With only key workers being encouraged to attend working sites, there have been calls in various European, Middle Eastern and African regions for some lubricant blenders to maintain operations in order to produce finished lubricants required to service emergency vehicles and equipment. Military and health workers are dependent on finding supplies of lubricants to maintain machines and vehicles involved in the fight against the virus.

These operations will be difficult and dangerous, with availability of base oils and additives being essential in providing supplies. Government authorities have been issued in a number of prime regions which are suffering at the moment, requisitioning essential materials including lubricants.

Crude oil prices totally collapsed early this week with levels reaching points at which there may be no return. Demand has completely disappeared from markets and with inventories growing, prices are destined to fall.

Dated deliveries of Brent crude are currently trading at $22.40 per barrel for May front month, some $4 lower than last week. West Texas Intermediate crude is showing at $19.60 per barrel also for May front month settlement.

ICE LS Gas Oil prices have not drifted to the same extent as crude, but at the same time have reached a level of $284/t for April front month settlement.

These prices were obtained from London ICE trading late Monday.

Base oil prices are extremely difficult to pinpoint, since with virtually no trades being effected there is no real market. Strategic supplies are being made to blenders and resellers from stocks already held in tank, with some vessel fixtures being canceled or delayed due to ullage and containment problems in some storage facilities.

The system is backing up with a number of producers scaling back output to marginal levels, merely to maintain operational capability. Supply trains all across the regions are being interrupted with the knock-on effects of such actions yet to be fully felt.

There are also rumors of restrictions being placed on vessels calling at certain ports with procedures being adopted in light of the Covid-19 virus. Details are not available this week, but more information is being sought, since this could affect trading of base oils around Europe and elsewhere.

For the sake of good order, prices contained in this report are maintained as last, since with little input to buying and selling practices, this has been adopted as the best course of action at this time. The ranges are still extremely wide, since there may be pockets of supply where the higher ends are being used, while at the same time, sellers desperate to move material out of tank have been offering various arbitrary discounts which suggest the lower ends of the spreads.

Europe

European Group I export prices are unchanged with solvent neutral 150 between $425/t-$540/t and SN500 at $425/t-$550/t. Bright stock remains assessed at $505/t-$625/t.

These levels refer to cargo-sized parcels of at least 2,000 tons, sold on an FOB basis from European supply points, always subject to availability.

European regional Group I prices are also maintained with no news of the usual round of new prices being issued from April 1. Sellers are largely missing from the market with only a few players trying to operate from home. Offices are closed with no administration personnel in attendance. Storage farms are functioning but only on safety grounds and with few loads being bought and sold, the scene is very quiet. With lockdown restrictions in all the main commercial centers, and only strategic supplies being maintained, it may be some time before the European, Middle Eastern and African base oil regional markets reappear in any recognized form.

The price differential between domestic prices and those applying to exports is again not reported due to there being no practical market on which to base local prices.

Group II base stocks are no different from API Group I in that demand has fallen away, and with the announcements of source decreases in the U.S. of more than $150 per metric ton in some cases it is deemed possible that European levels for any scant trades will follow suit, perhaps just to move product. One source contacted this week maintained that this may be a good buying opportunity, but with personnel missing and contacts extremely difficult to locate, it may be impossible to transact, let alone deliver base oils at this stage. 

Prices are readjusted to take account of recent source movements with wide ranging assessments at $485/t-$650/t (€445/t-€595/t) for the two lighter viscosity grades (150N and 220N), with higher viscosity grades (500N and 600N) at $495/t-$650/t (€455/t-€595/t).

These prices apply to Group II oils with full slates of finished lubricant approvals as well as those with partial slates or no approvals.

Group III business has almost disappeared with only a handful of small quantities being delivered or collected ex tank. For the sake of good order and price indication, price ranges are widened to take account of some sellers trying to move material out of tank to enable replenishment cargoes which have already loaded to be accommodated into storage.

