Although the Ukrainian lubricants market has been supplied by various companies since the invasion, there had been a heavy dependence on Russian base oils, additives and finished lubricants. Ukraine has gradually weaned itself off reliance on Russian products, and has moved over to Turkey, Poland, Hungary and other Eastern European neighbors for supplies of base oils and finished lubricants.

Should hostilities be halted, it can be expected that blenders based in Ukraine will not revert to Russian suppliers, leaving the door open for suppliers from other allied nations to step in. However, these thoughts are mere conjecture until a settlement starts to take shape.

In the Middle East, amidst a wobbly ceasefire discussions begin about the future administration of Gaza and base oil suppliers are checking for opportunities to resume business in that region. Traders have been putting out feelers and contacting past buyers who have been dormant since that war began. Many players are suggesting that business will get back to previous levels should the peace remain in place, and a start the the rebuilding of Gaza gets underway.

With container ports restarting operations in the region, and shipping lines able to call at ports which were part of the war zone, a couple of European traders are offering supplies of API Group l, II and III base oil in flexi-tanks to receivers in Israel. More flexibility is expected to develop as transport links are re-established and supply lines are opened up once again. 

During the past two years, Israeli blenders have been able to access supplies of base oils but only by circuitous routes that have been closely guarded to prevent espionage and disruption by rebel forces from Gaza and Lebanon. Supplies of base oils and additives – along with other essential commodities and materials – have been convoyed into receivers under military escort, and this may continue for the moment. Ultimately, though, the absence of conflict should smooth out supply lines.

Some base oil business goes on tn Middle East Gulf regions, as evidenced by a number of cargoes arriving into the United Arab Emirates, Qatar and Bahrain and material also arriving into Iran, Kuwait and southern Iraq from sources in Asia-Pacific and India.

There appears to be increasing demand for Group II base stocks that are limited in availability in the area. Imports of Group II to the region are flowing from the U.S., Europe and Asia and are changing the base oil supply slate for the Middle East Gulf regions. The move to premium base oils is gathering pace and can be expected to accelerate over the coming years.

A similar picture is evolving in East and South Africa, where greater emphasis is being placed on use of premium grades rather than Group I. There are even reports of a large quantity of Group II base oils being made available for receivers in West Africa. This would constitute a near first for the region, which previously had received only one South Korean cargo.

In Europe base oil trading remains sluggish amidst an increasingly negative economy. This scenario does not apply to just one or two nations but is a widespread problem from the Mediterranean to the North Sea and the Atlantic. Some economies are in better shape than others, but with prime markets experiencing tough times the tolls being taken on Europe as a whole.

Crude and Gas Oil Prices

Crude prices have moved lower during the past week.  Dated deliveries of Brent fell below $60 per barrel on one day last week. Predictions remain dovish for any resurgence in crude prices as major consumers such as China and India are not purchasing large quantities of crude oil from OPEC members. These countries are continue to buy discounted crude from Russia, which supports Putin’s war chest whilst stifling exports from principal OPEC members such as Saudi Arabia.

Dated deliveries of Brent crude: $60.65 per barrel, for December front month
West Texas Intermediate: $56.95/bbl, November front month
European low-sulfur gasoil: $639 per metric ton, November front month
Source: London ICE, late Oct. 20

Europe

With growing and extensive inventories at refineries, European Group I price levels are continuing to come under pressure, and weak local demand has driven producers to examine possibilities for export sales to move large quantities of product. Opportunities for export sales from Europe are limited due to the current restrictions on Suez and Red Sea safe passage. The detour around the Cape pushed freight costs higher, making it uneconomic to look at cargoes moving material into Middle East Gulf and Indian markets.

FOB numbers would have to hit unacceptably low levels to make sales into those markets work, hence West Africa may be the only viable option at the moment. Cross Mediterranean cargoes are possible, and trade into Egypt and Turkey are being weighed up, but cargoes into these locations tend to be smaller – up to 5,000 tons – and hence are not so appealing. Shipments to Nigeria, for comparison, are typically around 10,000 tons.

