Converting Group I capacity to Group II or lll is not a simple exercise, requiring considerable investment and construction and commissioning of new units. For example, Shell is converting its Wesseling, Germany, refinery into a Group III unit. Construction started earlier this year, and operations are expected to begin in 2028.

More upgrades will possibly follow in years to come, with a general move away from Group I base stocks to premium grades.

However, Group I base oils are still forecast to be around for some years to come as many blending operations depend on availability of these grades. Formulations may change and additive packs may be updated, but there will still be a role for Group I base oils in Europe for some years to come.

Whist it is widely acknowledged that there will be a general move to premium base stocks over the coming years, many industry pundits maintain that all types of base oils will continue in production, although the ratio of Group I products to premium grades will gradually decrease as time moves on, with a new generation of finished lubricants requiring higher specification base oils to meet environmental and technical standards.

Meantime, around Europe, the Middle East and Africa, business and trade continues to flourish, with most markets showing healthy demand following the summer period when markets slow due to holidays and weather patterns such as the rainy season, monsoon and tropical storms.

Industry reports are that demand throughout all three regions is rising and is back to levels last seen in 2019. This is in spite of geopolitical tensions running high in the Middle East and Eastern Europe. Availability of all types of base oil remains positive as markets respond to demand. Economic growth is still missing from some parts fo the market, such as Europe, but areas of the Middle East and Africa are taking up the slack in terms of demand.

Base oil prices may still face downward pressure through the rest of this year, although markets are so far holding up better than some sellers expected. Prices are eroding gradually rather than falling dramatically, and with crude and feedstock prices remaining relatively static, this scenario could continue through the rest of 2025.

Sellers are able to offer discounts for prompt sales of Group I and II material. Group III prices remain stable at current levels, with little downward pressure in evidence for these grades. Some distributors of Group III are recovering stock positions following replenishment cargoes reaching markets that had been deprived during the summer months, leading to a tight supply scenario throughout Europe.

Crude and Gas Oil Prices

Crude prices are forecast to soften during the coming months, but these predictions have been in place for a number of months, with little evidence of any movement in crude values. Production is being ramped up by OPEC+ members, and this may ultimately cause prices to fall. If large economies emerge from slumps, though, it could create upward pressure.

Dated deliveries of Brent crude: $67.45 per barrel, November front month
West Texas Intermediate: $63.30/bbl, October front month
European low-sulphur gasoil: $696 per metric ton, October front month
Source: London ICE late Sept. 15.

Europe

European Group I prices continue to dip, with considerable inventories at refineries and in third-party storage. This is prompting sellers to discount prices to achieve prompt sales, producing lower FCA and FOB prices.

A couple of sellers in the Mediterranean actually tried to push numbers higher, but this was relatively unsuccessful, buyers having countered offers of lower numbers. Demand picked up over the past couple weeks, but is unclear whether this can offset the downward pricing pressure.

Sellers may look for export sales, but these would have to be at considerably lower prices than domestic numbers. Sellers may not be prepared to sacrifice margins to make these sales, and even then, the opportunities are limited for export sales, since many markets are currently out of the question, such as the United Arab Emirates and the West Coast of India, due to the higher freight rates involved with detouring around Africa to avoid Red Sea problems.

Export levels would have to be assessed at around $725/t for solvent neutral 150, $800/t for SN500 and bright stock possibly below $1,200/t, say around $1,185/t, all on an FOB basis Mediterranean. Sellers seem unlikely to go for that.

FCA levels remain unchanged but with Eastern European levels subject to discounting.

Group I Prices

Exports, FOB
SN150: $720/t-$745/t
SN500 : $785/t-$800/t
Bright stock 150: $1,175/t-$1,200/t

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: $885/t-$925/t
SN500: $965/t-$1,020/t
Bright stock 150: $1,340/t-$1,385/t

Eastern Europe,  FCA (“Posted” levels that may be discounted)
SN150: €966/t
SN500:  €1,021/t
Bright Stock 150: €1,352/t

Pan-European, FOB/FCA basis
SN150: €745/t-€775/t
SN500/600: €820/t-€845/t
Bright stock 150: €1,165/t-€1,225/t

Pan-European prices are assessed with representative numbers from Poland, France, Germany, Benelux, Iberia, Italy, Greece and the United Kingdom. The euro’s exchange rate with the U.S. dollar was at $1.17594 Monday.

