Weekly EMEA Base Oil Price Report

The difficulties in identifying possible breaches are infinite, with one blending operation based in the U.K. commenting during last week that all that is required in one zealous customs officer inspecting material which is being exported from EU or U.K. to distant markets, and requiring that the seller prove that the finished lubricant does NOT contain Russian base oils or additives.

The inference here is that it will be down to the blender to prove that the lubricant is free from Russian derived materials and that it meets the export criteria laid out under the sanctions.

Here lies a problem, since with other aspects of the European ban, the sanctions have been ill thought through, and tools to prove compliance are not in place.

The bottom line is that there is no method of proof, and considerable costs could be involved with hold ups and delays to vehicles and containers used for shipping these products for export. Barring inspections by customs officers throughout the blending operation, there are no methods to ascertain the composition and make-up of the finished lubricants, other than a declaration by the blender, which, of course, is open to abuse and dishonest claims.

Bulk cargoes of jet fuel and diesel meanwhile are simple and straightforward to identify and track, and can be routinely tested to ascertain sources of crude involved in producing these grades. Some suppliers will continue to host more than one crude source, including Russian material which is lower cost and provides better margins for the refiner.

Product designated for EU or U.K. will be kept segregated, and the process will be monitored by inspectors to meet the criteria required under the sanctions. Not so base oils, which could be produced using Russian crude and could be blended with Western refined base oils prior to blending to produce finished lubricants. There are infinite possibilities and combinations to breach the sanctions imposed by the EU.

On contacting U.K. Customs and Excise personnel, this report posed the questions as to how officers would apply checks to establish conformity with the new rules and regulations. The questions were met with incredulity and a lack of understanding as to any sanctions being imposed or a methodology could be applied.

Further investigations with the Office of Financial Sanctions Implementation in the U.K. yielded nothing, except an offer for potential further information which could be accessed on-line. Nothing was found to be remotely connected to the issue in question.

Therefore it is a sad reflection that information for lubricant blenders is totally absent from any legislation issued from EU or U.K. authorities.

With the immediate threats of Greenland tariffs from U.S. and counter measures from the EU being removed from the table, base oil prices around the European, Middle Eastern and African regions are described as stable to weak, with ample availabilities of both Group I and Group II base stocks. Group III appears to be moving shorter in Europe, but with a number of cargoes arriving in the next few days and weeks, availability should improve in the short term.

Demand remains poor for Group I grades, with only marginally better demand for Group II base oils around all European, Middle Eastern and African regions. API Group III demand remains firm, with 4 centiStoke the most popular grade from the slate.

Crude and Gas Oil Prices

Crude oil prices firmed over last week, with the U.S. threat to Iran still very much in minds across the Middle East and on the global stage. The Trump administration appears not to have made any decisions as yet to attack weapons sites such as missiles which have range of around 700 miles, putting Israel and U.S. bases in the Middle East within range.

Crude prices may have reacted to a possibility of U.S. strikes against Iran, but with a projected glut of crude oil appearing from mid year onwards, there appears to  be no shortage of supplies with OPEC+ members opening up the taps to benefit from crude revenues wherever possible.

Crude and gas oil current prices
Dated deliveries of Brent crude: $65.50/bbl, March front month
West Texas Intermediate: $60.65/bbl, March front month
European low-sulfur gas oil: $682.00/t, February front month

Source: London ICE late, Monday Jan 26.

Europe

European Group I base oil business enjoyed a mini spike some ten days back, but activity has now quietened down following the initial rush back after the holidays now seemingly over to some extent. 

The latest from barge operators along the Rhine is that water levels are improving and they are now able to load almost full capacity on many barges, with only deep-keel vessels restricted on loading. This means that base oils can be delivered at optimum prices, and with barge operators more than happy with the revenue stream from full loads.

Orlen from Gdansk have announced that they will enter into a turnaround at the refinery during March/April time. Exact dates are not yet known but should get confirmation during the course of this week. The maintenance will be directed at the new Group II stream which will be forthcoming from this refinery either in 2027 or early 2028.

The addition of another European source for Group II is important for the market, and will alter the reliance solely on one refinery for these grades, plus imported barrels from U.S.

Group I prices remain steady but with weak demand, keeping numbers stable, and without any crazy offers from sellers, levels may remain around current values. Feedstock costs are rising, but not to the extent of applying upward price pressures on refiners. Bright stock still remains tight, but prices have slipped a littler and are described as ‘steady’. Bright stock continues to  maintain a large premium over solvent neutral price levels.

Prices shown for European Group I exports are notional and reflect those that would be necessary to complete sales. Suppliers either lack the necessary quantities for export shipments or are unwilling to meet such prices. Mol is still relying on base oils purchased from PK Orlen in Gdansk to supply Group I oils in Eastern Europe.

