The Mediterranean regions are showing healthier demand, with Italy, Spain and Greece confirming adequate uptake even as production has returned to optimum levels following maintenance at Spanish refineries and a fire at the refinery at Agioi Theodoroi, Greece. 

In Africa demand is growing for replacement barrels in key markets such as West Africa and South Africa. Seasonality is an important factor in African markets with the onset of the summer months in the Southern Hemisphere, and the near end of the rainy season in sub-Saharan regions.

Group I cargoes are being negotiated and prepared for receivers in Nigeria and South Africa, but with price pressure being brought to bear on sellers, there are delays and hold-ups to supplies reaching blending operations in many areas.

Middle East buyers are forging ahead with large cargoes of Group I base oils coming into the Middle East Gulf from United States and Asia-Pacific sources. The regions are starting to cool down following a long hot summer period, prompting blenders to increase production of finished lubricants to fulfil export orders to global destinations.

Prices for Group I base oils in Middle Eastern markets have steadied even in the face of rising freight costs, with FOB levels often taking a hit when these large cargoes are fixed.

Group II demand appears be building across Europe, the Middle East and Africa, with forecasts predicting that 2026 will see incremental activity in Group II demand in locations that have to date been entirely reliant on Group I base stocks. For example, West African markets are seeing the introduction of premium base oils in areas that traditionally have been using Group I and where price has been the main driver for base oil purchases.

With limited production but rising demand for Group III base oils, Europe remains a key market for exporters from Asia-Pacific and the Middle East Gulf, but South and East African markets are also showing a growing interest in Group III to accommodate formulation upgrades for the new generation of finished lubes.

Over the summer months there have been considerable delays to Group III arrivals into Europe, with shipping delays and extended maintenance programs delaying cargoes from Asia-Pacific and the Middle East Gulf. Replenishment stocks have now arrived, but more cargoes will be required to meet rising demand for Group III grades.

All stocks of Group III are being immediately allocated to existing contracted buyers, who are also looking to take spot barrels from distributors at current prices. Prices have moved significantly higher than when the market experienced its nadir but have not achieved the zenith levels seen some three years ago.

In summary, Group I prices continue to remain under price pressures across the regions, whilst Group II numbers appear to be more resistant and are holding up, maintaining a healthy premium over crude and distillates. Group III levels could feel upward pressure should supply not meet increasing demand, causing a shortfall in availabilities that ultimately could push levels higher.

Crude and Gas Oil Prices

Crude prices moved slightly firmer the past week, mainly in response to geopolitical decisions by the West against Russia over its war in Ukraine. Prices are now near the top of the narrow range in which they have remained for months, but the U.S. is producing at healthy levels and touting availabilities of crude and petroleum products while OPEC+ members ramp up production. Forecasts call for crude prices to decrease in the medium and longer terms.

Dated deliveries of Brent crude: $68.10 per barrel, November front month
West Texas Intermediate: $63.65/bbl, November front month
European low-sulfur gasoil: $703 per metric ton, October front month
Source: London ICE late Sept. 29

Europe

European Group I values have finally succumbed to rising stocks and availabilities and are now under considerable downward pressure. Light and heavy solvent neutrals are the main targets for buyers, but even bright stock prices are being nibbled at and fell this week by $20/t-$25/t.

Some sellers continue to evaluate export sales, such as Motor Oil Hellas in Greece, which has 10,000 tons of SN500 available for an export sales. The producer is rumored to want split that quantity into two parcels, but lack of availability of other Group I grades could make it difficult to strike deals into traditional export markets.

Possibilities could include Turkish buyers, but prices and finance issues may pose hurdles there. Markets such as West Africa are possible, but again the availability of just a single grade is difficult.

Other suppliers are being canny in their approach to exports, aware that such sales would require heavy discounts that might then be cited by intra-regional customers.

FCA levels dropped the past week. Some some prices quoted here are subject to individual customer discounts.

