Some middle ground may be found before the end of the year, when many sellers are looking to hold minimum inventories to reduce tax liabilities.

Some finished lubricant blenders around Europe are to take advantage of the holiday season to cease operations for extended periods, concluding that business is not showing the buoyancy expected earlier in the year and that a recovery may be delayed until March or April at the earliest, when the spring oil change and season starts in the Northern Hemisphere.

Even in predominantly Muslim regions of the Middle East and Africa, many companies are planning to take extended holidays to counter the lack of commercial activity expected during the weeks surrounding Christmas and New Year. The festive season is now celebrated across most of Europe, the Middle East and Africa, bringing a short hiatus to trade and commercial activities for a time.

In Europe, there was welcome news that Mol’s refinery in Szozhalombatta, Hungary, would resume normal operations in early January after a recent major fire. However, the Druzhba pipeline in Russia, which delivers Urals crude oil to European Union countries such as Hungary and Slovakia, was bombed Dec. 1 for the fifth time, causing an explosion and temporarily disrupting delivery. EU sanctions against Russia still permit supply of that country’s crude oil to landlocked members lacking alternatives.

It has not yet been established what effect the explosion will have on base oil supplies from the Szozhalombatta refinery, but without continuous supplies of crude, feedstock supply will be at risk, and availability of Group I base oils could ultimately be affected.

Mol has been scrambling to obtain supplies of Group I base oils to deliver to regular and contracted customers, tapping sources such as rerefiner Avista in Denmark and PK Orlen in Gdansk, Poland. Mol may continue to rely on these and other sources.

In the Southern Hemisphere, South Africa gears up for summertime with demand for base oils increasing, and now with all base oil types being imported into the country, large cargoes are arriving from Europe, the United States, the Red Sea and Singapore to cover requirements for blending finished lubricants for automotive, industrial and agricultural applications.

Specialty finished products such as electrical transformer oils, white oils and a variety of greases are also being imported and distributed from hubs in South Africa. Markets in Namibia, Zimbabwe and Botswana are all reliant on base oils, additives and finished lubricants being imported through South African ports such as Durban and Cape Town.

There is a noticeable shift in South Africa and East African countries toward the use of premium base oils and upgrading the range of finished lubes being produced. The move away from Group I base stocks has been pronounced over the past couple years when facilities have been updated with new investment in modern plants and machinery.

Other parts of the African continent are also moving forwards, such as West Africa, where new operations are taking over from traditional blenders. Group II and III base oils are being imported into markets such as Nigeria and Cote d’Ivoire. New markets are opening up in countries such as Cameroon and the Democratic Republic of Congo, which have large agriculture, mining and manufacturing sectors.

Across all European, Middle Eastern and African regions there is a definite buzz in base oil and lubricant markets, and whilst economic growth has been lacking from more traditional areas, there are many upcoming developments that perhaps more than compensate for lackluster European activity.

Crude and Gas Oil Prices

Crude and feedstock prices continue to trend lower as crude oil supplies are set to grow and increase during the first half of next year. OPEC+ members and Russia are trying to capture parts of the market with discounted crude prices.

Following Russian President Vladimir Putin’s state visit to India, the latter country is set to continue receiving large swathes of Russian crude and petroleum products, as are Chinese buyers despite assurances earlier this year that Russian imports would be cut back.

Crude prices have hovered around levels seen during last week and really have not moved significantly the past month.

Dated deliveries of Brent crude: $62.85/bbl, February front month
West Texas Intermediate: $59.20/bbl, January front month
European low-sulfur gas oil: $669/t, December front month

Source: London ICE trading late Dec. 8

Europe

Inventories remain higher than sellers would ideally prefer, and with weak regional demand and few opportunities to move material to export destinations, the problem remains as to how to minimize inventories at year-end. The Turkish market still beckons suppliers with quantities available for cargo movements, but the reality is that most producers have limited available quantities of all grades. Another reason is that Turkish buyers, being used to Russian imports, are looking for prices comparable to Russian cargoes, which are very inexpensive but no longer arriving into Turkey.

The FOB levels required to meet buyer expectations would have to be under feedstock costs, hence this scenario is unacceptable to European sellers. At least at the moment.

Regional demand within Europe remains sluggish, and is not improving during December. Even with Mol out in Eastern Europe, there is insufficient demand to absorb inventories.

