill orders that have been waiting for weeks. Any downward pressure on prices may be minimal and temporary.

Prices for Group III oils with partial slates of finished lubricant approvals are unchanged this week at €1,085/t-€1,095/t for 4 and 6 centiStoke grades and €1,100/t-€1,125/t for 8 cSt, on an FCA basis Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Values for Group III oils with full slates of approvals have stabilized after a gradual run-up and are again at €1,695/t-€1,725/t for 4 and 6 cSt and €1,745/t-€1,760/t for 8 cSt, FCA ex Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

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

Baltic and Black Seas

The EU and allied nations have imposed new prohibitions on imports of refined products made from Russian crude oil, including base oils along with naphtha, jet fuel and diesel. After identifying countries that potentially could be sources of base oils produced in such a manner, this report could not identify instances in which it is actually happening. Indian base oils are not being imported into European destinations, and the only base oil producer in Turkey changed crudes some time ago and no longer uses Urals crude oil.

It is unclear whether the new prohibition applies to finished lubricants made from Russian base oils, but your columnist has posed the question to the EU officials.

Obtaining accurate information about shipments of Russian base oils from the Baltic remains an exercise in futility, but notional values can be estimated based on CIF or CFR prices for shipments received in locations such as Turkey or Nigeria. Therefore, notional FOB prices for Group I exports from St. Petersburg are assessed at $750/t-$775/t for SN150 and $780/t-$795/t for SN500. This is information is gleaned from the latest cargo to discharge in Gebze, Turkey.

Lubricant blenders in Turkey seem to be on a number of missions to procure European quality Group I and Group II from sources in the Red Sea and the U.S. U.S. barrels are scarce at the moment, and laying hands on a quantity that could make up an economically attractive cargo may prove difficult. There are possibilities for smaller quantities being brought in flexies from European suppliers.

A Turkish blender bought two grades of Group I base oils from a Spanish producer. SN600 was sold FOB at around $785/t, with bright stock at around $1,055/t, suggesting that either spec or quality were not ideal. A trader may have acted as a go-between to be able to open a letter of credit for the cargo and charter the vessel.

Prices for Rosneft and Bashneft base oils delivered into Turkey are reported higher this week, at $910/t for SN150 and $925/t for SN500, on a CIF or CFR basis ex Gebze.

Prices for Tupras Group I base oils ex Izmir refinery are unchanged:

Spindle Oil -Tl 35,436/t, plus duty of Tl 8,984/t;

SN150 -Tl 31,872/t, plus duty Tl 8,271/t;

SN500 -Tl 35,004/t, plus duty Tl 8,898/t;

bright stock -Tl 53,306/t plus duty Tl 12,558/t.

These prices are basis ex rack and incur a standard loading charge of Tl 8,199.20/t.

Turkish traders are again offering Group II base oils on an ex-works basis. Prices are $1,100/t for 110N and 220N of Russian origin and $1,275/t for 350N that may be blended or come from another source.

Group II oils from Taiwan or Saudi Arabia are offered at $1,595/t for 500N and $1,275/t for 150N.

Tatneft Group III 4 centiStoke is offered FCA at €1,295/t while other partly-approved grades were priced at €1,375/t-€1,400/t. The Tatneft barrels were openly being touted for sale into EU locations.

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

Middle East

Houthi activity in the southern Red Sea has gone quiet with no reports of attacks on any vessel transiting the Bab-al-Mandeb Strait or the Gulf of Aden. Perhaps the seizure of an Iranian cargo of arms has had some effect on Houthi commanders and their masters in Tehran.

Luberef from Yanbu refinery has been involved in cargoes of Group I and Group II material for European markets, and this trade is currently being assessed as a regular supply. Inquiries are being made for storage rental on a term basis. S-Oil is part of the Saudi Aramco group, and its presence in Europe offers advantage for expanding such trade.

July saw a surge in the number of cargoes moving into Middle East Gulf ports from Yanbu and Jeddah, Saudi Arabia, and from U.S. sources, but Asia-Pacific supplies dwindled during July, perhaps due to the market in that region starting to tighten.

There has been a marked shift in the United Arab Emirates from Group I base oils to premium Group II grades, thanks to UAE blenders adopting U.S. and European standards for finished lubricants. A large proportion of the finished lubricants blended in the UAE are exported to markets in the Middle East and East Africa, where European and U.S. standards and specifications are increasingly required. 