Prices are assessed with partly approved Group III base oils in a range of €555/t-€695/t for 4 centiStoke grades, with 6 cSt and 8 cSt base oils between €565/t-€695/t. Prices refer to FCA supplies ex northwestern European hubs. Prices for European OEM fully approved API Group III base oils are also assessed in wider spreads at €595/t-€745/t for 4 centiStoke base oils, with 6 cSt grades at €625/t-€765/t and 8 cSt oils at €630/t-€775/t.

Baltic and Black Sea

Baltic supplies appear to have almost dried up, with operations closing down or at least becoming very restricted. Cargoes still move out to Antwerp-Rotterdam-Amsterdam, although these are possibly subject to vessel fixtures that have already been booked and cannot be cancelled without significant financial penalties. These supplies mainly go to contracted receivers in Antwerp-Rotterdam-Amsterdam, where these parcels may be accommodated in storage, since demand for these supplies is non-existent.

Two large cargoes for Nigeria were completed and vessels fixed for prompt loading. However, these two cargoes of some 28,000 tons in total complete the latest round of enquired trades, and may be the last of the large Nigerian cargoes to move out. The cargoes will load out of two Baltic ports, with one also calling at a northwestern port in addition.

Indications are given for FOB prices which may have been lowered at the bottom end of the ranges with numbers in respect of SN150 at around $410/t/t-$510 per metric ton with SN500 in a similar range. SN150, SN500 and bright stock out of Gdansk are indicated at around $425/t/t-$525/t in respect of the neutrals, with bright stock between $530/t/t-$595/t FOB.

Black Sea reports contain news that a further Kavkaz, Russia STS loading for 10,000 tons will be effected during the first few days of April. This cargo is destined for Rotterdam, where it may be transshipped to the Caribbean. United Arab Emirates buyers may also be interested in taking material, hence further cargoes may be loaded from this facility. Sellers are heard to offer numbers between $410/t/t-$425/t in respect of SN500, with smaller quantities of SN150 at around $410/t.  Prices are indications only, but containment at refineries may be an issue. Also, a utilization issue for the mother vessel is believed to be an on-time charter.

Some Russian offers to Turkish buyers are for supplies CIF to Gebze in Turkey, but with the lockdown in Turkey, little interest is shown in these offers. 

As with the rest of the region, Turkish players are missing from closed offices, with few traders around to complete any business.

Group I offers are still apparently on the table from Greek sellers, but no takers show interest in these supplies, predictably due to lack of demand in the Turkish markets. Indications are around $525/t for quantities of SN150, with SN500 at $540/t basis CIF Marmara. SN600 was indicated at the same level, around $540/t.

Middle East

A large cargo of Group III base oils loaded out of the Middle East Gulf for receivers in Turkey, presumably fixed prior to restrictions and lockdown. Group II and Group III grades remain available out of tank in the major Turkish ports, Selling levels remaining were indicated between $695/t/t-$725/t in respect of the low and high vis Group II grades, with partly-approved Group III base oils between $710/t/t-$745/t. These prices may start coming lower, although material currently in tank will have been purchased prior to the latest downward curve for crude and petroleum products.

Red Sea reports contain information regarding vessels loading out of Yanbu and Jeddah, with a large cargo of some 16,500 tons of Group I and Group II base oils moving to the west coast of and the east coast of India. However, with all of India moving into a lockdown situation, this trade may start to become curtailed.

There is potential for a further supply of another Kavkaz, Russia cargo to go into United Arab Emirates, but with the virus situation under review in that region, there may be delays to receivers opting to take further material at this time. Sellers are keen to move material through the STS facility for many reasons but sources in the U.A.E. are reticent to commit to purchasing large cargoes from the Black Sea. 