Group I

Export sales, FOB basis
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: $865/t-$900/t
SN500: $925/t-$1,000/t
Bright stock 150: $1,185/t-$1,320/t (wide range depending on location)

Eastern Europe,  FCA
SN150: €934/t
SN500:  €1,008/t
Bright stock 150: €1,298/t

Pan-European, FOB/FCA basis
SN150: €725/t-€760/t
SN500/600: €800/t-€845/t
Bright stock 150: €1,145/t-€1,195/t

Pan-European prices are assessed on an aggregate basis from levels in Poland, Hungary, France, Germany, Benelux, Iberia, Italy, Greece and the U.K.

The euro-dollar exchange rate was at $1.17341 Monday.

European Group II prices remain steady, with reasonable demand for all grades. Light-viscosity grades are more in demand than heavier material, but 600N is establishing itself as a replacement for heavy Group I grades.

Some sellers are actively discounting, but they are also mindful of the euro’s strength versus the dollar, which is affecting this entire segment, not just imports, which come mainly from the U.S. Buyers are determined to negotiate, given the opportunity, and often quote the expanding differential between Group I and Group II prices, along with Group II premiums over crude.

Prices are taken marginally lower, reflecting the general lackluster economic situation around Europe.

Group II, FCA basis
110N/150N: €910/t-€935/t
220N: €930/t-€965/t
600N: €1,075/t-€1,100/t

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

Group III demand appears to be increasing, with 4 centiStoke grades most wanted by blenders around Europe. Six cSt is also in demand as some buyers unable to access sufficient quantities of 4 cSt are opting to take additional quantities of 6 cSt.

Some suppliers have noticed an increase in the number of inquiries for spot purchases, perhaps indicating supply disruptions, which are possible from one Middle East Gulf source and also from Malaysia. A supplier in Malaysia may be dealing with refinery hiccups, but news about this is third-hand and therefore possibly inaccurate. More investigations will be conducted during the course of this week.

One major supplier continues to claim shipping problems for Group III cargoes coming from South Korea. This supplier negotiated contracts at extremely low prices – around $120/t lower than current market prices – and is now bound to those levels for deliveries and FCA sales.

Prices may face more upward pressure due to rising demand, and also a dearth of availability. Prices in the European Group III market do not tend to move between months, but are reviewed when fresh replenishment parcels are landed into storage.

Group III

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

Full slates of approvals, FCA hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe, and 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 prices are floated higher due to demand, now at

$1025/t-$1,065/t for 4 and 6 cSt, basis FCA Germany.

Baltic Sea

Group l, II and III oils from Europe and the U.S. continue to make their way into the Baltic States by road tanker from mainland European sources. Small bulk cargoes from Northwestern Europe appear in shipping reports, discharging in ports such as Riga and Liepaja, Latvia. From shore tank storage, traders sell to blenders in Latvia, Lithuania and Estonia.

Lukoil cargoes of Russian barrels continue to load out of the Baltic from St. Petersburg, but the frequency of these movements is down from past years. Cargoes out of the Baltic go into Turkey, with vessels calling at Gebze to discharge SN150 and SN500.

A Belarus trader has loaded a small cargo of 3,500 tons of Russian base oils, possibly out of Vyborg, and shipped it to receivers in Lagos. This small cargo would appear to be less than ideal from the economics, due to potential freight cost of more than $200/t. FOB prices would have to be exceptionally low to make this work into Nigeria, as discussed below.

Baltic prices for Russian Group I exports are difficult to discern from local sources. Cargoes discharging in Turkey or Nigeria will provide CIF/CFR prices released by importers, customs officials or shipping agents. Figuring in freight rates indicated by shipbrokers, approximate FOB prices can be established.

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

Black Sea & Turkey

Turkey lurches from one bad spell to another, and its economy is now in tatters. Without the support from imports of Russian petroleum products, including base oils, all of which are at least being recorded at exceptionally low prices, the country would have suffered bigger problems months or years ago.

Payments for products, including base oils, are transacted on a government-to-government basis, presumably in foreign currency (dollars), with producers being recompensed by Russian banks or by Middle Eastern banks, based for example in the United Arab Emirates.