Bright stock remains relatively short in Europe, and large parcels of this grade are extremely rare. This grade maintains a increasingly large premium over light and heavy solvent neutrals, which are seeing prices fall. Bright stock prices, however, have been tempered, with buyers obtaining lower levels than previously seen. The differential between neutrals and bright stock remains large.

European FCA levels are unchanged this week. Bright stock prices for sales within Europe remain in a wide range depending on location.

Group I

Exports, FOB
SN150: $700/t-$725/t
SN500: $745/t-$770/t
Bright stock 150: $1,175/t-$1,200/t

Northwestern Europe, FCA basis, Antwerp-Rotterdam-Amsterdam
SN150: $825/t-$875/t
SN500: $910/t-$980/t
Bright stock 150: $1,180/t-$1,285/t

Eastern Europe,  FCA valid until end October but subject to local discounting
SN150: €934/t
SN500:  €1,008/t
Bright stock 150: €1,298/t

Pan-European, FOB/FCA basis
SN150: €700/t-€730/t
SN500/600: €775/t-€800/t
Bright stock 150: €1,120/t-€1,155/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 to the U.S. dollar was $1.16551 Monday.

Group II prices in Europe are unchanged this week, but with demand flagging a little, they too are now coming under pressure. Their premium over Group I values, which continues to rise, is also a factor. European Group II prices remain higher than those in other regions, such as Far East and the U.S. , encouraging suppliers to prioritize the European market above other alternatives. One U.S. producer is undergoing a major maintenance turnaround, whist another U.S. producer appears to have containment problems and is heavily discounting FOB prices to effect rapid sales.

Sellers are offering lower numbers, but buyers are being cautious in light of excellent availabilities. The fourth quarter is typically a time to draw down inventories, not build them up.

Further news from sources in Brussels appears to confirm that European Union will recind import duties on Group II base oils being sourced from countries not holding a free trade agreement  with the EU. The date for the transition is still not announced, but rumor has it that the change will take place from Jan. 1.

More Group II imports from the U.S. may be targeted at Europe, where demand is predicted to grow, but these forecasts were done previous to current poor economic conditions.

Group II prices, FCA basis
110N/150N: €890/t-€925/t
220N: €930/t-€955/t
600N: €1,065/t-€1,095/t

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

Group III demand remains relatively strong, with 4 centiStoke the grade most in demand from blenders around Europe, although 6 cSt is also popular with European blenders. Most distributors now have stocks in tank after arrival of replenishment cargoes over the past few weeks. Some distributors are looking forward to further shipments, planning at least a couple of months ahead since there are shipping delays because of issues with availability of vessels in the Middle East Gulf.

There has been an increase in the number of inquiries for spot purchases, but this demand seems likely to recede a bit now that most suppliers have material available. The only seller still having problems is a South Korean supplier claiming shipping delays. One cargo for this supplier has arrived and been allocated to buyers who were waiting for some time. Another cargo is expected to dock in early November, but the size is unknown.

The ceasefire in Gaza has held so far, but Houthi militants have repeated warnings that they may attack ships deemed to have ties to Israel. The route through Suez for Group III cargoes from Asia-Pacific and the Middle East Gulf remains firmly closed, therefore, on the recommendation of many P&I clubs issuing vessel insurance.

Group III

Partial slates of finished lube 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, 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

Product sold on a delivered basis will incur an additional charge covering transport costs.

Rerefined Group III prices are unchanged at $1,025/t/t-$1,065/t, basis FCA Germany.

Baltic Sea

Imports of Group I base oils are reported going into ports of Baltic states, with material loaded from Northwestern Europe discharging in Riga and Liepaja, Latvia. Other material for receivers in Lithuania is moving into Klaipeda, from where the grades are distributed to blenders.

Group II and Group III supplies are not usually being shipped by sea but are brought in by road from Antwerp-Rotterdam-Amsterdam and Germany. Buyers in the Baltic States are contacting traders, resellers and producers to access quantities of premium base oils that are now being used to blend finished lubes, in a move away from a previous reliance on Russian Group I grades.