European Group II prices are not moving lower quickly, but are continually subject to negotiations by buyers looking to get lower numbers than previous purchases. Sellers are prepared to offer lower levels in return for prompt sales of large quantities of light and heavy grades.

Buyers continue to cite the large differential between Group I and Group II prices, along with the large premiums Group II grades continue to carry compared to distillate and crude levels. European Group II prices remain higher than levels in other regions, providing an incentive for importers and resellers to move large quantities into Europe.

Group II prices, FCA basis
110N/150N: €920/t-€955/t
220N: €945/t-€975/t
600N: €1,085/t-€1,110/t

Prices potentially refer to a wide range of Group II base oils that can be sourced from Europe, the U.S., the Red Sea and Asia-Pacific. Ranges refer to bulk shipments, though smaller quantities can be imported in flexi-tanks.

Group III demand remains good, particularly for 4 centiStoke product, which remains scarce; distributors are still selling out on all available stocks. Material is now becoming available from a number of cargoes that have been arriving into Northwestern Europe over the past few weeks.

Distributors are trying to maximize cargo quantities and increase the frequency of parcels arriving into Europe, although this is being tempered by limited availabilities from producers.

One supplier states that shipping problems are slowing its deliveries of Group III grades from South Korea. This supplier previously negotiated contracts at extremely low prices and currently remains to meet those levels FCA sales of cargoes being delivered. But that obligation lasts only until completion of the contract period.

Group III Prices

Oils with partial slates of finished lube approvals, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe
4 and 6 cSt: €1,070/t-€1,100/t
8 cSt: €1,125/t-€1,145/t

Fully-approved, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 and 6 cSt: €1,675/t-€1,715/t
8 cSt: €1,725/t-€1,740/t

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: $995/t-$1,045/t, basis FCA Germany.

Note : Base oils are also purchased on a delivered basis, CIF the east coast of the U.K.

Baltic Sea

Group l, II and III from Europe and the U.S. are being delivered into the Baltic States by road tanker, but the occasional marine cargo also discharges in ports such as Riga and Liepaja, Latvia, or Klaipeda, Lithuania.

Lukoil cargoes of Russian barrels load out of the Baltic from St. Petersburg. Many of the cargoes loading out of the Baltic are imported into Turkey, with vessels calling at Gebze, normally carrying around 5,000-6,000 tons of mostly SN150 and SN500.

Accurate Baltic prices for Russian Group I export cargoes cannot really be established, but if cargoes are discharged in Turkey or Nigeria, CIF/CFR prices will be released by importers, customs officials or shipping agents. Taking freight rate ideas from shipbrokers, approximate FOB prices can be worked out.

Notional prices for Russian exports, FOB St. Petersburg
SN150: $625/t-$655/t
SN500: $660/t-$685/t.

Black Sea & Turkey

The Turkish economy is struggling, and without a buoyant tourist trade, the country would have gone to the wall some time back. Inflation is rife, and the exchange rate for the Turkish lira is in freefall against major currencies such as the dollar.

Banks cannot fund lending, which limits imports of goods such as base oils being sourced from suppliers like Motor Oil Hellas or ExxonMobil. Buyers are unable to open letters of credit due to restrictions on foreign currency lending.

Russian base oils are prominent on import schedules, though, apparently because of a government-backed scheme that pays suppliers such as Lukoil, Rosneft and Bashneft.

Rosneft CIF/CFR price levels were heard a couple of weeks back at $590/t for SN150 and $655/t for SN500. Normal economics would place these levels below feedstock cost. Why Rosneft prices are so low is an unknown, since Lukoil prices from the Baltic around $100/t-$150/t higher. Freight is higher from the Baltic.

Turkish buyers are still holding out hope to buy quantities of U.S. barrels of Group I and Group II base oils through a trader. No cargoes have been announced, and there are no reported vessels being chartered out of the U.S. Gulf of Mexico or Atlantic coasts. Receivers are looking for levels pitched just above Russian numbers when values for U.S. base oils are around $300/t higher.

