Against a backdrop of a continent on holiday, the European base oil markets appear to have been energized by a bout of activity that would normally be described as unusual for this time of year.
Some players are commenting that this is the storm before the lull, as many participants in the base oil trade planning on leaving the offices toward the end of this week. Many others have already flown the coup and will not return to their desks until near the end of August.
The surge in trading activity seems to stem from increased demand for API Group II and Group III base stocks, with a number of buyers moving to cover requirements in the shorter term rather than wait until after the holiday season. Some are exercising caution in light of United States President Donald Trump’s ultimatum to Russia to end the war in Ukraine.
There are adequate stocks of Group II grades in storage to cover the mini spike in sales, and even Group III distributor inventories in Europe are recovering with the arrival of cargoes from the Middle East Gulf and Asia-Pacific.
Trump’s edict could result in rising crude and feedstock prices, which ultimately could lead to base oil prices rising. It is very difficult to call this one, with some buyers saying that they will wait until September before restocking inventories, which many finished lube blenders have allowed to run down to almost critical levels.
This could also lead to a base oil demand spike toward the end of August if buyers decide to restock after the summer holidays.
The U.S. administration could start to impose sanctions and tariffs on countries that are buying crude oil and products from Russia. India, one of the biggest buyers, has responded to threats by stating that crude and product supplies are based on term contracts and cannot easily be undone at the drop of a hat – or the issuance of a threatened tariff from Mr. Trump.
That said, three vessels carrying Russian crude have deviated from planned discharging in Indian ports and rerouted to alternative havens. These vessels, operating under Iranian control, have already been sanctioned under U.S. rules.
In Middle East regions, base oil trade has slowed due to many of the principal players leaving the region to take time out with family and friends. Due to the high ambient temperatures in the area, normal working will not restart fully until mid-September, although there are a number of base oil cargoes arriving from sources in the U.S. and the Red Sea, continuing supplies of Group I and Group II base oils moving into Middle East Gulf regions.
The conflicts in Ukraine and Gaza continue to dominate the news, with few signs of either moving toward resolution. The U.S. and other allied nations have been active in both regions, trying to supply Palestinians with aid in Gaza, and pushing Putin to the negotiating table.
Both wars are preventing base oil supply chains for the embroiled zones from functioning as they have historically, but new lines of supply have been formed to maintain the supply of base oils and additives to blending operations in the war zones, ensuring that finished lubricants for both civilian and military use are made available as required.
Crude and Gasoil Prices
Crude oil prices again remained relatively stable the past week, with no wild swings in either direction. The consistency in crude prices over the past five weeks has been unexpected as analysts had forecasted higher levels than seen so far. Crude supplies have been more than adequate in a market where demand is still lagging from major consumers such as China.
Dated deliveries of Brent crude: $69.15 per barrel, October front month settlement.
West Texas Intermediate: $66.65/bbl, September front month.
European low-sulfur gasoil: $684 per metric ton, August front month.
Source: London ICE late Aug. 4.
Europe
European Group I base oil demand has waned, with most buyers purchasing all requirements for August in good time prior to the slower period during holidays. Prices remain at existing levels, with no buyer pressure to push numbers lower.
Sellers are looking to September for demand to return, but U.S. tariffs could start to have an impact on demand for finished lubricants over the next few months. A couple of buyers contacted this report last week to emphasize that Group I base oils still maintain a large share of the automotive slate of lubricants, although there have been moves by some blenders to upgrade to premium base oils with new formulations.
The arbitrage from the U.S. to Europe remains open for Group I cargoes, but with European production back on track following a number of temporary maintenance shutdowns, imports may be held back until the market is assessed going into the fourth quarter. Also, availability of U.S. base oils may be an issue as refiners there work to stock up for hurricane season.
The rumors continue regarding the potential closure of a European API Group I facility, but with conjecture filling most of the conversations around this subject. No specific refinery has been mentioned or nominated.
FCA Rotterdam prices, pertaining to the remaining balance of a cargo imported from the U.S. East Coast, are seen lower, while Pan-European euro prices remain unchanged. Bright stock has come off the highs established a couple months back and shows weaker, though it still retains a significant premium to solvent neutral prices.