There are direct dealings between Turkish buyers/traders and Lukoil, but dealings with companies such as Rosneft and Bashneft appear to be conducted at a government level. This may be why prices are reported as artificially low, at levels that appear below cost. But who knows how costs are allocated in Russia.

Turkish banks are still unable to fund lending, particularly on foreign currencies such as the dollar. This limits shipments from suppliers such as Motor Oil Hellas, ExxonMobil Repsol or Cepsa. Buyers find it difficult to be able to open letters of credit due to restrictions on foreign currency availability.

Rosneft CIF/CFR price levels are at $590/t for SN150 and $655/t for SN500. Western economics would certainly put these levels below feedstock cost, but the “cost” of VGO may be much lower in Russia than in Western markets. Lukoil prices from the Baltic are around $100/t-$150/t higher, but freight is higher from the Baltic, and that element must be paid to a third party – the ship owner/operator.

Turkish buyers hoping to buy Group I from the U.S. through traders appear to have lost out, since the trader concerned has opted to sell a previously mentioned 8,000-ton cargo into Nigeria.

Turkey Base Oil Prices

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

Group I from Rosneft or Bashneft, CIF/CFR Gebze
SN150: $590/t
SN500: $655/t

Tupras Group I, ex rack Izmir refinery
Spindle oil: Tl 35,035/t plus VAT 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: $975/t
350N, blended or from alternative source: $1,135/t
150N, from Taiwan or Saudi Arabia: $1,020/t
500N/600N, from Taiwan or Saudi Arabia: $1,240/t

Group III, partial approvals
4 cSt from Tatneft, FCA: €876/t

Group III, full approvals, from Spain
4, 6 and 8 cSt, CIF Gemlik, €1,825/t-€1,855/t.

Middle East

September was an especially busy month for cargoes of Group I and II base oil loading from Yanbu and Jeddah, Saudi Arabia. Cargoes moved to the routine discharge ports in India and the UAE, with additional shipments to Thailand, South Africa and Europe.

A 3,500-ton parcel of bright stock loaded out of Yanbu bound for Alexandria. This is under the EGPC contract.

A Netherlands-flagged general cargo vessel, the Minervagracht, a general cargo vessel, was attacked in the Gulf of Aden Monday with missiles launched by Houthi terrorists. There reportedly were no casualties but the vessel was on fire. An allied naval vessel is en route to the scene. The ship was on passage to Suez and the Mediterranean having left Djibouti a few days earlier.

Group I and Group II base oils continue to arrive in UAE ports from sources in the U.S. Vessels will be calling at Fujairah, Hamriyah, and Jebel Ali to discharge base oil cargoes. European traders are trying to place cargoes, not from Europe, into the UAE, often combining parcels for receivers in Mumbai anchorage. European cargoes have extended voyage times because of sailing around the southern end of Africa rather than through the Red Sea where they would risk being attacked by Houthis.

Shipping from Europe therefore incurs higher freight rates, which would mean that FOB prices would have to be exceptionally low. This option is currently being resisted by suppliers in Europe. U.S.-sourced cargoes are the preferred option for Group I and II base oils moving into the UAE and India, even for traders based in Europe.

Demand in the UAE is healthy, leading traders there to scour markets for opportunities to purchase Group I and II oils. Many cargoes are negotiated directly with producers, especially when it comes to sourcing from South Korea and Singapore, but U.S. cargoes are almost entirely arranged through traders.

Iran has been sanctioned by many Western nations, and the U.K. today has issued a new stream of sanctions against the republic’s nuclear industry and associated companies and individuals. Once again, shipping reports include no mention of base oil exports from Iran, so if material is being exported it must be by shadow vessels. Sources in the UAE said Iranian sellers have not been active in the market for the last few months, suggesting most of the country’s Group I production is going into the domestic market or Iraq.

Mahan Group makes Group II base oils along with Group I at its refinery in Qom, but the Group II grades are only distributed within Iran and are not exported. Group II and III base oils are imported from Bahrain by traders based in the UAE and India.

