After the opening of ExxonMobil’s base oil expansion in Singapore, now the largest global base oil production facility, supply of Group II base oils may start to grow from this source. With additional capacity also being added to South Korean and Chinese refineries, Asia-Pacific suppliers could establish new trading patterns into Indian subcontinent and Middle East markets, particularly for supplies of Group II base oils.

That is not to say that a Middle East producer, Luberef at Yanbu refinery, will not play a considerable part in supplying Group I and II oils to emerging markets in the Middle East Gulf and India, where there is a growing trend and moves for buyers to switch from Group I products.

U.S. President Donald Trump is pushing hard for Hamas and Israel to accept his 20-point peace plan for Gaza. If they do and fighting stops,

it will open up Eastern Mediterranean trading corridors that have been closed or curtailed since Hamas’ attacks in Israel on Oct. 7, 2023. Perhaps the anniversary of that dreadful event can yield some hope for the future of the region and for all who live in the area.

Cessation of hostilities would be a positive step for base oil trading, opening ports and routes that have been closed for the past couple years. If Hamas and Palestinian authorities accept the terms offered, it is assumed that Houthi attacks on Red Sea transit vessels will cease, and the Suez Canal will once again be the main route for shipping, rather than the circuitous deviation around the Cape of Good Hope in South Africa.

Economics will change, voyage times will be shorter, and cargoes of base oil moving east and west will be simpler and more straightforward to arrange and organise. The implications for peace are tremendous.

Base oil prices across the European, Middle Eastern and African regions are difficult to forecast right now, although industry sources expect Group I will remain subject to downward pressure in Europe and the Middle East, thanks to generally good availabilities and buyers are able to call the tune as to when they purchase and in what quantities.

Group II suppliers look to be in a better position, given strong demand for the whole slate in all regions, even perhaps in West Africa. Group III remains in demand with markets in all key regions showing increasing use of Group III base oils in blending operations. With increasing availabilities from Asia-Pacific and ultimately from new production in Europe, this sector is set to grow.

Crude and Gas Oil Prices

Crude prices have moved lower, mainly due to lower demand in the U.S. markets, and forecasters are predicting dated deliveries of Brent crude could fall to around $57 per barrel during the first half of next year. This call is due to increased production from OPEC+ members and sluggish demand in prime economies such as China and Europe.

Following a spike last week, levels have retreated and were showing at recent lows in early trading on Monday. Cated deliveries of Brent sank below $64/bbl.

Dated deliveries of Brent crude: $65.35/bbl, December front month
West Texas Intermediate: $61.65/bbl, November front month
European low-sulfur gasoil: $670 per metric ton, October front month
Source: London ICE late, Oct. 6

Europe

European Group I prices are under pressure from all sides. Falling crude and feedstock costs are fueling calls for base oil values to be adjusted in turn. Should economists have the right call on crude prices going into next year, the dynamic for Group I should continue, even for bright stock, which remains relatively scarce and in demand.

Some sellers continue to evaluate export sales, including Motor Oil Hellas, in Greece, which still has 10,000 tons of solvent neutral 500 available for one or two export sales. The seller would ideally want to split the quantity into two parcels, of 5,000 tons each, but it is unclear if that will prove practical. Potential destinations include West Africa and the UAE.

Other suppliers are guarded in their approach to export sales, aware that competing for business in export markets could affect domestic price levels.

European FCA levels are unchanged this week.

Group I

Exports from Europe, 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: $865/t-$900/t
SN500: $925/t-$1,000/t
Bright stock 150: $1,185/t-$1,320/t

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

Pan-European, FOB/FCA basis
SN150: €720/t-€745/t
SN500/600: €785/t-€820/t
Bright stock 150: €1,125/t-€1,175/t

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

The euro’s exchange rate with the U.S. dollar was $1.16984 Monday.

European Group II prices remain stable, with good demand for all grades across the slate. Light-viscosity grades appear to be more in demand, but 600 neutral is catching up and is steadily, replacing SN500.

Some sellers are discounting their high almost-posted prices, although these levels are still in the market for smaller buyers and need to be included in the ranges reported here. Sellers, especially importers, are mindful of the euro rising in value against the dollar.

There was good news last week that the European Union is considering cancelling its duty on Group II base oil imports from countries that do not have free trade agreements with the bloc. This charge has essentially been waived for some months because the quota after which it applies was suspended. This may now change as part of trade negotiations by Brussels.