December European prices remain weak, with rates being offered in wide ranges. One Spanish seller pushed numbers to new recent highs, perhaps in the belief that buyers will pay these higher levels. Sellers apparently have not relented to cut prices, but with three weeks of December still remaining, anything could happen.

Bright stock remains relatively tight as is maintaining a large premium over solvent neutrals.

Prices for solvent neutral grades are unchanged, and this section adds rates this week for a Mediterranean supplier. Those rates are pitched high for unknown reason.

Group I

European exports, FOB
SN150: $635/t-$675/t
SN500: $700/t-$725/t
Bright stock 150: $1,155/t-$1,195/t

Northwestern Europe, FCA Antwerp-Rotterdam-Amsterdam
SN150: $785/t-$810/t
SN500: $865/t-$900/t
Bright stock 150: $1,275/t-$1,325/t

Eastern Europe, FCA
SN150: €773/t
SN500: €825/t
Bright stock: €1,134/t

Mediterranean prices, FCA
SN150: $835/t
SN600: $950/t
Bright stock: $1,420/t

Pan-European, FOB/FCA
SN150: €625/t-€675/t
SN500/600: €700/t-€745/t
Bright stock 150: €1,085/t-€1,120/t

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

The euro’s exchange rate with the U.S. dollar was $1.16287 Monday.

Group II base oils around Europe are feeling further downward price pressure in the form of counters by buyers, but European prices remain higher than other regions. Buyers are very much aware of collapsing values for Group I base stocks, but as seen in Spain, some suppliers are pushing back on lower prices, perhaps trying to prop up the market for January sales.

Buyers are quick to suggest that a differential between the two base oil types should be maintained and should reflect the relative prices of both types and grades of the base oils.

Demand for Group II base oils appears to be slow, with blenders around Europe commenting that they will only lift contracted or agreed quantities during December and will not be persuaded to purchase additional material.

Prices are maintained as per previous

Group II

Imports, FCA basis
110N: €845/t-€865/t
150N: €855/t-€885/t
220N: €875/t-€895/t
600N: €965/t-€1,010/t

Posted prices, European production
150N: €965/t
600N: €1,110/t

The numbers above are subject to selective discounts depending on buyer reputation and quantities being purchased. Prices refer 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 are being imported in flexi-tanks.

European demand for Group III base oils remains positive, especially for the 4 centiStoke grade. Six and 8 cSt remain available, but no spot sales were reported the past week for 4 cSt because all available material has been allocated to customers. Cargoes are continuing to arrive this month, replenishing stocks and adding to availabilities.

Group III demand in Europe should continue to rise, so projects bringing more production to the market should benefit the region. Among projects now underway are expansions and refinery retrofits in Saudi Arabia, Germany and along the U.S. Gulf of Mexico coast.

Prices for Group III oils are unchanged this week. A South Korea supplier is offering discounts of $50/t below the low end of the partly approved 4 cSt price listed below. For small buyers the low end of the 4 cSt range was $10/t-$20/t higher.

Group III

Partial slates of approvals, FCA Antwerp-Rottderdam-Amsterdam
4 cSt: €1,165/t-€1,190/t
6 cSt: €1,135/t-€1,155/t
8 cSt: €1,125/t-€1,145/t

Full slates of approvals, FCA Antwerp-Rotterdam-Amsterdam, Northwestern Europe, Spain
4 cSt: €1,610/t-€1,625/t
6 cSt: €1,595/t-€1,620/t
8 cSt: €1,585/t-€1,610/t

Products sold on a delivered basis are subject to transportation costs, which will be added to the prices above.

Prices for rerefined Group III oil were amended this month to €990/t for 4 and 5 cSt and €1,050/t for 6 cSt, basis FCA Germany.

Baltic Sea

There has been no mention of export prices or cargoes loading out of the Baltic. There are currently no Russian offers for Nigeria, and no material moving into Turkey. It is difficult to work out what exactly is happening in Russia now, due to the lack of  news or information from sources. The assumption is that Russian refineries are supplying only the domestic market. Ukrainian drone strikes on Russian refineries and storage terminals appear to have had some impact.

In this information vacuum, notional prices are unchanged from previous reports.

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

Black Sea & Turkey

No Russian base oil cargoes have been seen or reported moving into any Turkish ports, and local traders say Russian base oils are no longer available, lending to the theory that they are constrained to the domestic market.

The new U.S. sanctions on Lukoil and Rosneft may also have implications for base oil movements. It has been noted that Lukoil operations outside of Russia, in Europe for example, are being sold off to interested parties. A potential buyer is bidding for the company’s unit in Germany.

