These wars are having increasingly massive effects on trade and commerce in the respective regions, effects which are spreading to adjoining territories, creating uncertainty about future investments in Middle East and Eastern Europe.

A number of base oil projects have been put on indefinite hold for blenders in Ukraine and importers in Israel as investors understandably want to see a positive outlook before undertaking large capital projects that had been in place before the latest invasion of Ukraine and the massacre by Hamas.

However, at an Argus base oil conference in Dubai last week, the vibes were positive apart from gaps in demand appearing in the European market. Demand in the region for API Group I and III oils is weakening. Buyers are aware that availabilities remain good, so it makes sense for cash flow purposes to hold off on purchases.

Other regions such as Southern and East Africa are showing positive signs of developing faster than Europe and the Middle East. West Africa remains buoyant in countries such as Guinea, Cote d’Ivoire and Ghana, where local economies are expanding. The only negative situation is in Nigeria, where financing remains very difficult and where low-cost Russian base oils have pushed out products from other sources.

Fundamentals remain steady as crude oil costs have settled down following a mini spike after Iran’s DATE missile attack on Israel. Even a pair of hurricanes striking the United States Gulf of Mexico Coast did not keep prices from softening the past week.

Dated deliveries of Brent crude came in Monday at $77.60 per barrel, still for December front month settlement, around $2 lower than last week. West Texas Intermediate crude also traded down to $74/bbl, for November front month. Low-sulfur gasoil prices fell around $25 to $696 per metric ton, now for November front month. All of these prices were obtained from London ICE trading at the close of Oct. 14.

Europe

Prior to last month’s fire at the Motor Oil Hellas refinery in Agioi Theodoroi, Greece, a cargo was sold and loaded to a trader who placed this parcel into the Nigerian market, somehow competing with the low Russian prices saturating that market. This appears to be the first of a new stream of export cargoes that have incongruously started to appear from some European sources.

With Group I supplies becoming more available, perhaps it was natural process that sellers would look to export destinations. Another oddball export has been reported: a 2,000-ton parcel of bright stock sold from a Spanish refiner to receivers in Turkey. This transaction is puzzling for a number of reasons. Bright stock remains in short supply in European markets, so there should be demand for the grade nearer to home. The refinery is preparing for a maintenance shutdown next month, which presumably reduces availability of surpluses for such sales, and the price for the sale was reportedly less than $1,190 per ton, exceptionally low for this grade.

Turkish buyers are said to have poor access to dollar transactions, limiting availabilities of base oils from mainland Europe for that market.

ExxonMobil continues to bolster the European export market by moving large base oil cargoes to Africa and Singapore. Group II base oils have been shipped to Singapore, covering for a major refinery maintenance program that has yet to be fully completed. 

Blenders around Europe say that availabilities are plentiful and that they sense little or no pressure to purchase larger parcels for stocks and inventory. Prices – at relatively high levels reached during summer – are starting to come under downward pressure from lower demand. In Eastern Europe, values for solvent neutral 150 remained steady at $1,160/t, while SN500 stayed at $1,255/t.

In the Mediterranean, prices are lower – between $1,010/t and $1,035/t for SN150, $1,075/t-$1,095/t for SN500 and bright stock now in an exceptionally wide range of $1,190/t-$1,345/t.

The maintenance turnaround at Repsol’s installation in Cartagena, Spain, will affect availability of feedstocks for Group II and Group III base oils, although it has been reported that Group I will not be affected.

Prices for Group I sales within the overall European market are lower this week at €995/t-€1,045/t for SN150, with SN500 in a wide range of €1,010/t-€1,200/t and bright stock at €1,310/t-€1,395/t. The dollar exchange rate versus the euro has been relatively stable and posted at $1.09093 Monday. The average price differential across all grades between Group I sales within Europe and exports is now extended to between €45/t-€75/t.

Group II prices are all coming under subtle price pressure, but with demand holding up for some of these grades, only the higher viscosity grades 500 neutral and 600N are becoming susceptible to lower offers. Low-vis grades are standing relatively firm, with demand higher for the lighter grades due to the closer proximity on prices with the lighter Group I base oils. Group II prices continue to provide a respectable versus distillates.

Group II prices this week are at €1,150/t-€1,175/t for 110N and 150N, at €1,185/t-€1,215/t for 220N and at €1,265/t-€1,305/t for 600N. These values apply to a wide range of Group II oils from Europe, the United States, the Red Sea and Asia-Pacific, all imported in bulk.

European Group III markets appear to have received a wake up call from higher costs associated with replenishment cargoes arriving into European markets. The result has been most sellers firming prices to their regular buyers.

Reactions varied, with some buyers commenting they may switch to alternative suppliers, but the nature of finished lubricant approvals can create difficulties for such changes. That is not to say that there is not scope for negotiations – especially with new suppliers coming into the market.