More Group II imports from U.S. will be targeted at Europe, since U.S. export prices for 600N were $430/t lower than European supplies during the last week of September.

Buyers are trying to negotiate lower prices, citting the differential between Group I and Group II prices and premiums over crude oil and distillate prices. But prices are unchanged following adjustments made last week.

Group II prices, 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. Smaller quantities can be imported in flexi-tanks.

Group III demand is strong, with reported shortfalls in availabilities from some distributors. It is unclear whether this is down to shipping delays or production problems. Four centiStoke grades are most in demand from blenders around Europe, but 6 cSt demand is growing, partly because of some buyers using that grade to make up for 4 cSt that they cannot procure.

One distributor has noticed an increase in the number of inquiries for spot purchases, indicating temporary supply disruptions, possibly from sources in the Middle East Gulf and Malaysia. Sources in Kuala Lumpur have confirmed at a Malaysia refinery.

European Group III prices are unchanged for contract customers and previously agreed sales, but a dearth in availability and rising demand may create upward pressure on future cargoes.

On the other hand, a Gaza peace deal that halts Houthi attacks on commercial shipping in the Red Sea should allow Group III shipments from Asia-Pacific to resume transitting through the Suez Canal, shortening journeys and reducing shipping costs.

Group III

Oils with 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

Fully-approved Group III, FCA from 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.

Prices for rerefined Group III are unchanged at $1,025/t-$1,065/t for 4 and 6 cSt, basis FCA Germany.

Baltic Sea

Group l, II and III base oils from Europe and the U.S. are being delivered into the Baltic regions, mostly by road tanker from mainland European sources. Small bulk cargoes do also appear in shipping reports, having loaded from Northwestern Europe and discharging in ports such as Riga and Liepaja, Latvia. From shore tank storage, suppliers and traders sell to blenders in Latvia, Lithuania and Estonia.

No further messages have been received by this report regarding possible supplies of Russian base oils to receivers in the Baltic. Russian base oils are available in the Baltics, coming in by road from Russia and Belarus. Operations are mostly undertaken under the cover of darkness, using forest roads and tracks. This practice is in strict breach of EU sanctions.

Cargoes of Lukoil base oils continue to load out of the Baltic, from St. Petersburg, but the frequency of these movements is down from past years. Cargoes from the Baltic go into Turkey, with vessels calling at Gebze, Turkey, 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 has sailed the shipment to Lagos. This small size would appear to make economics less than ideal as it could raise freight costs to more than $200/t. The trader uses the same Maltese-flagged vessel for most cargoes.

The vessel discharged the cargo around two weeks ago and is now sailing, after calling at Las Palmas, to Setubal port in Portugal. The vessel is already blacklisted for use by other EU charterers because of calling at Russian ports, and is it interesting to see it calling at an EU port, presumably to load a cargo of CPP or veg oil.

Baltic prices for Russian Group I exports cannot be established from local sources, but cargoes discharging in Turkey or Nigeria will lead to CIF/CFR prices released by importers, customs officials or shipping agents. Adding freight rates indicated from 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’s economy is in a dire state with rampant inflation and the Turkish lira exchange rate climbing again. Turkish oil company Tupras has stopped using Russian Urals crude at its Izmir refinery, believed to have changed to Saudi Light two years ago.

The reason is unknown, but it may have been a political decision. Prices for Saudi Light are considerably higher. The change occurred prior to the Russian invasion of Ukraine.

Payments for some base oils and other oil products – for example those from Rosneft and Bashneft, appear to be conducted on a government-to-government basis. Transactions are conducted in foreign currency, most often in dollars, and suppliers are recompensed by their government.

Some deals are transacted directly between commercial entites, for example those involving base oils from Lukoil. Prices are reported at incredibly low levels that would appear to be below European cost.

Turkish banks are still experiencing difficulty accessing dollars, limiting the ability of traders to open letters of credit. This would apply, for example, to transactions for base oils sourced from suppliers such as Motor Oil Hellas, ExxonMobil, Repsol or Cepsa.

Rosneft CIF/CFR prices are heard at $590/t for SN150 and $655/t for SN500. Western economics would put these levels below feedstock cost, but the “cost” of vacuum gasoil must be much lower in Russia than traded on ICE.

Lukoil prices from the Baltic are around $100/t-$150/t higher, perhaps due to freight from the Baltic being higher than from the Black.