Group I Prices, Rotterdam, FCA basis
SN500: $1,010/t
Bright stock: $1,475/t-$1,500/t
Pan-European, FOB basis
SN150: €800/t-€825/t
SN500/600: €860/t-€900/t
Bright stock: €1,275/t-€1,320/t
The euro has weakened, reaching €0.86 to the dollar.
As briefly mentioned above there has been a flurry of activity in purchasing of Group II base oils, but how long this spurt will last is unknown at this time. With the main holiday season starting this week, buying may decline until September, when forecasts are that demand will start to pick up through mid Q4.
Prices are more competitive following recent across-the-board discounting, so buyers may be taking advantage, perhaps concerned that levels could rise in late summer in light of stronger vibes coming from Asia-Pacific markets. Europe maintains higher Group II prices than other regions, though, providing a cushion against such impacts.
Group II prices, FCA basis
110N/150N: €950/t-€995/t
220N: €1,015/t-€1,045/t
600N: €1,120/t-€1,150/t
These values apply to a wide range of Group II base oils from Europe, the U.S., the Red Sea and Asia-Pacific. For imports the ranges refer to bulk shipments, though smaller quantities are also transported in flexi-tanks.
The Group III market in Europe remains steady with prices hovering around previously set levels. There was some expectation that levels might rise following the dearth of imports the past couple months, but recent shipments seem to be priced in the same ballpark as current numbers.
Cargoes for Europe are confirmed, with two from the Middle East Gulf due to discharge in Antwerp-Rotterdam-Amsterdam between mid-August and mid-September. Another large cargo loading out of Ras Laffan, Qatar, may be positioned to supply European receivers. Asia-Pacific is also involved, with cargoes from South Korea and Malaysia expected during August.
Quantities arriving in August will fill orders that have already been placed but were postponed for lack of material. Distributors are announcing that they will continue to only cover regular contracted buyers and will not offer material for spot purchases.
Suppliers and buyers of Group III oils with partial slates of finished lubricant approvals have agreed that prices will remain unchanged for replenishment cargoes arriving in August.
Group III prices, partial slates of approvals, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 and 6 cSt: €1,085/t-€1,095/t
8 cSt: €1,100/t-€1,125/t
Fully approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 and 6 cSt: €1,695/t-€1,725/t
8 cst: €1,745/t-€1,760/t
Fully-approved prices are for FCA sales ex hubs in Antwerp-Rotterdam-Amsterdam and northwestern Europe. Where product is sold on a delivered basis, a premium covering transport costs will be added to the above prices.
Rerefined Group III, FCA Germany
4 and 6 cSt: $1,035/t-$1,075/t, basis FCA Germany.
Baltic Sea
Cargoes of European origin are moving into Baltic states such as Lithuania and Latvia, where blenders are using base oils from Poland and Germany to produce finished lubricants. These blenders traditionally would have used mostly Russian base oils, probably only Group I grades. The European Union, however, recently imposed new sanctions banning the import of petroleum made from Russian crude, including finished lubes made with Russian base oil. Companies and individuals proved to be involved in such activity are subject to substantial fines and arrests. Companies violating the prohibition may be banned from the region, which includes the EU’s 27 member countries plus the United Kingdom and Norway.
Recording and researching Baltic prices for Russian export cargoes of Group I base oils is impossible, but customs or shipping agents disclose CIF/CFR prices for Russian cargoes discharged in Turkish or Nigerian ports, and these – along with estimated freight rates – can be used to estimate FOB rates from Baltic ports.
Notional prices for Russian exports, FOB St. Petersburg
SN150: $750/t-$775/t
SN500: $780/t-$795/t.
Black Sea
Lubricant blenders in Turkey are pursuing avenues to lay hands on U.S. Group I barrels through the auspices of a Swiss based trader. No news has yet filtered through as to trader’s success in finding a cargo.
Small quantities could be bought from a number of European suppliers to be transported in flexies.
