Group II has seen a number of new inquiries, in addition to the regular lifters, many of whom are replenishing inventories that were depleted earlier in the summer.

Group III has witnessed a surge in requests of grades with partial slates of finished lubricant approvals – a segment that now has many suppliers in Europe and surrounding markets such as Turkey and North Africa.

Europe appears to be lagging behind the move away from Group I base stocks, as seen in other regions such as the United States and Asia-Pacific. This may be a sign that European blenders may take longer to make the move to premium base oil grades, although suppliers of Group II and Group III appear to be  content to be supplying the current quantities of products, and are not looking to boost overall sales at the expense of remaining Group I business.

The wars between Russia and Ukraine and Israel and Hamas continued unabated the past week. Other geo-political news is that Turkey, a member of the North Atlantic Treaty Organization, is keen to join Russia, China, India and others in an economic community to rival the G7. G7 members such as the U.S., the United Kingdom and Germany have already expressed displeasure, warning that a follow-through by Turkey could compromise NATO security and defense commitments.

These items of news whilst not directly concerning base oil business, could have longer term effects on trading patterns and supply chains which could be disrupted or amended due to new political ties.

Market fundamentals weakened again the past week, with crude oil and feedstock values sliding to lows not seen for more than a couple years. Crude traders are suggesting that global demand is lacking, in part due to economic underperformance in nations such as China.

With the U.S. and Europe teetering on possible recessions, and with many third world countries in the midst of economic and political strife, the world is not in a good place right now. However, these are some signs that improvements will start to happen in the next couple of years, lending some positive notes for the future.

Libya has resumed exports of various crudes to Mediterranean refineries, eliminating worries of crude shortages for a number of regional refiners. Spanish, Italian and Greek facilities will be relieved to know that this supply can be tapped again.

Crude oil prices have fallen significantly, with dated deliveries of Brent crude decreasing around $5 since last week to $71.20 per barrel, still for November front month settlement. West Texas Intermediate slid around$6 to $67.80/bbl, still for October front month. These levels represent a decrease of around 18% since May.

Low-sulfur gasoil prices have also dropped – around $40 to $649 per metric ton, still for September front month. All of these prices were obtained from London ICE trading late Sept. 9.

Europe

Exports of Group I base oils are almost missing from European sources, with only small parcels leaving Mediterranean supply points for receivers in Morocco and Tunisia. ExxonMobil continues to ship large parcels of various base oils to receivers in parts of Africa. Some quantities are delivered to affiliated companies and thus do not qualify as true export cargoes.

Europe is receiving base oil cargoes from Turkey, Egypt and the Red Sea, and Group I shipments may start to come from the U.S., since prices in Europe have remained higher than alternative markets in Asia-Pacific and the Americas.

The Tupras parcel from Aliaga, Turkey, was firstly put up for a tender sale, but was privately sold and eventually moved to Greece. It was comprised of solvent neutral 150, SN500 and bright stock totaling 7,100 tons and was sold in July. The Turkish sellers were able to take advantage of the relatively high prices in Europe. The volume would have been replaced in the Turkish market by low-priced Russian imports.

European regional markets have sprung back to life following the holiday month of August. Buyers have been scouring the market for available material to replenish inventories, which had been depleted during the months leading up to the summer.

Bright stock remains tight, with a restricted number of refiners now producing this grade. Sellers say bright stock will only be for sale in combination with other Group I grades.

Prices heard early this week remain high, with offers in the Mediterranean heard at $1,545/t, but some other sellers indicating lower levels of $1,460/t to $1,485/t for limited supplies of bright stock. Some buyers have disclosed prices that are lower than these ranges, perhaps showing that negotiations are possible.

FCA prices are unchanged this week at €1,085/t-€1,165/t for SN150, €1,280/t-€1,300/t for SN500 and €1,450/t-€1,525/t for bright stock.

The dollar exchange rate versus the euro is largely unchanged, posting at $1.10508 Monday. The average price differential across all grades between Group I sales within Europe and notional Group I exports is unchanged at €10/t-€25/t.

Buyers and sellers of Group II oils seem to agree that upward pressure exists on prices now. Increased supply may start to arrive, though, from the United States, where suppliers have finished padding inventories for the current hurricane season.

Group II prices are currently at €1,175/t-€1,200/t for 110 neutral and 150N, while 220N is at €1,225/t-€1,255/t and 600N at €1,325/t-€1,355/t. All of these rates apply to a wide range of Group II base oils from European, U.S., Red Sea and Asia-Pacific sources, all imported in bulk.

European Group III markets are complex as some suppliers have entered the market with very low prices only to run low on availabilities, leading them to raise their own rates. A couple South Korean suppliers are offering 4 centiStoke oil for around €1,160/t. Replenishment cargoes are steadily hitting the European market where demand is forecast to grow over the next few months. Efforts to lift prices are being met with incredulity by buyers, who have a wide choice of sources.