Group I

European exports, FOB basis
SN150: $625/t-$660/t
SN500: $695/t-$720/t
Bright stock 150: $1,100/t-$1,125/t

Northwestern Europe, FCA basis Antwerp-Rotterdam-Amsterdam
SN150: $775/t-$800/t
SN500: $855/t-$890/t
Bright stock 150: $1,225/t-$1,255/t

Eastern Europe,  FCA
SN150: €764/t
SN500: €820/t
Bright stock: €1,126/t

Mediterranean prices, FCA (from one Spanish source)
SN150: $815/t
SN600: $925/t
Bright stock: $1,310/t

Pan-European, FOB/FCA
SN150: €620/t-€665/t
SN500/600: €695/t-€740/t
Bright stock 150: €1,050/t-€1,075/t

Pan-European prices are assessed on an aggregate basis from prices obtained from Scandinavia, Poland, France, Germany, Benelux, Spain, Italy, Greece, the United Kingdom, and Baltic States.

The euro-U.S. dollar exchange rate was $1.18836 on Jan. 26. The dollar is weakening against major currencies due to Trumpian economics.

European Group II base oil prices have steadied with levels becoming accepted by buyers following a lowering of prices from a major supplier. Levels are being held at around $1010/t in respect of the 150N grade and $1175/t for 600N.

The EU duty element of 3.7% for non-FTA imported Group II base stocks was to be removed Jan. 28, but that is in doubt now due to new tariff threats from Trump. Now that the threat of Greenland tariffs has receded, it will be interesting to see if the duty element will now be removed.  

New Group II production will be forthcoming from PK Orlen at Gdansk refinery with a timetable yet to be formally announced. The nameplate production will be 400,000 tons per annum, but it is thought that initial output will be lower, suggested starting output is heard at around 160,000 t/y.

Demand is healthy, with February expected to be equally buoyant, with buyers replenishing stocks ahead of Spring.

Group II, FCA basis
110N: €825/t-€860/t
150N: €825- €865/t
220N: €820/t-€850/t
600N: €890/t-€960/t

Prices refer to a wide range of Group II base oils which may be sourced from within Europe, the U.S., the Red Sea and Asia-Pacific.

Group III base oils show excellent demand, particularly for the 4 centiStoke grade. New cargoes continue to arrive from Middle East Gulf and AsiaPac with in-tank stocks being made available to regular/contracted customers.

The cargo of Group III grades which loaded from Indonesia coming into Antwerp-Rotterdam-Amsterdam has been confirmed again, with the vessel reaching Antwerp-Rotterdam-Amsterdam any day now. It is thought that this cargo is trader driven, with one candidate in particular. A trader based in geneva is considered to be behind this cargo, having lifted Group III cargoes in the past from Petronas in Malaysia, and Bapco in Sitra Bahrain. All cargoes have been delivered into Antwerp-Rotterdam-Amsterdam where this trader has storage ready. The quantity is unknown as yet, but will be sold FCA, or on a delivered basis.

European Group III prices are maintained around current levels but with buyers accepting small increases for February and March.

The market remains relatively tight, with no spot trades being reported. All quantities arriving into Rotterdam are being allocated to regular or contracted buyers.

Group III prices in respect of partly-approved material, FCA are moved slightly higher.

Group III

Partly approved, FCA Antwerp-Rotterdam-Amsterdam and Northwestern Europe
4 cSt: €1,175/t/t-€1,195/t
6 cSt : €1,155/t-€1,175/t
8 cSt: €1,145/t-€1,165/t

Fully-approved, 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

All the above products sold on a delivered basis are subject to transportation charges, added to the prices above.

Rerefined Group III, FCA Germany
4 cSt:  €990/t
5 cSt: €990/t
6 cSt: €1,050/t

Baltic Sea

No Information, confirmation or otherwise has been received in trying to establish the verification of a cargo which was rumored to load out of St Petersburg. It must be assumed that this cargo was entirely fiction.

Supplies of Russian base oils continue to be directed towards the domestic market, following significant and major damage to production and storage facilities at a number of refineries and terminals around Russia.

Export destinations such as Turkey, the United Arab Emirates and Nigeria have not seen any Russian barrels of base oils for some time, and receivers in those regions have had to adapt to more expensive base oils in blending finished lubricants. Notional levels for Russian base oil exports are unchanged.

Group I exports, FOB St. Petersburg or Vyborg
SN150: $625/t-$655/t
SN500: $660/t-$685/t.

Black Sea & Turkey

Contacts in Turkey have confirmed that no Russian base oil cargoes have been delivered into Turkey for some months now, and in the unlikely event that this trade resumes, then repairs to refineries and storage farms will have to take place.