Turkey Prices

Group I from Lukoil, CIF/CFR Gebze
SN150: around $835/t
SN500: around $850/t

Rosneft and Bashneft, CIF/CFR Gebze
SN150: $590/t
SN500: $655/t

Tupras Group I, ex rack Izmir refinery
Spindle oil: Tl 35,035/t plus value added tax of Tl 8,904.44/t
SN150: Tl 29,849/t plus VAT Tl 7,867.24/t
SN500: Tl 32,969/t plus VAT Tl 8,491.24/t
Bright stock: Tl 52,094/t plus VAT Tl 12,316.24/t

Sales incur a standard loading charge of Tl 9,487.20/t.

Group II, ex-works
110N and 220N, Russian origin: $995/t
350N, blended or from alternative source: $1,155/t
150N, from Taiwan or Saudi Arabia: $1,030/t
500N/600N, from Taiwan or Saudi Arabia: $1,275/t

Partly-approved Group III
4 cSt from Tatneft, FCA: €928/t

Fully-approved Group III from Spain, CIF Gemlik
€1,825/t-€1,855/t.

Middle East

Cargoes continue to load from Yanbu and Jeddah, Saudi Arabia. Yanbu supplies Group I and Group II base oils, whilst the Jeddah refinery now produces only SN150 and SN500. A 3,000-ton parcel of bright stock has loaded from Yanbu for Alexandria. This is a regular continuous supply under the EGPC contract.

The Houthi stronghold in Sanaa continues to be targeted by the IDF in response to missiles being launched against Israel from Yemen. Unknown sanctions were imposed by the U.S. following continuing attacks on shipping and drone launches from Yemen targeting Israeli civilians.

The Houthi leader was killed in air strikes by Israeli warplanes, but it is unknown what effect on the Houthis this development will have.

Supplies of Group I and Group II base oils are being sold into the UAE from sources in the U.S. European sellers are also poised to try to place cargoes into the UAE, combining with supplying on the same vessel into Mumbai anchorage. The major problem from Europe is that the voyage time is extended due to sailing around the Cape, rather than through the Red Sea and the Bab-al Mandeb Strait, where the Houthis are still active in targeting international shipping with drones and missiles.

Also with the shipping from Europe, freight rates are higher, taking FOB prices exceptionally low, to levels that many suppliers are unwilling to commit to. It would appear then that U.S. cargoes are the preferred option for Group I and II base oils moving into the UAE.

A couple of the traders are regular suppliers to Nigeria where the market is currently almost impossible. Traders are better spending time, effort and money in sending cargoes to the UAE, where trading is done on a regular commercial basis, with banking and payments secured against letters of credit.

Demand is rising in the UAE, with traders and receivers scouring markets east and west for opportunities to purchase Group I and Group II  oils.

There are a number of combination cargoes loading, with Group I and part Group II base oils loading on the same vessel. Both types of base stock are being delivered to the same receivers, who use both types of base oils in blending for export and the local markets around the Middle East Gulf.

Iranian cargoes appear to have halted, with sources in Sharjah, UAE, relating to this report that suppliers in Iran have not been in the base oil market for the past few months. It is said that most of the production of Group I base oils is going into the domestic market, with Group II and Group III imports also figuring in the supply picture for Iran.

Indian receivers have confirmed taking delivery of a parcel of around 4,500 tons of rubber process oil from traders who use storage in Ras al Khaimah, UAE. This material is certainly of Iranian origin.

UAE Prices

Group I, CIF/CFR UAE ports
SN150: $895/t-$935/t
SN500: $965/t-$1,000/t
Bright stock: $1,245/t-$1,275/t

Group I cargoes are purchased from traders based in the U.S. and Europe, some of whom have representation in the UAE.

Group II, FCA or on an RTW basis UAE and Oman
110N, 150N and 220N: $1,375/t-$1,410/t
600N: $1,455/t-$1,500/t

Group II base oils imported into the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore are resold ex tank UAE, or on a truck-delivered basis throughout the UAE and parts of Oman. The highs of the ranges refer to RTW deliveries. Deliveries are made by distributors who purchase base oils directly from Luberef, and from U.S. and European majors and traders.

Group III, FCA Hamriyah or delivery by RTW in the UAE and Oman
4 cSt: $1,275/t
6 cSt: $1,285/t
8 cSt: $1,310/t

Group III prices include a reseller margin of around $75/t to cover storage, handling and operating margin. RTW deliveries incur a further charge of $20/t-$55/t.