UAE Prices

Group I, CIF/CFR UAE ports
SN150: $890/t-$925/t
SN500: $960/t-$995/t
Bright stock: $1,225/t-$1,255/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 are imported into the UAE from the Red Sea, the U.S., South Korea, Europe and Singapore and are resold ex tank UAE, or on a truck-delivered basis throughout the UAE and northern Oman. Deliveries are made by distributors who purchase base oils directly from Luberef in Saudi Arabia and from the U.S. and European majors and traders. The high ends of the price ranges refer to RTW deliveries.

Group III, FCA Hamriyah or RTW UAE and Oman
4 centiStoke: $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 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, UAE. These base oils are then offered for resale through the appointed distributors rather than directly from Bapco or Adnoc.

Group III cargoes loading out of Al Ruwais and Sitra are under the auspices of distributors based in the U.S., Europe, India and China. Receivers in Thailand have bought cargoes directly from Adnoc. There are also instances of Indian cargoes being purchased directly from Adnoc and Bapco.

When cargoes are sold FOB to distributors, they then have responsibility for shipping, storing and reselling in various markets. Group III netbacks from Al Ruwais and Sitra are on a par, with almost identical refinery economics. Netbacks are assessed between $1,030/t-$1,055/t for 4, 6 and 8 cSt, which may also indicate FOB prices from producers.

Netbacks for gas-to-liquids Group III+ base oils loaded ex Ras Laffan, Qatar, are assessed between $1,085/t-$1,100/t. These latter numbers are indications only economics or information regarding these cargoes is not public. Group III netbacks are calculated using selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Africa

There are no reported cargoes moving around Mediterranean ports. Meanwhile, the final large Durban cargo for this year will load from Rotterdam and Fawley, U.K., during October or November, no vessel has been fixed yet, but charterers will use the usual owners and indeed perhaps a vessel that was previously chartered for this voyage. The cargo will comprise of around 18,500 tons to 20,000 tons of various base oils.

After Chevron announced the appointment of a distributor in Nigeria for its Group II base oils, there will be no fast transition in this market away from Group I. Local sources have advised that the introduction of Group II base oils will be to supply a specific segment of the market that produces limited specialty finished lubes. It is expected that the number of users of Group II will eventually expand.

Currently buyers and receivers in Lagos continue to argue with traders to get to prices in line with Russian rates. Receivers routinely will refuse to pay higher numbers for U.S. or European base oils.

With the end of the rainy season rapidly approaching, Nigerian base oil buyers are replenishing Group I stocks at extremely low prices. SN900 is becoming scarce, but buyers are hesitant to purchase this grade at what they consider to be exceptionally high prices. Bright stock has to be used in the blending of this grade, therefore the price moves higher, making SN900 too expensive for receivers to consider.

Receivers say they have difficulty reselling this grade to blenders. Prior to SN900, bright stock was used as a high-vis blend stock. SN900 came in as substitute, since it could sell at a lower price whilst boosting the viscosity of the blend.

Buyers are currently bidding around $880/t for SN150, $930/t for SN500 and $1,060/t-$1,095/t for SN900, though some traders offering around $1,120/t for the latter grade. These values are in line with rates for Russian product, which are avoided by many around the market due to financing and quality issues.

Three cargoes are arriving into Lagos’ Apapa port during the coming weeks, two Russian parcels and a cargo of around 8,000 tons from the U.S. East Coast. The first Russian cargo is relatively small at 3,500 tons, with the other parcel thought to be around 10,000 tons. Prices requested are $900/t-$930/t for SN500 and $1,000/t-$1,025/t for SN900, on the basis of CFR Apapa.

Demand is expected to pick up after the end of the rainy season, and prices may be expected to face upward pressure in this market, perhaps giving traders space to bring in quality Group I grades. If this does not happen then there will be less material available in the Nigerian market, and shortages could develop.

The black market exchange rate for the Nigerian naira fell the past week to NGN 1,492 to the dollar Monday.

Nigeria Group I prices

Russian origin, CFR Apapa
SN150: $860/t-$875/t
SN500: $885/t-$900/t
SN900: $1,060/t-$1,095/t

U.S. origin, CFR Apapa
SN150: $965/t-$980/t
SN500: $1,020/t-$1,040/t
SN900: $1,120/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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