Turkish buyers trying to buy quantities of U.S. Group I through traders appear to have lost out, since a trader opted instead to sell an 8,000-ton cargo into Nigeria.

Turkish base oil prices are maintained at previous levels.

Group I

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 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

Partly-approved
4 cSt from Tatneft, FCA: €876/t

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

Middle East

September was a bumper month for base oils shipping from Yanbu and Jeddah, Saudi Arabia. Cargoes loaded for receivers in India and the UAE, along with Thailand, Sudan and South Africa. Another 3,000-ton parcel of bright stock is to be loaded out of Yanbu for EGPC in Alexandria.

More cargoes of Group I and II are being negotiated for receivers in the UAE from sources in the U.S. Vessels carrying the cargoes will discharge at Fujairah, Hamriyah and Jebel Ali and may also carry some base oil on to receivers in India, thus improving economies of scale. European traders are involved but are not looking to load cargoes from Europe at this stage.

U.S. sourced cargoes are the preferred option for Group I and II moving into the UAE and India. Demand is booming in the UAE, with international traders scouring U.S. sources for opportunities to purchase. Many cargoes are negotiated directly between receivers and producers, especially when it comes to sourcing from South Korea and Singapore. U.S.-sourced cargoes are almost entirely arranged via traders.

Sources in the UAE have told this report that Iranian sellers have not been active in the market for the past few months. Sources report that most of the production of Iranian Group I base oils is  going into the domestic market or into Iraq. Group II and III base oils are being imported in to Iran from Bahrain by traders based in the UAE and India.

Group I, CIF/CFR U.A.E. ports
SN150: $890/t-$925/t
SN500: $960/t-$995/t
Bright stock: $1,225/t-$1,255/t

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

The high ends of the ranges refer to material being delivered by RTW around U.A.E. and into northern Oman.

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 in the 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.

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

The ranges of Group III prices above include a reseller margin of around $75/t to cover storage, handling and margin. RTW deliveries from the distributor incur an additional charge of $20/t-$55/t, depending on delivery location.

Middle East Gulf Group III base oils from Al Ruwais, UAE, and Sitra, Bahrain, are delivered by sea into Hamriyah in U.A.E.. 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 also sold into other markets around the world by distributors based in the U.S., Europe, India and China. Receivers in Thailand have bought cargoes directly from Adnoc. Cargoes are sold FOB to the various distributors, who then have the responsibility for shipping, storing and reselling in their markets.

Netbacks for these sources are assessed at $1,030/t-$1,055/t for 4, 6 and 8 cSt grades. Netback levels may also reflect FOB prices from producers. These figures could change positively should vessels change course and return to sailing through the Red Sea, thus saving on freight and improving the economics of these deals.

Group III 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 loaded ex Ras Laffan, Qatar, are assessed at $1,085/t-$1,100/t. Levels are indications only, as no distributors are involved in this trade, and the supplier does not release information regarding these cargoes.

Africa

The only significant Mediterranean cargo is the recent bright stock shipment that discharged in Alexandria port for EGPC. Another loading will take place in the next few weeks.

A large base oil cargo will load from Rotterdam and Fawley, U.K., during October or perhaps November, but so far no vessel has been fixed. Charterers will no doubt use the usual owners for this voyage. The cargo will consist of around 18,500-20,000 tons of various base oils.

The rainy season in West Africamay finally be finished, so Nigerian buyers are looking to replenish Group I base oil stocks at extremely low prices. SN900 is becoming scarce as suppliers are having difficulty selling it at the high prices required. When sourced from the U.S., SN900 is made using bright stock, making it too expensive for receivers to consider.

When sourced from Russian suppliers, SN900 can be made with Russian bright stock or another high-vis grade such as SN1200, both of which cost much less but could affect quality.

Buyers are currently bidding at around $880/t for SN150, $930/t for SN500 and $1,060/t-$1,095/t for SN900, other traders are offering higher numbers at around $1,120/t. Such numbers refer to Russian product, but many blenders dislike purchasing Russian base oils due to financing and quality problems.

Cargoes are arriving into Apapa port in Lagos or are scheduled to do so in coming weeks, including two Russian parcels and a cargo of around 8,000 tons from the U.S. East Coast. The first Russian cargo was relatively small at 3,500 tons and discharged a couple weeks back. The other Russian parcel is thought to be around 10,000 tons.

The black market exchange rate for the Nigerian naira fell the past week to NGN 1,473.

Nigeria Group I prices, CFR Apapa

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

U.S. Origin
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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