API Group I prices generally are trading lower, with more availability from Europe and the United States. However, Asia-Pacific has started to tighten as a number of refineries come out of maintenance. This would appear to be strange in light of the seasonal slowdown across all global base oil markets.

Group II prices in Europe face downward pressure from buyers requesting discounts and total volume allowances. Demand is still healthy with a showing of customer loyalty with regular suppliers. Group III levels are holding up, mainly due to realizations of higher freight costs associated with replenishment cargoes arriving from Asia-Pacific and the Middle East Gulf, which are necessarily being re-routed around South Africa because of risks from Houthi attacks on shipping in the Red Sea.

European markets appear to have accepted that API Group III imports are facing higher costs and that prices will ultimately reflect this aspect. There is still pressure from the sheer quantities of material available in the markets, although it has become relatively difficult for buyers to chop and change suppliers due to formulations and specifications that limit interchange.

Crude oil costs rose slightly the past week, not because of higher demand, but because OPEC accorded that prices were unsustainably low. Saudi Arabia and Russia led OPEC+ members to delay an increase in production as the group works to prop up prices. The cartel confirmed last weekend that it was pushing back a December production increase by a month, marking the second occasion it has postponed the event.

The cartel, which includes twelve members and ten other countries had planned to expand oil production by 180,000 bpd, initially from October.

Weaker demand in China and Europe has prompted warnings that prices could fall further than recent dips, from early next year. Estimates from the International Monetary Fund suggested Saudi Arabia needs to sell crude at around $100 per barrel to fund large capital projects within that country. Lower oil prices also spell trouble for the Russia for funding the war in Ukraine.

A Middle Eastern war like the current one would have been expected to drive up crude values, but the market has won the day, keeping a lid on levels. OPEC found it could not ignore the macroeconomic realities of Europe and China.

Dated deliveries of Brent crude rallied to $74.45 per barrel, now having moved to January front month settlement. West Texas Intermediate climbed back above the $70 mark to $70.90/bbl, $3 higher than reported last week, still for December front month.

Low-sulfur gasoil prices rose more than $30 to $680 per metric ton, for November front month. All of these prices were taken from London ICE trading late Oct. 28.

Europe

In some other base oil reports there are suggestions that there has been an increase in exports from Europe to Asia-Pacific destinations. There have been movements of quantities of Group II base oils, which have been necessary to cover demand in Singapore due to a delay in the completion of maintenance shutdown. But there is no evidence of Group I grades being exported large quantities, and in fact, greater amounts of Group I have been imported into Europe from U.S. and Red Sea sources.

One trader has taken two Group I cargoes out of Europe – one to Nigeria and the other a parcel of bright stock and SN150 going into Turkey. These cargoes are not representative of an export market. The same trader also imported a small cargo of Group I base oils from a U.S. East Coast source at the same time as moving Mediterranean material to Nigeria and Turkey.

ExxonMobil continues to export mixed cargoes of base oils to Africa, some of which are delivered to appointed distributors, for example in South Africa and East Africa, whilst parcels of Group I grades are delivered to regular receivers in West Africa.

Prices for Group I sales within Europe are starting to move lower with a number suppliers offering markdowns effective Nov. 1. Demand will wane during the next few months and not pick up until around the end of February.

In Eastern Europe, prices for supplies from Poland and Hungary have fallen to around $995/t for solvent neutral 150 and $1,075/t for SN500. These levels are now in effect, and there are reports that availabilities ex Gdansk, Poland, may be offered for “export.” This availability could be used to cover requirements in the the United Kingdom, for example with one trader believed to have shown interest to take a parcel of 4,000-5,000 tons to the west coast of the country. Mediterranean prices are down to $975/t-$995/t for SN150, $1,020/t-$1,045/t for SN500 and SN600 and $1,220/t-$1,260/t for bright stock.