It is unknown whether another unit, Litasco in Geneva, is also being sold. This report has contacted sources in Switzerland to clarify the position on this company. Litasco is a wholly owned subsidiary of Lukoil, responsible for trading cargoes of petroleum products worldwide, including base oils.

Rosneft’s last recorded/noted CIF/CFR price levels into Turkey were at $590/t in respect of SN150, with SN500 at $635/t, but these levels are no longer valid, and are indicated only for historical interest.

Group I

Lukoil, CIF/CFR Gebze (historical)
SN150: around $835/t
SN500: around $850/t

Rosneft and Bashneft, CIF/CFR Gebze (historical)
SN150: $590/t
SN500: $635/t

Having applied a surprise cut in prices three weeks ago, Tupras last week then increased prices. Levels were unchanged the past week.

Tupras
Spindle oil: Tl 32,090.00/t plus VAT Tl 8,315.44/t
SN150: Tl 27,764.00/t plus VAT Tl 7,450.24/t
SN500: Tl 34,443.00/t plus VAT Tl 8,786.04/t
Bright stock: Tl 51,258.00/t plus VAT Tl 12,149.04/t

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

Group II, ex-works from Turkish traders
110N and 220N, no current availabilities
350N: no offers
150N, ex Taiwan or Saudi Arabia: $1,010/t
500N/600N, ex Taiwan or Saudi Arabia: $1,225/t

Group III

Partly approved, from Tatneft, FCA
4 cSt: €918/t (still available)

Fully approved from Spain, CIF Gemlik
€1,695/t-€1,725/t

Middle East

Large base oil cargoes continue to load from Yanbu and Jeddah, Saudi Arabia, even with the maintenance turnaround at the Yanbu refinery in full swing. Cargoes of around 18,000 tons in total are mainly bound for the West Coast of India and the United Arab Emirates, with smaller parcels loaded for Aqaba, Jordan; Alexandria; and Port Sudan, Sudan.

Latest updates are that the turnaround at Luberef in Yanbu will run until the end of December, making it a 45-day event. Luberef is upgrading the Yanbu base oil plant to make Group III oils, aiming to make them commercially available by 2028. More information is being advised by Luberef as the project advances. The construction of the Group III facility will integrated into the new overall expansion of the refinery.

A couple of Group I and II cargoes arrived during last week into Fujairah and Hamriyah, UAE, and another cargo believed to be Group II base oil is moving in from the U.S. Gulf Coast to discharge in Jebel Ali, UAE.

Cargoes are marked to come into Hamriyah from Rayong, Thailand, in the next couple of weeks, along with a large parcel of Group II grades that loaded out of Ulsan, South Korea, and is bound for Hamriyah port.

It has not been possible to ascertain whether there are still problems berthing at Hamriyah, with local sources unaware of any delays up until present. But one contact said the port authority could at any time prioritize container traffic over bulk liquid vessels, leading to delays, demurrage and even detention.

European traders are investigating export cargoes to the UAE, but the economics are weighted against this voyage due to high freights and longer voyage times around the Cape of Good Hope. FOB prices from Europe would have to come in exceptionally low, possibly below cost, which would be unacceptable to sellers. Also it is doubtful is any European producer would have sufficient quantities of Group I grades to make this realistic.

An Indian source advised this report that one Iranian base oil cargo had moved from Bandar-e Emam Khomeyni to Haldia, India, but no vessel details were recognized from shipping reports. The cargo was said to total 6,500 tons, perhaps made up of SN150 and premium SN500 if originated from Sepahan Oil.

Rubber process oil cargoes continue to be offered into Indian receivers, where there are around five buyers involved in the tire manufacturing trade who use this product.

Sources in UAE also maintain that Iranian Group I base oils are being transported by road, transiting Iraq before delivering into Syria and Eastern Turkey.

Iran’s domestic Group II production is being distributed only internally within Iran. Imported Group II and Group III base oils move into Iran through traders based in the UAE and India, but the deals are mainly transacted through UAE banks in U.S. dollars.

There are no reports of Russian cargoes sailing from Limas terminal in Turkey to the UAE. This report has been trying to establish what is happening with blenders who used Russian base oils previously, but has come up against a brick wall so far, with those known to have been importing and using Russian base oils in blends unwilling to discuss the matter.

Imported prices into United Arab Emirates are unchanged again this week.

