Base oils have been affected by weaker demand, both in the short-term and longer positions in the medium- and longer-term forecasts. With crude weakening, petroleum products and hence feedstock values fell and started to create downward price pressure on current base oil prices. Buyers are now countering offers with requests for large discounts.

Some API Group I and Group II prices have come under examination from buyers bandying suggesting for lower prices, particularly around markets in Europe and the Middle East Gulf. East African receivers immediately requested price reviews for prompt and future purchases.

Where demand and supply are in balance, the talk in Group I and Group II markets is that availability is sufficient to cover requirements and that suppliers should be looking at future prices ahead of the summer peak period prior to the holiday month of August when trade and business will slow until September.

Strangely, while researching this report, your columnist found that Group III base oils had largely escaped such discussions and seemed to feeling less downward pricing pressure, perhaps none. Replenishment cargoes moving from the Middle East Gulf and Asia-Pacific sources to Europe face delays, and buyers do not want to risk the ire of distributors by entering new negotiations now.

However, should all the nominated cargoes start to arrive in Europe for example, there could evolve an oversupply situation that could create downward pressure. 

Crude oil had shown some strength last week as prices firmed, but those gains were more than wiped out Monday.

Dated deliveries of Brent crude fell to $84.85 per barrel, for September front month settlement, lower by around $2 from last week’s level. West Texas Intermediate fell less – around $1 to $81.95/bbl, now for September front month.

Low-sulfur gasoil prices retreated almost $20 to $770 per metric ton, now for August front month. All of these prices were obtained from London ICE trading late July 15.

Europe

As mentioned last week, reports by other sources of “several Group I cargoes” moving out of Northwestern Europe for receivers in Apapa, Nigeria, were found to be false.

No Group I cargoes have been loaded in Europe for export because no producers in the region have surplus quantities for such trade. Given the current problems with finance in Nigeria, it is impossible for traders to have payments guaranteed for imported base oil cargoes.

For Group I, Europe remains tight but probably in supply and demand balance. Suppliers continue to concentrate on local markets. Were it not for imports of Group I grades, all requirements would not be covered.

More Group I supplies from Turkmenistan and possibly Uzbekistan may materialize in coming weeks. They are likely to be smaller in size and of lower specifications than mainstream European production and may allow some flexibility when it comes to selling prices.

More bulk cargoes of Group I are being planned from a Red Sea source to Europe for the second half of this year, with the next due to arrive in August. United States Gulf Coast sources are unable to supply all inquiries, but Group I base oils may be available out of a U.S. East Coast refinery that will not be so affected by weather problems during the hurricane season.

Group I markets within European are steady with no immediate supply issues. Availabilities are now returning from ExxonMobil’s Port-Jerome, France, refinery. With no planned maintenance announced for any European Group I refinery for the second half of the year, availabilities should start to improve, although unplanned interruptions are always possible.

Prices continue to be relatively stable, but some buyers are calling for lower numbers. Offers out of the Gdansk, Poland, refinery for quantities of 300 tons for the local market have been heard at $1,040/t for solvent neutral 150, $1,070/t for SN500 and $1,340/t for bright stock. These prices are relatively aggressive compared with others in northern Europe.

In Spain there are still reports of delays and supply interruptions following the fire at Puertollano. Cepsa continues to only offer SN150 and bright stock for July. FCA prices are quoted at $1,150/t for quantities of SN150 and $1,390/t for bright stock.

Producers at Aghio, Greece, have offered high prices, seemingly to deter spot buyers. There does not appear to have been a rush of buying interest at those levels – $1,234/t for SN150 and $1,530/t for SN500/600, all on an FCA basis.

Some prices are taken higher with FCA levels of between €1,065/t and €1,150/t for SN150, €1,185-€1,215/t for SN500 and €1,385/t-€1,445/t for bright stock, all on an FCA basis. It must be added, though, that some downward pressure exists.