There are rumors circulating around Black Sea ports that Russian refineries cannot access parts and spares to effect repairs to various parts of the refineries. It would appear that Ukrainian drone operators knew exactly where to strike. Traders and blenders involved with Russian base oils in the past, have no availabilities to offer.

Turkish blenders have been purchasing Group I bas stocks from Sonatrach in Augusta, Sicily, and also from Alexandria in Egypt. Tupras Group I prices remain as published last week.

Group I, ex rack Izmir refinery
Spindle oil: Tl 32,090.00/t plus VAT Tl 8,315.44/t
SN150: Tl 278,620.00/t plus VAT Tl 7,621.44/t
SN500: Tl 35,299.00/t plus VAT Tl 8957.24/t
Bright stock: Tl 51,258.00/t plus VAT Tl 12,149.04/t

Sales also incur a standard loading charge of Tl 9,487.20/t which should be added to the prices above.

Group II, ex-works through Turkish traders
110N and 220N, no availabilities
350N : no offers, assuming no avails.
150N, ex Taiwan or Saudi Arabia: $955/t
500N/600N, ex Taiwan or Saudi Arabia: $1,155/t

Group III
Partly-approved
Tatneft 4 cSt, FCA: €933/t (no availabilities)

Fully-approved from Spain, CIF Gemlik
€1,655/t/t-€1,680/t.

Middle East

Following the lull in activity during December, when the refinery went into a planned turnaround, cargoes of Group I and Group II base oils are now being loaded for receivers in Mumbai and UAE. Group I solvent neutral grades, SN150 and SN500 are also been loading out of Jeddah for buyers in India, Aqaba, and Port Sudan.

The turnaround was partly preparatory work for the introduction of  production for Group III base oils. Dates for this expansion are not announced as yet, but clarification may be gained during base oil conferences to be held in London during the first week of February.

A Saudi rerefiner is to be present at one of the conferences, and this report will hold meetings with that party to establish the latest updates should Luberef not be present at that particular conference.

Elsewhere Group II cargoes are being arranged for receivers in Durban, and 3,000 tons of bright stock has loaded during January for Alexandria in Egypt, under the EGPC contract.

Group I and Group II base oil cargoes continue to arrive in UAE from the U.S., South Korea, Thailand and Indonesia, with parcels discharging in Fujairah, Hamriyah and Jebel Ali. A large Singapore cargo will also discharge in Jebel Ali with a large quantity of Group II base oils, Sources in Dubai have suggested that the cargo could be around 21,000 tons in total. This cargo will be under the auspices of a major supplier.

Iran still holds the news with the U.S. biding time on any further escalation of activity. News from Iran is sketchy but with continuing communication blocks with few telephones and internet. Reports are that more than 4,000 people died during the two weeks of protests, including some of the security police and members of the Islamic Revolutionary Guard Corps.

Trump has held off attacking the regime for the moment, but the U.S. Navy carrier group is now in position with air support from the West, hence the U.S. may be poised to go into action. 

Iranian Group I base oil news is not forthcoming nor available, but refineries were targeted by protesters, but the outcome of action is unknown.  Contacts in UAE have been trying to communicate with people in Tehran and Bandar-e Emam Khomeyni, but no real news has been forthcoming from within the country.

No Russian base oil cargoes have arrived into UAE, with no vessels sailing from Limas terminal in Turkey or from the Baltic. Turkish reports are that Limas terminal has been closed, whether temporarily or permanently, no one knows.

Imported base oil prices into UAE are maintained following the moves made last week.

Group I, CIF/CFR UAE ports
SN150: $860/t-$885/t
SN500: $910/t-$925/t
Bright stock 150: $1,195/t-$1220/t

Group I cargoes are sold to receivers in U.A.E. by traders based in the U.S. and also through companies based in Switzerland, but also directly from producers in Rayong, Thailand.

Group II, FCA or RTW UAE and Oman
110N, 150N and 220N: $1,255/t-$1,300/t
600N: $1,365/t-$1,395/t

Group II base oils are being imported into the UAE and other Middle East Gulf ports in Qatr, Bahrain and Kuwait from the Red Sea, the U.S., South Korea and Singapore, and are being resold FCA or on a truck delivered basis. The high ends of the ranges refer to material being delivered by RTW in the UAE and into Oman, north of Khorfakkan and Fujairah.

Group III, FCA UAE ports or RTW in UAE and Oman
4 cSt: $1,240/t
6 cSt: $1,250/t
8 cSt: $1,265/t

Prices for Group III prices above include a reseller’s margin of around $95/t to cover storage, handling, insurance and a margin. RTW deliveries from distributors can incur a further charge of between $20/t-$65/t, depending on delivery location and quantity.