At the same time, Group III markets in Europe are bracing for a potential over-supply situation that may develop over the next couple months and which could put pressures on prices.

One trader trying to establish market share is currently offering 4 centiStoke Group III for €1,135/t, although the trader has denied doing so. With replenishment barrels arriving in tank in Rotterdam, S-Oil’s prices are quoted at €1,230/t-€1,240/t for 4 centiStoke and marginally higher prices for 6 cSt, both on an FCA basis ex Antwerp-Rotterdam-Amsterdam. The cargo was apparently delayed due to weather.

Overall European prices for Group III oils with partial slates of finished lubricant approvals or without approvals are unchanged this week at €1,135/t-€1,355/t for 4 and 6 cSt and at €1,235/t-€1,275/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam and Northwestern Europe.

Prices for rerefined Group III grades are up this week to €1,175/t-€1,195/t for 4 and 6 cSt, basis FCA ex rerefinery in Germany. The increases were attributed to increased costs for collecting used oils.

European prices for Group III oils with full slates of approvals are at €1,775/t-€1,810/t for 4 and 6 cSt and at €1,820/t-€1835/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Two additional Group III suppliers could soon obtain full slates of approvals, so it will be interesting to see how that affects prices in the segment.

Baltic & Black Seas

There have been a couple reports of cargoes to load from the Baltic for Nigerian receivers. Payment issues for preceding cargoes aren’t seen as a problem.

The large Singapore cargo mentioned here previously was loaded during September, consisting of two grades with a total quantity of around 12,000 tons. Another cargo loaded during early October from St. Petersburg to eventually discharge around 5,000 tons of SN150 and SN500 in Gebze, Turkey.

FOB prices for Russian SN150 and SN500 ex St. Petersburg or Vyborg, Russia, are assessed from prices offered into Nigeria after taking account of typical freight and estimated margins. Those prices are unchanged at $765/t-$785/t for SN150, $790/t-$800/t for SN500 and $855/t for SN900 made with SN1200. These estimates are based on typical freight costs of around $185/t-$200/t for a parcel of 7,000-10,000 tons.

Other traders offering cargoes from the U.S. or from the Mediterranean will have to use bright stock to produce SN900. It is not apparent how the cargo loaded out of the Mediterranean, mentioned above, was able to access bright stock for the SN900 blend, since the refinery in question does not produce bright stock.

Turkey has now exported 104,000 tons of base oils to North Africa, Europe and West Africa during the first nine months of 2024. Tupras, the only domestic base oil producer, only accounted for around 20,000 tons, raising questions about the origin of the rest.

Russian imports from Baltic and from Black Sea ports continue to dominate the Turkish market, with prices estimated to be around $845/t-$860/t for SN150 and $855/t-$875/t for SN500, on a CFR basis ex Gebze.

Tupras quotes domestic prices at 36,872 lira/t for spindle oil; Tl 32,085/t for SN150; Tl 34,539/t for SN500; and Tl 46,626/t for bright stock. Prices are in lira and are offered ex rack, plus a loading charge of Tl 5,150/t.

Tupras also held another sales tender of an unknown quantity, believed to be around 6,000-7,000 tons, which has been purchased by a trader. The cargo is not yet loaded and is rumored to be bound for Nigeria, although how this parcel would be paid and accounted for remains a total mystery. A second option would be to place this cargo into the European market, but with Group I becoming more available and prices falling, this may not be an option, especially since the trader does not currently participate in resale markets.

Prices in Turkey for Group II oils are unchanged this week at €1,425/t-€1,465/t for 100N, 150N and 220N and at €1,595/t-€1,625/t for 600N, all on an FCA basis. Group II base oils have been imported from the Red Sea, the U.S. and South Korea, but Russian Group II grades are now being offered ex tank in Turkey reportedly for around €100/t-€150 less.

It is remarkable that Russian Group II base oils are being offered into Turkey because Russian demand for premium base oils is rumored to be at an all time high, due to the lack of imports from companies affected by sanctions.

The market in Turkey for partly-approved Group III oils includes 4 cSt from Tatneft in Russia. The latest price for that product was heard at around €1,255/t. Material from Middle East Gulf sources is no longer available.

Prices in Turkey for fully-approved Group III grades from Cartagena are unchanged at €1,960/t-€1,995/t, on an FCA basis ex Gemlik.

Middle East

Cargoes of base oils have reportedly loaded out of Yanbu and Jeddah, Saudi Arabia, for various destinations including Mumbai, Karachi, Singapore and Dar-es-Salaam, Tanzania. Other cargoes are bound for ports in United Arab Emirates including Fujairah, Jebel Ali and Hamriyah. Shipments are as large as 20,000 tons per cargo.