The dollar exchange rate to the euro improved the past week to $1.09116 on July 15. The average price differential across all grades, between Group I sales within Europe and notional export prices is unchanged at €10/t-€25/t.

Group II prices remain in the same ranges as previously reported, but as with domestic Group I supplies may be coming under downward pressure from buyers. However, imports from the U.S. may generate countervailing upward pressure due to higher FOB and freight costs.

This week may bring some clarity as to how these forces shake out.

Confirmation has been received from several sources that suppliers often work with wide ranging prices that are applied depending on the status of the customer. Payment record, quantities purchased and market position are all part of the general assessment. Large blenders may be able to negotiate lower prices.

One U.S. importer raised prices to €1,090/t for 110 neutral, €1,120/t for 220N and €1,220/t for 600N, all on an FCA basis Amsterdam-Rotterdam-Antwerp.

Overall Group II prices in Europe are tweaked slightly higher to €1,140/t-€1,165/t ($1,245/t-1,270/t) for for 110N and 150N, €1,200/t-€1,225/t ($1,305/t-1,335/t) for 220N and €1,275/t-€1,295/t ($1,390-1,410) for 600N. These prices apply to a wide range of Group II oils from European, U.S., Red Sea and Asia-Pacific sources, all imported in bulk.

Group III demand remains dull, increasing price pressure on distributors, but some buyers seem accepting that this market has little further room to take numbers lower. Some blenders are still hanging on to the notion that an increase in finished lubricant demand is coming and will spur Group III demand, but whether that bears out is yet to be seen.

Prices in Europe for Group III oils with partial slates of finished lubricant approvals have fallen over the past few weeks and are now assessed at €1,230/t-€1,300/t for 4 and 6 centiStoke and at €1,320/t-€1,355/t for 8 cSt, all on an FCA basis ex Amsterdam-Rotterdam-Antwerp or Northwestern Europe.

A couple South Korean suppliers lower prices of €1,230/t-€1,270/t for 4 cSt, basis FCA, for regular lifters.

Prices for rerefined oils are lower this week at €,1225/t-€1,320/t for 4 and 6 cSt, on an FCA basis ex refinery in Germany.

Values for Group III oils with full slates of approvals are unchanged at €1,785/t-€1,820/t for 4 and 6 cSt and €1,825/t-€1,835/t for 8 cSt, all on an FCA basis ex hubs in Amsterdam-Rotterdam-Antwerp, Northwestern Europe and Spain.

Baltic and Black Sea

The collection and collating of news and reports from the Baltic is becoming increasingly difficult, with no shipping reports published and no contacts now in Russia or Belarus. This report is based on secondhand, potentially out of date information.

Russian cargoes are certainly moving to Gebze, Turkey, Singapore, India and the United Arab Emirates. But these cargoes are reported on arrival at the discharge port. Snippets of information can be gleaned from blenders in Lithuania and Latvia, who sometimes buy parcels of Group I material from rerefiners in Kalundborg, Denmark, and from Lotos in Gdansk, Poland. Most of these cargoes are delivered on a CFR or CIF basis by traders or principal suppliers.

Lukoil continues to load base oil cargoes out of St. Petersburg, now that the terminal at Svetly, Russia, appears to have ceased operations. This may have come about due to supplies of base oils having to transit through Lithuania by train before entering the Russian enclave of Kaliningrad. This exercise was frowned upon by European Union ministers in Brussels and may have been subject to a certain period before being banned under the sanctions imposed by the EU. 

Prices for Russian Group I oils ex St. Petersburg or Vyborg, Russia, are estimated on a netback basis from prices offered into Nigeria, taking freight and margins into consideration. FOB numbers could be between $710/t and $735/t for SN150 and at $740/t-$765/t for SN500. Blended SN900 would be priced around $795/t using SN1200 plus various quantities of either SN150 or SN500.

Several Nigerian blenders had issues with the quality of SN900 coming out of the Baltic. Western SN900 is always blended using bright stock, but Russian SN900 is blended using SN1200 or Russian bright stock, which is of poorer quality in almost every characteristic.