Middle East Gulf Group III base oils sourced from Al Ruwais, UAE, and Sitra, Bahrain, are delivered by sea into Sharjah. These base oils are then offered for resale through an appointed distributor rather than on a direct basis from Bapco or Adnoc.

Group III cargoes from Al Ruwais and Sitra are also shipped to supply distributors in the U.S., Europe, India and China. Receivers in Thailand have bought a cargo from Al Ruwais. These cargoes are sold FOB to distributors who have the responsibility for shipping, storing and reselling on arrival in the various markets.

Group III netbacks from Al Ruwais and Sitra are similar, with almost identical economics applying in both production centers. Netbacks are assessed between $1,030/t-$1,055/t for 4, 6 and 8 cSt Group III grades. These netback levels may also indicate FOB prices from producers to distributors. Netbacks are calculated using selling prices in known markets, less estimated marketing costs, margins, handling, storage and freight.

Netbacks for gas-to-liquids Group III+ base oils loading ex Ras Laffan, Qatar, are assessed between $1,085/t-$1,100/t. Cargoes have been noted moving to Singapore and the U.S. of late. News of a European cargo is awaited.

GTL numbers are given as indications only, since no distributors are involved in this trade and supplier Shell does not disclose information regarding these cargoes.

Africa

Bright stock continues to be regularly delivered into Alexandria, in Egypt. Cargoes of around 3,000-3,500 tons of bright stock load out of Yanbu, supplying contracted volumes under the EGPC tender.

Cargoes and truck loads of Group I base oils are being sold by Naftec in Algeria to receivers in Tunisia and Morocco. These base oils can be used in local North African markets to blend finished lubricants

News from Durban is that a large cargo of base oils will load either during October or November. The cargo of around 20,000 tons will load from Rotterdam and Fawley.

West Africa

The usual supplier will deliver Group I base oils into three ports in West Africa. The cargo will load from Fawley in the U.K. and will comprise of around 9-10,000 tons of three grades, SN150, SN500 and bright stock. The cargo will discharge in Conakry, Guinea, then proceed to Abidjan, Cote d’Ivoire, and finally to Tema, Ghana, where around 5,000 tons of the cargo will be supplied under the Ghana tender. The actual rotation of the vessel is not known.

No more has been heard regarding the move to introduce Group II base oils into Nigeria, announced with Chevron’s appointment of Gapuma Group to handle base oil sales and distribution in Nigeria. It is imagined that the planning and setting up of storage and forward selling will start later this year. Initial quantities may be sent to Nigeria in flexies to start the supply chain.

There is currently a market for premium base oils in Nigeria. Group II base oils will be a niche market in Nigeria, and will only be used by major blenders or toll blends with branded finished lubricants meeting Western standards.

The transition from Group I to Group II base oil will be fascinating to watch, as buyers and receivers in Lagos are currently beating down offers from traders to try to get prices in line with Russian offers. Receivers are refusing to pay higher numbers for U.S. or European base oils.

Group I base oils will not disappear from this market but will remain the major base oil used in Nigeria. Group II use will be small compared to Group l, but may grow in time.

Nigerian base oil buyers are looking to replenish stocks from traders at extremely low prices. SN900 is scarce right now, but buyers are unwilling to purchase this grade at what they perceive to be inflated prices. The problem is that when bright stock is used in the blend, the price rises exponentially, making the blended SN900 too high for many of the receivers to consider.

Some buyers are coming back to traders, considering higher offers to purchase U.S. material but traders confirm that they are long way from finally agreeing a contract for the supply of a large quantity of Group I base oils.

Levels requested are repeated at $900/t-$930/t in respect of SN500 and $1,000- $1,025/t for SN900, on the basis of CFR Apapa. Traders are walking on these numbers and telling receivers that they cannot do business at these levels.

The Nigerian naira’s black market exchange rate is NGN 1,507 to the dollar, as of Monday.

Nigeria Group I prices, CFR Apapa
U.S. quality base oils
SN150: $880/t-$910/t
SN500: $920/t-$940/t
SN900: $1,075/t

Russian origin base oils
SN150: $880/t
SN500: $930/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.

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