Weekly EMEA Base Oil Price Report - Lubes'N'Greases (2024)

The situation arose after leader of Hamas’ military wing, Ismail Haniyeh, was assassinated in Tehran last week whilst attending the swearing in of the new Iranian president. Iran and Hezbollah have sworn to avenge Haniyeh’s death and that of a Hezbollah commander who was killed in Lebanon by an Israeli strike.

The effects on the base oil industry in the area are profound, with supply chain interruptions and logistics and transportation of raw materials all being affected by the conflict.

Fortunately, many players in the Middle East Gulf and surrounding regions are out of station for the summer recess and will not be returning to work until next month. Many blending operations and other lubricant companies are either on short time working hours or are completely closed for the month of August.

However, reports from the region suggest that many worry the battels between Israel and Iranian proxies escalate into an all out war, which would have serious consequences for all commercial operations in the Middle East.

There are few actions to be taken to prepare for such an escalation in the conflict. Many players in the United Arab Emirates are trying to organize supplies of base oil and additives from remote locations in Europe and India.

Elsewhere in Europe, the Middle East and Africa, many companies have slowed operations for August, and many individuals are on vacation for a number of weeks. Purchasing significant quantities of base oils has been put on hold until the resumption of business in September as only sporadic buying of top-up loads is happening during the next few weeks. A number of European lube blenders reportedly have seized the chance to perform annual maintenance to production lines and equipment such as tanks and vehicles.

The remainder of this month is expected to be slow, with many contacts for this report on holiday and out of the offices.

In last week’s report it was mentioned that unless some major geo-political event evolved, then markets would be quiet. Well, since last week, all bets are off the threat that fighting may spread.

Crude oil weakened even against that backdrop. Dated deliveries of Brent crude fell around $5 from last week to $76.80 per barrel, now for October front month settlement. West Texas Intermediate followed a similar track to of $73.48/bbl, still for September front month.

Low-sulfur gasoil prices sank below the psychological barrier of $700 per metric ton before rising back to $709/t, still for August front month. All of these prices were obtained from London ICE trading late August 5.

Europe

Europe’s switch from net exporter to net importr of API Group I base oils as cargoes continue to appear from Red Sea suppliers and more are planned for the remainder of the year. These are loading mainly from Yanbu, Saudi Arabia, but Jeddah, Saudi Arabia, is also a possibility for loading quantities of solvent neutral 150 and SN600 or SN500 The cargoes bound for Europe are under the auspices of S-Oil, which is part of the Saudi Aramco group and which has established representation in Europe. Cargoes are being moved into storage in Rotterdam before being resold.

ExxonMobil continues to load out of Rotterdam, Fawley, U.K., and occasionally out of Valencia, Spain, and Augusta, Italy, for a number of African destinations. Other than these large quantities, there are no Group I cargoes moving from European producers.

Imported Group I is playing a significant and increasing role in the European market, but sources are limited since the arbitrage from the United States is closed, and the European Union has banned Russian base oils.

European Group I supplies remain tight, but vacation season means demand will be very slow during August, with buyers not returning to the market until September at the earliest. A number of blenders laid in quantities of Group I base oils during July in preparation for the fourth quarter.

European markets are also quiet and will probably remain in balance, but buyers are hoping availabilities of heavy neutrals and bright stock will improve come September. Bright stock has become a bit of a conundrum because the number of refiners producing this grade is now limited. The Mediterranean regions lost a couple of major suppliers of bright stock in Galp in Portugal, and Eni in Italy, leaving Cepsa and Repsol in Spain and Sonatrach in Sicily as the only remaining producers along the Med’s northern coast. There are some possibilities for material to come out of Algeria and Egypt, but quantities are limited, and some products do not carry REACH accreditation.

Lower prices for crude oil and petroleum products have improved base oil margins and improved margins versus distillates removing any suggestions of potential price hikes during the quiet month of August. This gives refiners incentive perhaps to boost production at the start of September, when forecasts are that demand for all types of base oils will be strong, moving towards the fourth quarter.

Prices for Group I sales within Europe are unchanged at with SN150 between €1,065/t and €1,150/t, SN500 at €1,185/t-€1,215/t and bright stock at €1,385/t-€1,445/t.

The dollar exchange rate to the euro rose to $1.09985 on Monday. The average price differential across all grades between Group I sales within Europe and a notional export market is unchanged at €10/t-€25/t.

There were reports last week of some Group II prices moving upwards by small amounts of €20/t. These moves were from one of the major U.S. suppliers, and it was considered that the increases were merely to offset any discounting that crept into the Group II markets during July.

Availabilities are forecast to improve over the next few months as U.S. suppliers finish building inventories as precautions against disruptions from hurricanes.

European Group II prices remain relatively high compared to markets in Asia-Pacific and the Americas. Producers are being encouraged to move Group II base oils to Europe, where demand is forecast to grow over the next few years. The premium to vacuum gasoil and diesel has received a further boost from falling diesel prices.