Buyers are looking at Group III oils with partial slates of finished lube approvals. Product coming out of two producers in the Middle East Gulf are very similar in specfications, while gas-to-liquids Group III from Qatar is markedly superior. Korean material varies significantly from one supplier to another.

European prices for partly approved Group III are at €1,260/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, or Northwestern Europe. Note that the very low offers mentioned above have been omitted from the ranges. Prices for rerefined Group III are unchanged at €1,155/t-€1,185/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

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

Baltic & Black Seas

It looks like cargoes have loaded out of the Baltic Sea for receivers in Nigeria. How these cargoes were accounted for and paid for is anyone’s guess as responsible traders keeping well away from the Nigerian base oil markets at the moment. Russian base oils are being held in tank at Apapa port in Lagos, but when these supplies arrived into Apapa is unknown.

A smaller cargo loaded out of the Baltic for Turkey, discharging around 6,000 tons of two grades in Gebze. This is one of the many cargoes which are loaded when a suitable vessel, normally Turkish flagged, is available either in Northwestern Europe or the Baltic. Lukoil has to be alert to being able to assemble the material in tank in St. Petersburg before chartering the vessel to load for Turkey.

South American trade is still a possibility for suppliers working out of the Baltic, but apparently receivers in Brazil and Argentina are not particularly keen to accept Russian base oils for both quality and political reasons. Offers have been made to potential buyers, but with U.S. Gulf Coast cargoes freeing up now that the hurricane season has been covered, options to take prime U.S. material may be a preferred option. Freight costs from the Baltic are also a negative when looking at sending cargoes into South American receivers.

Prices for Russian SN150 and SN500 ex St. Petersburg or Vyborg, Russia, are assessed from the latest prices offered into Nigeria, after taking account of freight and margins. FOB numbers come out at around $745/t-$775/t for SN150 and $785/t-$795/t for SN500. Blended SN900 could be priced at around $840/t using SN1200 or Russian bright stock. All of these rates are based on a typical freight cost of around $175/t-$200/t for a 7,00/t-10,000/t parcel with a significant quantity of SN900.

Russian base oils form the backbone of all imports moving into the Turkish market. There is news that a parcel from Tupras was exported into the mainland European market where prices have been higher and Group I availability remains tight.

A cargo of 7,100 tons of Group I grades loaded from Aliaga, after being bridged from Tupras’ refinery in Izmir, ultimately sold into the Greek market. Turkish blenders cannot afford to take European produced Group I base oils, since they are unaffordable for Turkish buyers. Hence the reliance on Russian imports which are both cheap and plentiful.

From national stats released after the first six months of this year, it became apparent that more than 60,000 tons of Turkish produced Group I base oils were exported to Europe and Egypt during the first half. These sales would have provided dollar receipts rather than being transacted in Turkish lira.

Russian imports will continue to flood the Turkish market, with prices estimated to be around $845/t-$860/t for SN150 and $855/t-$875/t for SN500, basis CFR in Gebze. Base oils originating from Europe cannot compete with Russian prices.

Tupras have issued the following prices for the local market, effective Sept. 1:

35,957 lira per ton for spindle oil; Tl 31,329/t for SN150; Tl 33,432/t for SN500; and Tl 45,791 for bright stock. Prices in lira are offered ex rack, plus a loading charge of Tl 5,150/t.

Prices for Group II grades imported into Turkey have risen following increases in Europe and are now at €1,425/t-€1,465/t for 100N, 150N and 220N and €1,595/t-€1,625/t for 600N. These oils are imported from the Red Sea, the U.S., and South Korea and are being offered ex tank in Turkey. Russian prices are now being imported and offered ex tanks as well and are reported to be around €100/t-€150/t cheaper.

Partially approved Group III base oils available on an FCA basis include 4 cSt from Tatneft in Russia, most recently heard priced around €1290/t. Partially approved Group III from Middle East Gulf sources is no longer to be found in storage but was last available at around €1,625/t-€1,670/t.

Smaller quantities of fully-approved Group III grades from Cartagena, Spain, continue to be delivered into Gemlik and are then resold on an FCA basis to local blenders. Prices are unchanged this week at €1,960/t-€1,995/t, basis FCA.

Middle East

Base oil cargoes loading out of Yanbu and Jeddah, Saudi Arabia, have slowed down in numbers of vessels and also the sizes of the parcels. United Arab Emirates blenders had limited activity during the summer recess and were also running down inventories. Indian receivers were also subdued, perhaps due to taking large quantities of low-priced Russian base oils.

Ships sailing under Indian, Pakistani and U.A.E. flags get safe passage from the Houthi rebels in Yemen, but it is not understood why Saudi Arabian cargoes would be blessed by the rebels. Luberef is looking to move more Group I and Group II cargoes towards Europe – to Northwestern European for Group I and Greece and Italy for both grades.