Lotos has a small quantity of Group I grades for sales to larger buyers taking more than 300 tons per delivery. The breakdown of viscosity grades is not known, but SN150 is being offered at $1,040/t, SN500 at $1,070/t and bright stock at $1,340/t, all on an FCA basis. These grades are not for export since the overall quantity is reckoned to be around 1,000 tons – too small for a seagoing cargo.

In the Black Sea region, European traders are looking to take Group I base oils out of Turkmenbashi, Turkmenistan, and from Sanoat in Uzbekistan. These base oils will not meet mainstream European standards on quality but can be used with the right additives to produce basic finished lubricants. It is thought that these grades will find their way into Eastern European markets such as Romania, Bulgaria or Hungary. Quantities will be small, and the material will have to be taken to a neutral Black Sea port to be loaded into flexi-tanks in containers and then transported across the Black Sea to a European port. 

Some blending operations in Turkey are merely trying to survive the moment. With commercial borrowing from Turkish banks being difficult at best, and impossible at worst, some companies are shutting down and releasing staff. Turkish banks are also coming under pressure from international banks because of alleged ties between the former and Russian banks or companies.

It has been reported elsewhere that in May and June record quantities of Russian base oils were imported into Turkey. The quantities are not given, but it was also said that at the same time European quality base oils sunk to the lowest quantities ever. This report was unaware of any European base oils moving into Turkey following the two cargoes that were loaded out of Livorno, Italy and discharged in Gebze.

The latest Russian base oil prices are estimated to be around $825/t-850/t for SN 150 and $835/t-$865/t for SN500, on a CFR basis ex Gebze.

Tupras announced an “export” tender for around 7,000 tons of Group I grades. The material will be made available on an FOB basis Aliaga, having been trucked from Izmir, a sizeable and time-consuming operation. Dates for the loading laycan are not yet announced, but it is assumed that the loading will be towards the end of July or beginning of August. This is not the first cargo Tupras has sold on this basis, and the rationale is obviously to obtain payment in dollars rather than the local lira.

Tupras maintained its prices for the local market at TL34,326/t ($1,037.3/t) for spindle oil, TL29,745/t ($898.88/t) for SN150, TL31,829/t ($961.85/t) for SN500 and TL43,036 ($1,300.52/t) for bright stock, all offered ex rack and subject to a loading charge of TL5,150/t ($155.63/t).

Prices for Group II grades, which are imported and then resold on an FCA basis, are unchanged at €1,290/t-1,345/t for 100N, 150N and 220N and at €1,475/t-€1,525/t for 600N.

Group II base oils were previously imported from the Red Sea, the U.S. or South Korea, but Russian Group II grades have recently been offered at much lower selling prices. Russian prices have yet to be established.

Partly approved or non-approved Group III offered in the market include 4 cSt oils from Tatneft in Russia, priced around €1,465/t on an FCA basis. Other material is now thought to be in short supply, having been imported in the past from the U.A.E., Bahrain and Asia-Pacific. These grades had FCA prices of €1,625/t-€1,670/t, but most of these stocks have been depleted and are now gone.

Smaller quantities of fully approved Group III grades from Cartagena, Spain, continue to be delivered into Gemlik for resale to local blenders needing fully approved grades for toll blending for international oil majors. Prices for these are unchanged at €1,960/t-€1,995/t, basis FCA.

Middle East

Luberef continues to load and deliver large base oil cargoes to receivers on the West Coast of India, Pakistan and the U.A.E. In May and June, more than 70,000 tons was shipped from Yanbu and Jeddah, Saudi Arabia, somehow avoiding Houthi attacks on shipping passing through the Bab-al-Mandeb Strait. Indian and Pakistani flagged vessels are apparently not being targeted. With trading relationships still intact between the U.A.E., Pakistan, India and Iran, it is considered that the Iranian government is instructing the Houthis as to which vessels are to be targeted.