Iran has stopped the loading of base oil cargoes from southern and western ports.  Sources in India have confirmed that there are no Iranian offers for supplies of Group I base oils.

Iranian Group I prices were last heard in June at around $965/t for premium SN500 and $945/t for SN150. These prices are given as indications only.

Group I base oil prices delivered into UAE ports are confirmed at $940/t-$965/t for SN150, $975/t-$995/t for SN500 and $1,375/t-$1,400/t for bright stock, all on a CIF or CFR basis. These cargoes were purchased from traders based in the U.S. and Europe, some of whom have representation in the UAE. An interesting point in the latest prices is that the solvent neutral grades have increased while bright stock fell.

Group III cargoes are loading again from Abu Dhabi and Bahrain, with the latter moving back to full operational capability following an extended turnaround.

Group III base oil netbacks from Al Ruwais and Sitra maintain indications of $1,270/t-$1,300/t for 4, 6 and 8 cSt grades. These levels reflect prices from producers to the various distributors buying on an FOB basis. These levels will remain in place until the new cargoes start to arrive into Antwerp-Rotterdam-Amsterdam from mid-August onwards.

Netbacks for gas-to-liquids Group III+ base oils loading ex Ras Laffan, Qatar, are estimated at $1,255/t-$1,290/t but are offered as indications only. FOB netbacks are calculated using distributor selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Group II base oils are imported into the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore. Yanbu in the Red Sea controls a large percentage of Group II base oils moving into the UAE. These products are resold ex tank or on a truck-delivered basis throughout the UAE and parts of Oman.

FCA prices remain 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 U.A.E. and northern Oman. Base oils are priced either in U.A.E. dirhams, or in U.S. dollars. The U.A.E. currency AED 3.67 to the dollar.

Group III base oils sourced from Al Ruwais and Sitra are delivered into Sharjah, UAE, and offered for resale by a distributor. Even with a short voyage such as from Al Ruwais to Sharjah, quantities are delivered by sea using a small vessel, which appears to be more economical than land route.

Prices are confirmed by the distributor in Sharjah at $1,375/t for 4 cSt, $1390/t for 6 cSt and $1,400/t for 8 cSt, all basis FCA Hamriyah or RTW which incurs a delivery charge of $20/t-$55/t. Group III base stocks may be offered in dirhams. These prices include a reseller margin of around $75/t to cover storage, handling and profit margin.

Africa

Another cargo of around 3,000 tons of bright stock has loaded or is loading on a prompt basis from Yanbu and sailing to Alexandria in Egypt to cover requirements under the EGPC contract.

Samir in Morocco is still in the market for a cargo of Group I SN150, SN500/600 and bright stock. Supplies would typically come from Spanish sources, but both suppliers in Spain may not have the required quantities of each grade to form a cargo. No more news has been heard regarding the possibilities for a cargo from Valencia or from Augusta in Sicily.

As this report is being written, yet another large composite cargo appears to be planned for Durban. This parcel would look to load sometime during August, with a possible arrival into Durban during October.

West Africa is quiet with little activity on deliveries of cargoes into the usual ports in Conakry, Cote dIvoire, Ghana and Nigeria. In Nigeria base oil prices ex tank are still dropping to be able to move material out of tank. The rainy season is affecting all trade and business, causing internal transportation problems for goods and people moving around the country.

Nigerian buyers are looking for cargoes from sources in the U.S. and also from Russian traders, either from Baltic ports or from transhipments through Egyptian ports from Turkey or the Sea of Azov. Nigerian buyers are being told that their price expectations are unrealistic and that presently no availabilities will be forthcoming from the U.S. Receivers in Lagos are looking for low prices with can compare with Russian barrels delivered into Apapa, some months ago. The markets have changed, though, and even with slightly weaker prices for Group I barrels in Europe, there is no way that export cargoes could be considered from any European source.

Receivers are also surprised that traders are not able to offer U.S. barrels at this time, but prices requested by buyers are far too low and cannot be considered as serious. Levels being talked and requested are $900/t-$920/t for SN500 and $1,000/t-$1,025/t for SN900, basis CFR Apapa port in Lagos.

The Nigerian naira official exchange rate to the U.S. dollar is unchanged at NGN 1,530.

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

Russian origin barrels of Group I base oils are indicated at $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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