Prices from one U.S. importer rose this week to €1,110/t for 110 neutral, €1,140/t for 220N and €1,240/t for 600N, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

In general, Group II prices are slightly higher at €1,160/t-€1,185/t ($1,270/t-$1,295/t) for 110N and 150N, €1,220/t-€1,245/t ($1,330/t-$1,360/t) for 220N and €1,295/t-€1,320/t ($1,415/t-$1,445/t) for 600N. These prices apply to a wide range of Group II base oils from European, U.S., Red Sea and Asia-Pacific sources, all imported in bulk.

Group III markets around Europe continue to erode, with some sellers willing to underprice others to gain or perhaps just retain market share. Prices appear to be dragged down by an oversupply situation, with one or two suppliers continuously undercutting prices in the market. This is not necessarily offering lower prices against competition, but the levels are circulated around the market, causing problems for incumbent suppliers who are trying to protect their customer base. There is almost a constant barrage of new, lower prices being talked in this market.

European prices for Group III base oils with partial slates of finished lubricant approvals or without approvals are realigned in the face of numbers heard around the end of July. Levels are assessed at €1,170/t-€1,240/t for 4 and 6 centiStoke grades and at €1,165/t-€1,250/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Two South Korean suppliers continue to offer lower numbers of €1,170/t-€1,195/t for 4 cSt, though reportedly only for regular customers.

Prices for rerefined Group III oils are also taken lower to €1,155/t-€1,185/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Prices for Group III grades with full slates of approvals remain at premium levels of €1,785/t-€1,820/t for 4 and 6 cSt and €1,825/t-€1,835/t for 8 cSt, FCA ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic & Black Seas

No cargoes appear to have been loaded out of the Russian Baltic ports of Vyborg and St. Petersburg during the past week. There are more rumors that Russian suppliers and other Russian and Belarus traders are looking at Central and South American destinations to place cargoes. At the same time, Indian traders are reporting that that country will rapidly become self-sufficient in Group I and Group II base oils, which will ultimately affect suppliers such as Lukoil that are importing large quantities of Group I to the Indian market. It is believed that more than 80,000 tons of Russian barrels have moved into India so far this year.

Having recently broken into the Indian market, suppliers of those barrels could soon be pushed out. The irony of this situation is that the future surplus of Indian base oils will come about partly because of the huge quantities of cheap Russian crude oil which are being dumped into the Indian market.

The South American option may run into quality issues as many receivers in Brazil, for example, currently depend on U.S. material carrying higher specifications than Russian Group I grades.

It is also feasible that Russian refineries will start looking to export quantities of Group II and Group III base stocks, which could be of interest to Latin American buyers. This possibility may be on the horizon, but reports suggest that domestic Russian markets are thirsty for supplies of Group II and Group III base stocks.

Traders may be looking to offer a Russian base oil cargo to Nigerian receivers. There are reported instances of new prices being heard in the Nigerian market, bit finance and quality parameters may stand in the way of a cargo being successfully sold there.

Baltic cargoes continue into Gebze, Turkey, and Singapore but are only reported following discharge. Information is obtained from local shipping agencies in the various ports.

FOB prices for Russian SN150 and SN500 ex St. Petersburg or Vyborg are estimated on a netback basis from the new prices being currently offered into Nigeria, after taking freight and margins into consideration. These FOB numbers could be $730/t-$755/t forSN150 and $760/t-$775/t for SN500. Blended SN900 could be priced around $820/t using SN1200 or Russian bright stock plus quantities of SN150 or SN500.

Blending operations in Turkey have gone exceptionally quiet the past week, with many blenders closing for the whole month of August. Some are doing basic maintenance on machinery and lines. Management has requested staff to work for flat fees to effect repairs and maintenance to plant and equipment. Apparently, a number of companies have adopted this practice, offering relatively large payments to entice workers to participate.

Prime European banks continue to pile pressure on Turkish banks that have trading relationships with Russian banks and suppliers. Some banks in mainland Europe have now decided to cut ties with certain Turkish banks, otherwise those European banks could be in breach of EU rules and sanctions.

Imported Russian base oil continues to dominate the Turkish market, with latest prices estimated to be around $825/t-$850/t for SN150 and $835/t-$865/t, basis CFR Gebze.

The Tupras export tender for around 7,000 tons of Group I grades appears to have been abandoned for lack of buying interest from any traders. One trader was trying to negotiate a deal for Nigeria, but the quantities of the grades are not right, and the largest quantity in the tender would have been SN500, which would hinder the trader’s ability to blend a larger required quantity of SN900.

Tupras re-issued prices for the local market: 34,935 lira/t for spindle oil, Tl 30,582/t for SN150, Tl 32,474/t for SN500 and Tl 44,429/t for bright stock. Prices in lira are offered ex rack, plus a loading charge of Tl 5,150/t.

Group II grades, imported and resold on an FCA basis, are at €1,325/t-€1,375/t for 100N, 150N and 220N and at €1,520/t-€1,555/t for 600N.

Group II base oils are imported from Red Sea, U.S., and South Korean sources, but now Russian Group II grades are also being offered in Turkey. Prices are reported to be around €100/t lower than those from other sources.