Russian base oil imports are back on the menu in Turkey, but the market is slow right now, perhaps because many of the blenders and traders in Turkey are taking a break, holidaying in the south of Turkey as do their Russian counterparts.
Turkey prices
Russian Group I from Rosneft and Bashneft, CIF/CFR Gebze
SN150: around $910/t
SN500: around $925/t
Tupras Group I, ex rack Izmir refinery
Spindle oil: Tl 35,447/t plus Tl 8,986.84/t duty
SN150: Tl 30,261/t plus Tl 97,949.64/t duty
SN500: Tl 34,204/t plus Tl 8,738.24/t duty
Bright stock: Tl 52,506/t plus Tl 12,398.64/t duty
Spindle oil and SN150 prices valid from July 31, SN500 and bright stock prices from July 10. Sales also incur a standard loading charge of Tl 9,487.20/t.
Group II, ex-works Turkish trader
110N and 220N, Russian origin: $1,100/t
350N, blended or from another source: $1,275/t
150N, from Taiwan or Saudi Arabia: $1,275/t
500N/600N, from Taiwan or Saudi Arabia: $1,595/t
Partly approved Group III
4 cSt from Tatneft, FCA: €1,295/t
4 and 6 cSt, other sources, perhaps unavailable: €1,375/t-€1,400/t
Fully-approved Group III from Spain, CIF Gemlik
€1,825/t-€1,855/t.
Middle East
There has been a hiatus of Houthi militant attacks on ships in the Red Sea, but international news groups attribute it to potentially vulnerable ships detouring from the Bab-al-Mandeb Strait rather than the Houthis laying down arms. Whether this is the case or remains to be tested, perhaps by a U.S. aircraft carrier.
Luberef has been sending Group I and II cargoes from its Yanbu, Saudi Arabia, refinery to European markets, and this trade is now being assessed as a regular supply, with inquiries believed to have been made for storage rental on a term basis in Antwerp-Rotterdam-Amsterdam.
Cargoes continue to load for the United Arab Emirates and Pakistan, but not many for Mumbai anchorage, perhaps due to the monsoon season, which will end in the next few weeks.
July saw a large number of cargoes moving into UAE ports from Yanbu, Jeddah, Saudi Arabia, and the U.S., and this appears to be continuing into August. Asia-Pacific cargoes are reduced after FOB firmed – closing or at least limiting the arbitrage between Asia-Pacific and the UAE.
Iran has ceased loading base oil cargoes from southern and western ports Bandar-e Emam Khomeyni or Bandar Abbas, but relatively large quantities of rubber process oil are being exported from Iran going into Ras al Khaimah and then being bridged to the West Coast of India or Ulsan, South Korea. Sources in India have again confirmed that there are no Iranian offers for supplies of Group I base oils, but equally, imports may not be necessary now that Indian refineries are processing large quantities of Russian crude, which is being sold at discounted prices. UAE sources have stated that availability of Indian Group I base oils has risen around 15% – a substantial increase.
Iranian Group I prices in June were at around $965/t for premium SN500 and $945/t for SN150. These prices are given as FOB indications only and will no longer be valid due to the current non-availability of base oils.
Group II base oils are being imported into the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore, though Luberef in Yanbu controls a significant percentage of this trade. Grades are resold ex tank in the UAE, or on a truck-delivered basis throughout the UAE and parts of Oman from various distributors who purchase the base oils directly from Luberef and also from U.S. and European traders.
Group III supplies are again available in the UAE from both Adnoc’s plant in Al Ruwais, UAE, and Bapco’s plant in Sitra, Bahrain. Buyers tend to remain with one sourced supplies, even when Bapco was not producing material for resale.
Group I, CIF/CFR UAE ports
SN150: $940/t-$965/t
SN500: $975/t-$995/t
Bright stock: $1,345/t-$1,370/t
Group II, FCA or on an RTW basis UAE and Oman
110N, 150N and 220N: $1,425/t-$1,475/t
600N: $1,510/t-$1,555/t
Group III, FCA Hamriyah or RTW in the UAE and Oman
4 cSt: $1,385/t
6 cSt: $1,395/t
8 cSt: $1,420/t
Group I cargoes are purchased from traders based in the U.S. and Europe, some of whom have representation in the UAE.