Group I, CIF/CFR U.A.E. 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 also directly from producers in Thailand, some of whom have representation in the UAE.

Group II, FCA or RTW, UAE and Oman
110N, 150N and 220N: $1,285/t-$1,325/t
600N: $1,395/t-$1,420/t

The high ends of the ranges refer to material being delivered by RTW in UAE and northern Oman. Group II base oils are imported into the UAE from the Red Sea, the U.S., South Korea and Singapore. Deliveries are made through UAE distributors who can purchase base oils directly from Luberef in Saudi Arabia and also from U.S. and Far East majors and traders.

Group III, FCA Hamriyah or RTW in UAE and Oman
4 cSt: $1,225/t
6 cSt: $1,235/t
8 cSt: $1,255/t

Middle East Gulf Group III base oils produced in Al Ruwais, UAE, and Sitra, Bahrain, are delivered by sea into Hamriyah, Sharjah port and Jebel Ali, UAE. The ranges of Group III prices above include a reseller margin of around $90/t covering storage, handling, insurance and a margin. RTW deliveries from distributors can incur a further charge of between $20/t-$55/t, depending on delivery location and quantity.

Netbacks for Group III base oils loaded ex Sitra and Al Ruwais for distributor sales in Europe, the U.S., India and China are maintained at $1,045/t-$1,075/t for 4, 6 and 8 cSt grades. Only small changes have been observed in selling prices in known markets, so netbacks are retained at existing levels.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, remain at $1,085/t-$1,100/t but are indications only since there are no distributors involved and Shell, joint venture partner of the production source, uses most output for in-house blending.

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

Africa

The availability out of St Roque, Spain, may be directed at receivers in Mohammedia, Morocco, since this facility may be looking for a supply of all three Group I grades – SN150, SN500/600 and bright stock.

A cargo has loaded out of Spain, perhaps Valencia or Cartagena, for receivers in Alexandria and Ashdod, Israel. The relative quantities are not disclosed, but the vessel would carry around 5,000 tons of various base oils.

Another large base oil cargo has loaded or will load out of Rotterdam and Fawley, U.K., for Durban, South Africa. It was anticipated that another cargo of around 19,000 tons of all types of base oil would load before year end for South Africa.

Durban agents have confirmed that a vessel will arrive from Northwestern Europe during late January or early February. The vessel has not been identified from shipping reports, which are normally the primary source of information for these cargoes.

The ExxonMobil cargo of around 10,000 tons Group I base oils loaded out of Fawley is delivering 5,000 tons of SN150, SN500 and bright stock 150 into Tema, Ghana. The remaining portion of the cargo will be discharged in Abidjan, Cote d’Ivoire, and Conakry, Guinea.

There are no offers for cargoes of Russian base oils going into Nigeria, but the Russian numbers are still talked about by receivers, always looking for lower prices for available barrels. This is now a problem, since there are few availabilities in the U.S., and European numbers do not work into Nigeria. Amounts needed for sizeable Group I cargoes are just available in Europe.

However, Nigerian receivers are now looking to take cargoes during January to cover requirements going forward. Few good prospects are apparent at the moment, and upward pricing pressure could result.

One cargo that discharged recently was 10,000 tons purchased by a European trader from Phillips 66 ex the U.S. Gulf Coast. This cargo finished discharging during November.

Another cargo loaded from PBF in Paulsboro, New Jersey, on the U.S. East Coast, with a 10,000 tons of SN150, SN500 and SN900. This cargo was supplied at very low prices by a European registered trader with representation in the UAE. Other traders purchased a previous parcel from PBF a couple months ago, but the current cargo was bought by a  competitor who apparently was prepared to pay a higher price in the bidding process.

A 6,000-ton cargo loaded out of another U.S. Gulf source and may consist of Group II base oils.

The peak season is about begin in Nigeria, and sources said importers are becoming concerned about their ability to build up their own base oil inventories but are still looking for lower prices for large Group I purchases.

Offer numbers from buyers are currently $825/t for SN150, $925/t for SN500 and $1,030/t for SN900, on the basis CFR Apapa.

The black market exchange rate for the Nigerian naira was NGN 1,438 to the U.S. dollar Monday.

Nigeria Group I

Russian origin, CFR Apapa (not currently available)
SN150: $825/t
SN500: $895/t
SN900: $985/t

U.S. Origin, CFR Apapa
SN150: $840/t
SN500: $930/t
SN900:$1,060/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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