Russian base oils are available in Baltic regions, deliveried by road from Russia and Belarus. Such trade is of course in breach of EU sanctions.

Lukoil schedule cargoes of Russian barrels loaded on trains from Perm refinery into storage in St. Petersburg before loading onto ships. Most of these parcels have ended up in Gebze, Turkey, but the frequency has decreased.

This may have something to do with Ukrainian strikes on Russian refineries, some of which produce base oils, but no reports have been heard of attacks on the Perm refinery. It might be assumed that availabilities of Russian barrels have been diverted into domestic markets due to supply interruptions from other base oil producing units.

Having tried different angles and approaches it has been impossible to obtain FOB Baltic prices in respect of Russian export cargoes of Group I base oils. However, cargoes discharging in Turkey or Nigeria generate CIF/CFR prices that, by factoring in freight rates, can be used to estimate FOB prices from the port of origination.

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

Black Sea & Turkey

There are fewer Russian cargoes arriving into Turkey, and local sources say material is being re-routed to domestic customers to cover for supply chain interruptions caused by Ukrainian drone strikes on a number of Russian refineries.

Drones have bombed base oil sources such as the Rosneft refinery at Novokuybyshevsk and the Bashneft refinery in Ufa. Rosneft base oil exports to Turkey appear to have ceased for the moment. Basneft appears to be still delivering.

Turkish buyers are looking at a quantity of 5,000 tons of SN500 from Greek suppliers. The sides are apart on price. More information will be forthcoming during this week.

Rosneft’s latest CIF/CFR price levels were heard at $590/t in respect of SN150, with SN500 at $655/t. Lukoil prices from the Baltic were around $100/t-$150/t higher, perhaps indicating higher freight rates coming from the Baltic.

Turkish Base Oil Prices remain unchanged and with no new cargoes arriving from Rosneft, ex-tank prices for stocks from previous cargoes remain.

Russian 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

It is unclear whether there are currently availabilities of all grades at the Tupras refinery in Izmir. Prices are therefore given on an indication basis only

Tupras
Spindle oil: Tl 34,622.00/t plus VAT Tl 8,821.84/t
SN150: Tl 28,185.00/t plus VAT Tl 7,534.44/t
SN500: Tl 34,220.00/t plus VAT Tl 8,741.44/t
Bright stock: Tl 51,681.00/t plus VAT Tl 12,233.64/t

Sales are ex rack the refinery and 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

Partly-approved Group III prices have been heard much lower during last week.

Group III
Tatneft, 4 cSt FCA: €796/t

Fully-approved Group III from Spain, CIF Gemlik
€1,785/t-€1,825/t.

Middle East

The Luberef refinery in Yanbu is undergoing a turnaround, and according to sources in India and the UAE, this probably will have no effect on contracted cargoes pre-arranged some time in advance. The refinery has stocks to cover contracted sales to the West Coast of India and the UAE.

There is no relief yet from the threat of Houthi attacks on shipping in the Red Sea. Israel has committed to continue strikes against the Houthis with drone and missiles taking out a significant Houthi military commander last Thursday in Sanaa, Yemen.

Group I and Group II cargoes of base oils have started arriving in Hamriyah anchorage in the UAE but are being delayed getting alongside to discharge. The port is giving preference to dry cargo vessels. These cargoes have been sourced from the U.S.

Vessels carrying base oils will also call at Fujairah and Jebel Ali to discharge part of their cargoes. With European producers again considering exports, traders are may look to import from there, but the cargo economics are still against this destination because of the high freight costs. U.S. sourced cargoes are the preferred option for Group I and Group II base oils moving into the UAE and India.

UAE sources have informed this report regarding Iranian base oil exports. There have been fewer cargoes loading from Sepahan refinery for Indian receivers, with some sources postulating that Group I base oils are being sold into Iraq and Syria as alternative markets where prices are higher. Some also report that material is going into Afghanistan.

At the same time, Group II and III base oils are moving into Iran by traders based in the UAE and India.