The highs of the Group II ranges refer to RTW deliveries Sales are in U.S. dollars or UAE dirhams, which are pegged to the dollar at AED 3.67.
Group III prices include a reseller margin of around $75/t to cover storage, handling and operating margin. RTW deliveries incur a charge of $20/t-$55/t.
Group III cargoes are loading from Al Ruwais in Abu Dhabi and Sitra in Bahrain. Group III base oil netbacks from Al Ruwais and Sitra are unchanged with indications at $1,270/t-$1,300/t for 4, 6 and 8 cSt. These levels may reflect prices from producers to the various distributors buying on an FOB basis.
Netbacks for gas-to-liquids Group III+ loading ex Ras Laffan, Qatar, are estimated to lie between $1,255/t-$1,290/t. Numbers are given as indications only, since there are no distributors involved in this trade and supplier Shell does not disclose information regarding the cargoes. FOB netbacks are calculated using distributor selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.
Africa
Cross-Mediterranean cargoes continue between Augusta in Sicily and Algiers, Algeria, for Sonatrach who took over the running of the refinery in Augusta from ExxonMobil. At around the same time, ExxonMobil opened a Group I and II supply hub in Valencia.
According to shipping reports more cargoes of bright stock are underway for Alexandria to cover the quarterly requirements under the EGPC contract. The quantities in the past were around 3,000 tons of bright stock per quarter, but this appears to have changed, with the frequency of deliveries stepping up to two or more cargoes per quarter.
A large cargo is planned for Durban, South Africa. This parcel would load sometime during either August or September, with a possible arrival into Durban during October or November. No vessels have appeared as inquiries, although the charterer seems to use the same owners, and indeed, sometimes the same vessels to perform this voyage. The cargo will be around 18,000-19,000 tons in total and may include Group I, Group II and Group III base oils along with a small parcel of easy chemicals, which may be polyalphaolefin.
West Africa remains quiet with no reported cargoes of base oils moving into the usual stops in Guinea, Cote d’Ivoire, Ghana and Nigeria. A cargo of Group I grades – around 10,000 tons – may load from Fawley during the next few weeks to call at Conakry, Guinea; Abidjan, Cote d’Ivoire; and Tema, Ghana. Receivers are probably trying to gauge the end of the rainy season prior to delivery taking place.
In Nigeria, base oil prices ex tank are still being discounted to be able to move material out of tank. The rainy season continues to cause internal transportation problems for base oils 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 transhipments through Egyptian ports from Turkey or the Sea of Azov. Buyers are being told time and again that their price expectations are unrealistic and that no cargoes will be coming from the U.S.
Receivers in Lagos are looking for low prices – $900/t-$920/t for SN500 and $1,000/t- $1,025/t for SN900, on a CFR basis ex Apapa port in Lagos. These levels are below those of Russian barrels delivered months ago when Russian FOB numbers were lower, freight rates were less, and sellers were willing to grants exceptional terms to complete the trades.
Markets across the spectrum have changed since then. Europe is out of the question for export cargoes of the size required to deliver into Nigeria, especially since prices in that region are higher than in export markets. U.S. markets are tighter, and hence higher in FOB prices than previously, and whilst it may be possible to purchase a cargo from one of more sources to get to the quantity required, the prices of bright stock are much higher than earlier in the year, making the blending of a SN900 grade much more expensive.
Nevertheless, receivers are determined that prices from the U.S. should be competitive with Russian levels, and that SN900 should be more competitive than ever. Traders are commenting that they are not going to waste time trying to put together cargoes that will just not work for any of the parties concerned.
The Nigerian naira’s black market exchange rate is NGN 1,524 to the dollar.
Nigerian Group I prices, CFR Apapa
U.S. base oils
SN150: $890/t-$910/t
SN500: $920/t-$940/t
SN900: $1,040/t-$1070/t
Russian base oils
SN150: $885/t
SN500: $929/t
SN900: $995/t
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/
Historic and current base oil pricing data are available for purchase in Excel format.