Group III base oils with partial or no approvals include 4 cSt from Tatneft in Russia, priced around €1,395/t. Imports from the U.A.E., Bahrain and Asia-Pacific had been available and prices at €1,625/t-€1,670/t on an FCA basis, but most of these stocks have been depleted.

Smaller quantities of fully-approved Group III grades from Cartagena, Spain, delivered into Gemlik, are being resold on an FCA basis to local blenders. Prices are maintained at €1,960/t-€1,995/t, FCA.

Middle East

With record shipments of more than 210,000 tons of base oils loading out of Yanbu and Jeddah during May, June and July, Luberef appears to have more than made up for delays and cancellations resulting early on from shipping disruptions caused by Houthi rebels. Initially these limited base oil exports from Red Sea ports. Quantities were moved to regular receivers on the West coast of India, the U.A.E., Pakistan and Singapore. It has not been possible to ascertain if any quantities of Group II might have loaded for Durban, South Africa.

It is not known whether the problems moving large quantities of base oil from the two Saudi ports were overcome by using friendly flagged vessels or through some other arrangement.

With India moving towards surplus Group I production the opportunities for Luberef to supply this market may diminish in the future. Sources say more emphasis will be placed to move Group I and Group II cargoes to Turkey and Europe.

With the latest news of the possibility for all-out warfare between Israel and Iran and its proxies – Hezbollah, Hamas and the Houthis – the region is watching news and taking steps to insure against fall-out from an escalating conflict that could draw the whole region into a battle zone. Should Iran take a direct position by striking at Israeli positions, then other allied nations could become involved in what could lead to an even broader war.

Base oil trading and supply in Middle East regions would come under renewed threats to supply chains and logistics. Iran continues to have trading relationships with the U.A.E. and Oman but not with the Saudis.

Sepahan, an Iranian base oil producer, is continuing to supply quantities of SN500 and SN150 through the ports of Bandar Bushehr and Bandar Khomeini. Most of these exports find their way into the U.A.E. and Pakistan. Indian receivers used to take considerable quantities from Sepahan, but due to a developing surplus of Group I base oils, this market will no longer be available to Iranian exporters.

U.A.E. blenders have literally shut up shops, and many key players are missing from their desks since the end of last week. Many have made their way to European and U.S. destinations where they will remain for the next few weeks. Many blending operations hold stocks in tank that they were required to move before replenishing inventories, which will not happen until September or October.

With the arbitrages from the U.S. and Europe closed, Middle East Gulf buyers are no longer dependent on receiving base oils from those sources. Russian base oil prices were heard to be priced at $835/t for SN150 and $845/t for SN500. Parcels of around 5,000 tons had previously loaded from Limas terminal in Turkey, with only a few cargoes of up to 12,000 tons loading out of St Petersburg in the Baltic.

Netbacks for Group III exports from Al Ruwais and Sitra for partly-approved Group III oils, are again maintained following the recent adjustment, but with prices dipping in Europe and the U.S., a recalculation may be warranted during the course of this week. Indications are placed in a range of $1,275/t-$1,300/t for 4, 6 and 8 cSt grades.

Netbacks for Shell gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are unchanged and estimated at $1,410/t-$1,445/t but are also under consideration to be revised. Levels are given as estimates or indications only, since Shell cargo economics and cost allocations are not disclosed. Netback levels are assessed from distributor selling prices, less estimated marketing, margins, handling and freight costs.

Prices are unchanged for Group II base oils sold ex tank in the U.A.E. or on a truck-delivered basis in the U.A.E. and Oman. Selling levels are relatively high compared to other regions, but these grades are being resold through traders, with a number of parties taking a margin out of the process. Prices are reported between $1,685/t-$1,725/t for 100N, 150N and 220N, with 600N between $1,775/t-$1,825/t. Some of these grades are sold in U.A.E. dirhams, which is based on the U.S. dollar. The high ends of the ranges refer to RTW deliveries to buyers in remote locations.

Africa

A large base oil cargo for Durban is due to load out of Rotterdam and Fawley, and will consist of Group l, II and III base oils and a small quantity of some easy chemicals. The exact dates of this cargo are not yet disclosed by shipping agent sources in Durban.

No more news has been heard regarding the Russian cargo for Nigeria. Finance and payment options may be an issue for traders involved with this parcel However, there are many hurdles to overcome before payments can be assured without guarantees or letters of credit.

There may be a cargo which will be sourced out of the U.S. loading in September when stocks put in place for the hurricane season will start to be released from storage, but finance is still the main obstacle to placing cargoes of base oil into Nigeria. Until satisfactory arrangements are in place, traders who have been doing business in Nigeria for years are staying away from this market.

Prices CFR Apapa in respect of potential ‘future’ trades, arriving perhaps during September/October, are being indicated at $1,155/t-$1,180/t for SN150, $1,225/t-$1,245/t for SN500 and $1,300/t-$1,335/t for SN900. These prices are for illustration only and will only become relevant when the banking and finance gets sorted out in Nigeria. Russian offers are much lower, last heard at $975/t for SN150, $1,020/t for SN500 and $1,065/t for SN900.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.

Lubes’n’Greasesshall not be liable for commercial decisions based on the contents of this report.

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