Pan-European prices for Group I sales are moved lower going forward into November – to €945/t-€965/t for SN150, €970/t-€1,045/t for SN500 and SN600 and €1,225/t-€1,295/t for bright stock. Supply of SN500 and SN600 remains tighter in a number of areas such as Greece and Spain, but demand is lacking in both regions.

The lows and highs of these ranges reflect quantities lifted, for example one truckload will come in a the top of the ranges, whilst barge loads of above 1,000 tons per each grade, will command the lower levels.

The dollar exchange rate versus the euro improved slightly to $1.08931 on Monday. The average price differential across all grades, between Group I sales within the region and any export market numbers is now moved to €20/t-€45/t.

European Group II prices are varied, with some large buyers reporting lower prices being applied. Suppliers have capitulated to some large blenders who lift considerable quantities and are coming from a position of considerable purchasing power. Buyers are citing reports that show European rates much higher than in other parts of the world.

European Group II prices are taken lower this week to €1,120/t-€1,140/t for 110 neutral and 150N, €1,145/t-€1,185/t for 220N and €1,200/t-€1,255/t for 600N. These levels apply to a wide range of Group II oils from Europe plus bulk imports from the U.S., the Red Sea and Asia-Pacific.

The European Group III market is generally oversupplied after the simultaneous arrival of a number of replenishment cargoes. Higher freight costs have invoked a new pricing model that raised values despite the quantities of material available around the European markets. Buyers have largely gone along.

One supplier offering substantially below the market raised its prices around €15/t to €1,150/t for 4 centiStoke oil. Sales from Antwerp-Rotterdam-Amsterdam were heard at €1,230/t-€1,240/t for 4 cSt and €10/t higher for 6 cSt, both on an FCA basis.

Overall, prices in Europe for Group III oils with partial slates of finished lubricant approvals or without approvals are assessed at €1,150/t-€1,300/t for 4 and 6 cSt and at €1,235/t-€1,345/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades are taken slightly lower to €1,135/t-€1,175/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Fully-approved Group III oils remain priced at €1,775/t-€1,810/t for 4 and 6 cSt and at €1,820/t-€1,835/t for 8 cSt, basis FCA ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic & Black Seas

Another cargo of Russian export SN150 and SN500 will load out of the Baltic for Turkey, possibly later this week although reliable shipping information is nigh impossible to obtain.

FOB prices for Russian oils sold ex St. Petersburg or Vyborg, Russia, are assessed from prices offered into Nigeria after taking account of typical freight and predicted margins, and also from reported landed prices into Turkey and Singapore. These levels are unchanged this week at $795/t-$820/t for SN150, $825/t-$840/t for SN500 and $885/t for SN900, which is blended for the Nigerian market using a heavy grade such as SN1200, also known as Russian bright stock.

Turkish refiner Tupras is conducting a tender cargo destined for Nigeria, heard to be around 7,000 tons in total, but information on the breakdown of viscosity grades has not been obtained. The trader involved has not revealed the receivers, but regular buyers are expected to share the cargo between two parties. Payment options are also not discussed, but perhaps part of the cargo will be accounted for in naira.

Russian imports from both the Baltic and Black seas continue to flood the Turkish base oil 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, Turkey. As long as the Volga river remains ice free, river vessels will deliver quantities of up to 3,000 tons per parcel by sailing around the Black Sea coastline and discharging in Sea of Marmara ports such as Gebze, Derince and Aliaga.

Tupras’ prices for Group I oils sold locally have been discounted for some reason and are now at 35,462 lira per ton for spindle oil; Tl 31,593/t for SN150; Tl 33,721/t for SN500; and Tl 45,038/t for bright stock. Prices are in lira and are offered ex rack, plus a loading charge of Tl 5,150/t.

Prices for Group II grades imported into Turkey 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. These oils are imported from the Red Sea, the U.S. and South Korea.