The U.A.E. and indeed all of the Middle East Gulf has come under real pressure from the virus spread in Iran, with restrictions on movements of people and goods into and out of U.A.E. ports by sea and air. Dubai and Abu Dhabi have taken on European style restrictions, with most people working from home. Offices are closed, although blending plants are still operating, but finished lubricant production is limited.

U.S. Gulf Group I offers to U.A.E. receivers appear to have been diverted to the Indian market.

Restrictions are strictly enforced on any and all Iranian vessels trying to discharge small quantities of base oils into Hamriyah in Sharjah, perhaps preventing the discharge of small parcels of SN500. Prices for material that has found a way into U.A.E. are indicated at around $485/t CFR in respect of SN500.

Group III trade continues, with reports of an oil major about to move a large cargo of Group III grades out of Sitra and Ras Laffan to the U.S. Gulf Coast. This was planned prior to U.S. restrictions, although the vessel has been fixed to load sometime during April. Al Ruwais is quiet this week, perhaps for obvious reasons, with no reported cargoes loading for Far East, India or Europe. Activity from both Al Ruwais and Sitra may be suspended for the foreseeable future, due to distributors avoiding ullage problems in receiving terminals because of the interruption to trade in the markets.

Notional FOB prices are lowered, with levels coming down to between $545/t/t-$585/t in respect of the partly-approved range of 4 centiStoke and 6 cSt Group III base oils. Eight cSt grades sold into India and Far East will have slightly lower FOB prices due to discounted selling prices in those regions, although not many cargoes are expected to be moving over the coming weeks.

“Nexbase”-branded Group III base oils from Sitra, which are marketed by Neste, are also marked down, with notional netbacks now between $675/t/t-$730/t FOB in respect of 4 centiStoke, 6 cSt and 8 cSt viscosities.

Notional FOB prices on a netback basis are based on prices derived and informally assessed from regional selling levels, less marketing, handling and freight costs.

Group II base oils out of U.A.E. hub storage also lost out in the restrictive new markets, with price levels somewhat indistinct. Numbers are indicated only an FCA basis between $675/t/t-$810/t in respect of the light vis grades 100N/150N/ 220N with 500N/600N between $700/t/t-$830/t. Prices are based on CIF/CFR numbers into U.A.E. from Far East, Red Sea and U.S. Gulf, plus freight, storage and handling, and distributor overheads and margin. Trade is reported as light this week with sources commenting that buying interest is minimal.

A European major sold a cargo from the Spanish Mediterranean into Mohammedia, the only reported cross Mediterranean trade. Presumably supplies will continue to flow into Alexandria to cover the second quarter requirements under the Egyptian General Petroleum Corp. contract, although the state of play in Egypt is confusing, with few reports available of the coronavirus statistics.

Africa

South African shipping sources reported that a large parcel of around 20,000 tons will arrive into Durban during May to discharge various grades of different base oils, which will have loaded out of Rotterdam and a southern United Kingdom port. Part of this cargo will then sail to Mombasa for supply to receivers in Kenya.

Two large cargoes will load out of the Baltic and northwestern for receivers in Apapa, hence the presumption is that trade is continuing at least at the moment. The loading out of Livorno appears to have been put on ice because the problems in Italy with refinery loading are difficult.

Current prices in respect of Group I base oils imported into Nigeria are expected to be under pressure to fall, with sailings to Nigeria showing lower FOB numbers, although freight rates may have firmed. Cargoes from here on in will be under pressure to reflect lower FOB prices, which are expected to be passed on to buyers.

CFR/CIF levels are therefore reassessed with prices indicated between $595/t/t-$625/t in respect of SN150, SN500 between $600/t/t-$640/t, and bright stock, where forming part of the cargo, between $710/t/t-$730/t. An Indication in respect of blended SN900 is between $625/t/t-$645/t.

Prices are in respect of cargoes of minimum 10,000 tons being delivered into Apapa port, Lagos, Nigeria.

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.

Historic and current base oil pricing data are available for purchase in Excel format.