Middle East Gulf Group III base oils produced in Al Ruwais, UAE, and Sitra, Bahrain, are delivered in relatively small parcels of around 3,000 tons-4,000 tons by sea into Hamriyah and Jebel Ali in the UAE.

Netbacks in respect of Group III base oils ex Sitra and Al Ruwais for distributor sales in Europe, U.S., India and China are maintained between $1,065/t-$1,085/t in respect of 4 centiStoke, 6 cSt and 8 cSt Group III grades.

Netbacks in respect of GTL Group III+ base oils ex Ras Laffan in Qatar, are unchanged and remain between $1,110/t-$1,135/t. Levels are given as indications only, since no distributors are involved in these cargoes, the product being mainly retained by Shell affiliates for in-house blending.

A large cargo of around 20,000 tons-25,000 tons, has loaded out of Sitra for receivers in U.S.  It is not clear if this cargo will be received by the appointed distributor in U.S.

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

Africa

Sonatrach have offered barrels out of Algiers t receivers in Morocco. The cargo which is required for Mohammedia. As an alternative, supply could be effected from Augusta in Sicily if REACH accreditation is required for the base oils.

The large base oil cargo loaded out of northwestern Europe ( Rotterdam and Fawley ) for Durban in South Africa should be arriving any time soon, and ship agents in Durban will give an update this week. The cargo will discharge all 19,000 tons, of all types of base oil in Durban.

A cargo from Red Sea is to be delivered for receivers in Dar-es-Salaam, Tanzania. The size of the cargo is not known yet but will probably be around 8,000 tons-10,000 tons of SN150, SN500 and bright stock. This receiver used to purchase large quantities of Group I base oils from Livorno refinery in Italy in years gone by. The supply was then taken over by a major either supplying from Rotterdam air alternatively from Singapore.

Logistically, it makes sense to supply out of Yanbu and Jeddah, with shorter voyage time and similar specification base oils as coming out of Europe or Singapore.

A European major has loaded a vessel out of Fawley with around 10,000 tons of three Group I base oil grades, before sailing the vessels to West Africa for the usual three discharge locations. Conakry in Guinea, Abidjan in Cote d’Ivoire, and Tema in Ghana. The latter supply is to cover the requirements under the Ghana tender, which is held on contract by this supplier, and has been for some years now.

In Nigeria the base oil market is moving quickly at a busy time of the year, when blenders all over the country take large and small quantities of base oils delivered by truck. vehicles are loaded in Apapa from shore storage and delivery can take a number of days to reach some destinations, since some blenders are based in the north of Nigeria, which can take up a week to travel.

Receivers/buyers do not appear to be overly concerned regarding extending further supplies, with FOB prices difficult to obtain from suppliers to meet buyers’ expectation ideas, the prospect for further cargoes going forwards seems remote.

Only when traders turn around to receivers and tell them that they cannot deliver further cargoes due to the low prices, will buyers maybe back down and negotiate sensible numbers which can be achieved.

Traders have been bidding FOB numbers to potential suppliers in the U.S., and in Europe, but reports are that suppliers are not interested to offer at the levels proposed. The numbers are based on what would be necessary to achieve bid prices from Nigeria. Prices being proposed by buyers reflect the last Russian cargo to arrive in Apapa port in Lagos, which was some months back, but against which, buyers use levels for new business which are expected to be met. Traders are commenting that it will be impossible to offer at the levels requested, on the basis that that Group I FOB prices remain where they are today. With no sign that markets are weakening to the extent required, it may be some time before further cargoes arrive into Apapa.

Bid levels are at $840/t for SN150, $900/t for SN500 and $995/t-$1,030/t for SN900. These numbers are nigh impossible to meet, taking FOB levels as they stand, then adding freight and a margin to cover all eventualities including possible demurrage, which never gets paid.

There could be an impending potential shortage of SN900, which has a noticeable price differential over SN500, and at the higher prices, some receivers and a number of buyers/blenders are unwilling to purchase at those levels. Some buyers are saying that they will not buy SN900, but will rely solely on SN500 as the highest viscosity base stock to feature in blends.

Bid numbers from buyers are heard at exceptionally low levels of $825/t for SN150, $900/t for SN500 and $1,030/t for SN900, on the basis CFR Apapa.

The Nigerian naira black market exchange rate is NGN 1,480 to the dollar Monday.

Group I, CFR Apapa

Russian origin (no longer available, but still used in negotiations)
SN150: $825/t
SN500: $895/t
SN900: $985/t

U.S. origin
SN150: $840/t
SN500: $900/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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