The Gaza ceasefire has been temporarily abandoned, though Qatar and Egypt are still trying to broker a peace between Israel and Hamas. Hamss has refused to agree to terms for a ceasefire and continues to launch drones and missiles at Israeli targets in conjunction with Hezbollah in Lebanon. The U.S. has suggested that it may try to communicate directly with Hamas representatives, but it is unclear how this would work.

Base oil producers based in Iran – Sepahan and Iranol – continue to export small quantities of Group I SN500 and SN150 through Bandar Bushehr and Bander Khomeini. These exports move into the U.A.E. and then Pakistan.

The arbs between the U.S. and the Middle East Gulf and between Europe and the Gulf are currently closed due to high FOB levels from sources in U.S. and due to a tight Group I market in Europe, where export sales are not a priority. Buyers are searching for support for Group I and Group II supplies from Asia-Pacific and the Red Sea. South Korea, Thailand and Indonesia are being targeted as potential supply points, with Singapore based refiners considered for supplies of Group I and Group II base oils.

Russian base oils are offered on a CFR basis in Hamriyah, U.A.E. No new prices were heard during the past week from information sources there, but most recent prices were heard at $845/t for SN150 and $855/t for SN500.

Netbacks for Group III exports from Al Ruwais, U.A.E., and Sitra, Bahrain, for partly-approved Group III base oils are maintained at the latest lower levels, with selling prices in Europe and the U.S. having come under price pressure. Distributors are in negotiations with producers for FOB prices that would allow flexibility when faced with discounted selling prices. Indication netbacks are assessed in a range between $1,185/t-$1,240/t for 4, 6 and 8 cSt Group III grades.

Netbacks for GTL Group III+ base oils ex Ras Laffan, Qatar, are also unchanged at around $1,365/t-$1,395/t. These levels are given as estimates or indications only, since Shell cargo economics and cost allocation are not disclosed. Netback levels are assessed from distributor selling prices minus estimated marketing, margins, handling and freight costs.

Group II base oils are being resold ex tank in the U.A.E. or on a truck-delivered basis around the U.A.E. and Oman. Prices are unchanged this week at $1,685/t-$1,725/t for 100N, 150N and 220N and at $1,775/t-$1,825/t for 600N. These grades are mostly sold in local U.A.E. dirhams, since the U.A.E. currency is based on and linked to the U.S. dollar.

High ends of the ranges refer to RTW deliveries to buyers in remote locations in U.A.E. and Oman.

Africa

Shipping agency sources in Durban, South Africa, indicate that another large cargo of base oils is possibly being loaded during September from Fawley, U.K. and Rotterdam. Inquiries are out on the shipping market for suitable tonnage to carry this cargo, but ExxonMobil normally uses the same shipping owners and operators to perform these voyages. No fixture has been reported yet.

West Africa remains quiet with suggestions that European Group I base oils had been delivered into Apapa some time during July or August. Russian barrels would have been delivered into Apapa by a Belarus trader loading out of the Baltic either from St. Petersburg or Vyborg, Russia, where the trader loaded a parcel early in the year for receivers in Nigeria.

Going by reports from sources who and sold a number of cargoes to receivers in Nigeria, the news is terrible to be able to account for any supplies being made into this market. How the Russian barrels would have been paid for remains a mystery to both this report and to traders experienced with the Nigerian scene. One trader who delivered a cargo in February is still awaiting for full recompense for the cargo. Buyers are unable to access dollars and so make payments in naira, which have to be exchanged, but dollars are not available even on the black market.

In more routine and structured trade, ExxonMobil made a delivery of Group I base oils into receivers in Conakry, Guinea, Abidjan, Cote d’Ivoire, and Tema, Ghana. The cargo was loaded out of Fawley.

Nigeria remains under the cosh due to exchange rate and lack of access to dollars, which limits the ability of traders to conduct and transact base oil business in this country. Low-cost Russian base oils are sitting in tank, but many blenders will not use them on quality parameters in addition to the political pressure that can be exerted on buyers from government circles.

According to sources, potential buyers are looking for prices that are unattainable, citing Russian prices and wanting the same for base oils that would possibly be supplied from Europe or the U.S.

It is impossible for experienced traders to compete with Russian prices whilst at the same time being faced with requests for open credit from receivers. These traders are staying well away from the Nigerian market at the moment.

There does not appear to be any end in sight for local banks to lay hands on dollars, to open letters of credit, or to guarantee payments in timely and efficient manner.

CFR prices for potential future trades are indicated at around $1,155/t-$1,180/t for SN150, $1,225/t-$1245/t for SN500 and $1,300/t-$1,335/t for SN900 but are given as indications only. Russian offers are heard much lower, most recently at $995/t for SN150, $1,035/t for SN500 and $1,075/t for SN900, basis CFR Apapa.