Group I, CIF/CFR, UAE ports
SN150: $885/t-$920/t
SN500: $940/t-$965/t
Bright stock: $1,220/t-$1,245/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 RTW basis the 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 many sources in the Red Sea, the U.S., South Korea, Europe and Singapore and are resold FCA UAE or on a truck-delivered basis throughout the UAE and northern Oman. Deliveries are made through distributors who purchase base oils directly from Luberef in Saudi Arabia, and from U.S. and European majors and traders.

Group III, FCA Hamriyah or RTW UAE and Oman
4 cSt: $1,225/t
6 cSt: $1,235/t
8 cSt: $1,255/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 a further charge of between $20/t-$55/t, depending on delivery location.

Group III base oils produced in the Middle East Gulf are also exported to markets around the world. Netbacks for Group III base oils loading ex Sitra, Bahrain, and Al Ruwais, UAE, for distributor sales in Europe, U.S. India and China are assessed between $1,030/t-$1,055/t for 4, 6 and 8 cSt grades. These levels may indicate FOB prices.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are assessed at $1,085/t-$1,100/t. These are indications only since there are no distributors involved in this trade. Most of these oils are used in house by Shell, which is a joint venture partner in the refinery.

Group III netbacks are assessed using selling prices in known markets minus estimated marketing costs, margins, handling, storage and freight.

Africa

Suppliers were gearing up to deliver base oils into traditional ports in the Eastern Mediterranean, but there is uncertainty about what will happen next. Some are saying the rebuilding of Gaza will begin after appointment of a Palestinian authority, but financial concerns and funding details are vague. Gazans are looking for guidance about the U.S. support to be expected.

The large base oil cargo previously mentioned as bound for South Africa should load from Rotterdam and Fawley, United Kingdom, during the last few days of this month. Charterers will use the usual owners/operators for this regular voyage. The cargo will comprise of around 18,500-20,000 tons of various base oils.

A major will be loading a cargo of three Group I grades for receivers in Guinea, Cote d’Ivoire and Ghana. Five thousand tons will be delivered into Tema, Ghana. Receivers in Abidjan and Conakry will take the balance of the cargo. The vessel will load out of Fawley.

In Nigeria there could be some interesting developments with a 6,000-ton cargo loading from the U.S. Gulf Coast with Group II grades on board. The pricing on this parcel is unknown at this time, but it is reckoned that the FOB levels would have to come in at around $800/t to compete with Group I prices from Russia and the U.S. East Coast. The seller of this cargo may have problems with containment, or the cargo may be aimed at some of the more “respectable” blending operations that can use these grades.

If this cargo is verified it can be said that this venture has nothing to do with the appointment of a distributor in Nigeria to handle Group II base oils in the future. More details are to be established later this week.

In Apapa SN900 is becoming scarce as buyers are hesitant to purchase this grade at exceptionally high prices. When sourced from the U.S. or Europe, bright stock has to be used in the blending of this grade, and with current high prices SN900 can become too expensive for receivers to resell to blenders in Nigeria.

Buyers continue to bid at around $880/t for SN150, $930/t for SN500 and $1,060/t-$1,095/t for SN900. Traders are offering higher numbers at around $1,120/t.

Cargoes have arrived into Apapa port in Lagos – two Russian parcels and a cargo of around 8,000 tons from the U.S. East Coast. The first Russian cargo was smaller at 3,500 tons and discharged around a month back. The second Russian cargo would normally be around 10,000 tons of three grades – SN150, SN500 and SN900 – possibly loading out of an Egyptian port.

Offers are at $900/t-$930/t for SN500 and $1,000/t-$1,025/t for SN900, on the basis of CFR Apapa.

The black market exchange rate for the Nigerian naira is NGN 1,470 to the dollar as of Oct. 20.

Nigeria prices
Russian Group I, CFR Apapa
SN150: $860/t-$875/t
SN500: $885/t-$900/t
SN900: $1,060/t-$1,075/t

U.S. Group I, CFR Apapa
SN150: $965/t-$980/t
SN500: $1,020/t-$1,040/t
SN900: $1,095/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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