Another S-Oil cargo of Group I grades for Northwestern Europe has loaded and is en route through the Suez Canal then to Rotterdam.

In Iran, Sepahan raised export prices for SN 500+ to around $1,075/t, on a CFR basis ex Hamriyah or Ras Al Khaimah, U.A.E. Small cargoes are coming out of Bandar Khomeini and Bandar Bushehr but are not moving to the West Coast of India.

India seems to have surplus Group I, which is being produced from large quantities of imported Russian crude. India has offered quantities of Group I grades to the U.A.E., but sellers are having to compete against Russian product coming in from the Baltic and Limas terminal on Turkey’s Black Sea coast.  

In the UAE, Group I imports are also arriving at Hamriyah and Ras al Khaimah from Thailand, Russia and Saudi Arabia, from where it has been reported that record quantities of base oils were shipped during May and June.

Russian base oil cargoes continue to be delivered to receivers in Hamriyah with prices around $835/t for SN150 and $845/t for SN500, basis CFR. Parcels of between 5,000 and 12,000 tons have loaded from Limas and St. Petersburg.

Netbacks for partly approved Group III exports from Al Ruwais, U.A.E., and Sitra, Bahrain, are lower this week due to selling price levels falling in main markets such as Europe and the U.S. Indications are now put at $1,275/t-$1,300/t for 4, 6 and 8 cSt grades.

Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, are also taken lower, being estimated at $1,410/t-1,445/t. These levels are estimates only since economics and cost allocations of Shell cargoes are not disclosed.

Netback levels are assessed from distributor selling prices, less estimated marketing, margins, handling and freight costs. Prices 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, are unchanged at $1,685/t-$1,725/t for 100N, 150N and 220N and at $1,775/t-$1,825/t for 600N. The high ends of the ranges refer to RTW deliveries to buyers in remote locations of those countries.

Africa

A large base oil cargo will load from Rotterdam and Fawley, United Kingdom, containing all types of base oil, including Group I, II and III and some easy chemicals, which may be polyalphaolefins or esters.

There is still no news whether the vessel will drop part of its cargo in Mombasa, Kenya. The total quantity of the cargo could be up to 25,000 tons. From shipping reports, a vessel is not yet fixed.

From West Africa comes news that the cargo that loaded out of Fawley with around 10,000 tons of three Group I grades for receivers in Guinea, Cote d’Ivoire and Ghana. The grades will be SN150, SN500 and bright stock. Five thousand tons will cover the contracted supply in Tema for the Ghana annual tender, with two parcels also with three grades, discharging in Abidjan, Cote d’Ivoire and Conakry, Guinea.

Little or no progress appears to have been made by government or local banks to sort out access to dollars. Responsible traders are boycotting the Nigerian market, staying away from importing base oils into Apapa, since there are no assurances of receiving payments. One U.A.E.-based trader has been searching US markets for a cargo of Group I but with little success at meeting the target prices required to make a cargo work. It may be that the same trader will look again at sending a cargo from the U.A.E. with imported Russian barrels, which would be sold into Nigeria under a U.A.E. certificate of origin.

There is still no news on the cargo loading out of El Dekheila, Egypt. Between 5,000 tons and 6,000 tons of bright stock was purchased from a U.S. East coast refinery then shipped to Egypt. The bright stock will be blended with other base oils to produce SN900. Russian-origin SN150 and SN500 would make up the balance of the cargo. At least part of this cargo is assigned to NNPC, which is looking for the supply on an imminent basis.

Prices in Apapa for potential future trades, other than Russian barrels, continue to be indicated at $1,125/t-1,165/t for SN150, $1,195/t-1,225/t for SN500 and $1,275/t-1,300/t for SN900. These prices are for illustration only and will only become relevant when the banking and finance gets sorted out.

Russian offers continue to be heard much lower and are unchanged at $930/t for SN150, $970/t for SN500 and $1,020/t for SN900.

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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