Israel’s war in the Gaza Strip and now Lebanon continues to rage, with conflict flaring the past week between Israeli forces and United Nations peacekeepers in Lebanon, and with the region still watching to see how Israel responds to Iran’s Oct. 1 missile attack on Tel Aviv. Base oil trade is being badly affected by the conflict and the uncertainties it causes.

At the Argus base oil conference in Dubai last week there was much debate about the outcome of the war and what the ultimate effect on regional business and trade would be. The outlook remains positive except for reservations about the possibility of Iran entering a full-scale war with Israel.

The arbitrage between the U.S. and the Middle East Gulf may start to reopen since hurricane season in the U.S. is coming to a close. Disruptions from two recent storms appears minimal, and stocks in tank may now be released for export markets, including the U.A.E. and the West Coast of India.

Prices for imported Group I base oils arriving into Middle East Gulf ports, predominantly the U.A.E., are pitched at $1,065/t-$1,095/t for SN150, $1,120/t-$1,155/t for SN500 and $1,200/t-$1,235/t for bright stock, all on a CIF or CFR basis ex U.A.E. ports.

Russian base oils continue arriving into Hamriyah, although there were reports of a vessel detained prior to discharging. Whether this vessel was carrying Russian base oils is not known, but the charterer is a trader much involved in the base oil business. Prices for Russian base oils offered on a CFR basis ex Hamriyah are unchanged at around $845/t for SN150 and $855/t for SN500.

Netbacks for Group III oils exported from Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged this week at $1,145/t-$1,220/t for 4, 6 and 8 cSt. Netbacks for gas-to-liquids Group III+ oils from the Shell-Qatar Petroleum joint venture in Ras Laffan, Qatar, are at $1,295/t-$1,325/t. Shell cargo economics and cost allocation are not disclosed, hence netbacks are only on an indication basis. Netback levels are assessed from distributor selling prices minus estimated marketing, margins, handling and freight costs.

Prices for Group II base oils being imported and then resold ex tank in the U.A.E. or often on a truck-delivered basis around the U.A.E. and Oman are unchanged at $1,685/t-$1,725/t for 100N, 150N and 220N and at $1,775/t-$1,825/t for 600N. These grades tend to be sold in local U.A.E. dirhams, since the U.A.E. currency is pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in U.A.E. and northern Oman.

Africa

Shipping agency sources in Durban, South Africa, have confirmed that a vessel sailing from the U.S. Gulf Coast will discharge in Durban during November. This vessel is carrying around 8,000 tons of Group II grades. Another large cargo of mixed base oils will load from Europe for discharge into Durban before the end of this year. The cargo will possibly load towards the end of this month.

Another cargo of around 9,000-10,000 tons will load from Fawley, U.K. for discharging into Conakry, Guinea, Abidjan, Cote d’Ivoire, and Tema, Ghana. The cargo will divide between 5,000 tons of three grades for Tema and the remainder for the other two ports.

The Nigerian base oil market is still beset by problems related to the exchange rate with the naira and the U.S. dollar, which reached 1,720 naira last week. Fluctuating rates on the black market make it uncertain how many naira will be involved to pay for the cargo. As reported last week, local banks have been accepting 125% deposits in naira for the issuance of letters of credit, but the same banks have not been bidding for CBN dollars, and instead have been using customers naira deposits to support their own businesses.

Russian supplies continue to impinge on the base oil market in Nigeria, setting a pricing norm that traders offering barrels from Europe and the U.S. are expected to compete with.

Russian suppliers have many large outstanding debts with buyers, who have been enjoying extended credit for terms that repeatedly extended. Suppliers may get their money eventually but perhaps not for months.

Some buyers want to have access to better quality material, so there is still an opening for cargoes from the U.S. and Europe. One trader has purchased a cargo from a Mediterranean source, prior to a fire breaking out at that refinery. The parcel has been sailed to Nigeria and is believed to have arrived into Apapa port in Lagos.

It is not clear how the shipment will be paid for, but it is worth noting that this trader has other representations in Nigeria supplying petroleum products such as mogas, jet fuel and diesel. Such a position may create opportunities to effect payments for base oil cargoes through existing channels. The interesting point regarding this cargo is that there would have been little or no bright stock available at the supply source to blend a SN900 grade. Normally SN900 would have formed a major part of this parcel.

Prices for potential future trades are going to have to be more competitive than previously estimated here in order to compete with Russian oils. Prices for the former are therefore adjusted, taking account of possible FOB numbers plus margins. These values are now assessed at $1,095/t-$1,125/t for SN150, $1,175/t-$1,220/t for SN500 and $1,255/t-$1,275/t for SN900, basis CFR Apapa.

Prices for Russian oils continue to be lower, indicated at $995/t for SN150, $1,035/t for SN500 and $1,075/t for SN900, again basis CFR Apapa.