Russian Group II grades are said to be offered ex tank in Turkey with prices reported around €70/t-€120 lower than those from other sources. This report still can find no trace of evidence of any Russian Group II base oils being stored and resold ex tank in any Turkish port. One source maintained that these Russian Group II grades are being sold in flexies and are not available FCA or ex tank.

The market for Group III oils with partial or no approvals does include 4 cSt from Tatneft in Russia. The latest prices for this product are heard at around €1,220/t. Smaller quantities of fully-approved Group III grades from Cartagena, Spain, are being sold on an FCA basis ex Gemlik. Prices are unchanged at €1,960/t-€1,995/t.

Middle East

The news of Russian satellite data being used to control attacks on merchant and naval vessels in the Red Sea and Gulf of Aden has raised questions of who is running the Iranian proxy in Yemen. Sources close to Iran have ventured that Tehran would have approached the Russians to access the data, and then used the information to advise the Houthis.  The instigator of the whole process would be the Iranian Revolutionary Guard Corps in Iran.

Base oil cargoes are reportedly loading out of Yanbu and Jeddah, Saudi Arabia, mostly allocated to the West Coast of India or United Arab Emirates ports.

More Group I and Group II cargoes are being considered for export to Europe, to be shipped by Saudi Aramco partner company S-Oil to Rotterdam for resale. The Group I cargoes may not be as viable as in previous times since availabilities of European-produced Group I has improved due to plants being fully operational and demand being lower than normal.

Following the Israeli strike into Iran targeting military sites around ten days ago, Iranian leaders announced they will respond but haven’t specified how or when the response will happen. The tit-for-tat attacks and reprisals appear likely to continue, although Iran does not want to engage Israel in a full-blown conflict that could escalate the conflict to new heights.

U.A.E. sources with close ties to Iranian base oil producers have ventured that Tehran will use its proxy in Lebanon, Hezbollah, but will not become involved directly, since this could trigger a full regional war.

There has been some side effects of the Iranian aggression into Israel, with sources in Saudi Arabia and U.A.E. going cold on communications and trade with Iran, commenting that some of the ties between Iranian base oil producers and importers in U.A.E. are under the spotlight and that some parties are opting to pause on accepting base oil shipments from companies such as Sepahan and Iranol. Large quantities of Iranian base oils had been exported through U.A.E. companies to buyers in India, Pakistan and even further afield in South Korea, with exports of rubber process oils sent on a regular basis.

Base oil trade is also being adversely affected by protection and indemnity insurance clubs declaring the Middle East Gulf a war zone, with all that that implies for insurance costs for vessels entering the area. A number of owners may decide to forego trading in and out of the region, limiting the tonnage available for traders and resellers to move base oil cargoes in and out of the region.

Prices for imported Group I base oils arriving into Middle East Gulf ports, predominantly into the U.A.E., are called lower, at around $990/t-$1,020/t for SN150, $1,035/t-$1,065/t for SN500 and $1,125/t-$1,180/t for bright stock, all on a CIF/CFR basis ex U.A.E. ports. These prices refer to imports from Thailand, India and Singapore. There is also talk this week of Iraqi base oils being available out of Basra, but this is unlikely since all Iraqi production is currently being retained within the country for domestic markets.

Russian base oils cargoes continue to arrive into the U.A.E. port of Hamriyah, with reports of a vessel carrying around 15,000 tons. This quantity has been loaded on a ship-to-ship basis at anchorage off Hamriyah. The vessel, FPMC 35, has sailed from the gulf and is now en route to Apapa port in Lagos. The vessel was last reported at Khorrfakkan anchorage some seven days ago. It is assumed that the vessel has sailed from that position and could be crossing the Indian Ocean towards the Cape of Good Hope.

Prices on a basis of Hamriyah anchorage are assessed only for this cargo and are put at around $785/t for SN150 and $795/t for SN500. It is assumed that there will be a large quantity of SN900 included in the cargo and that it could be priced around $845/t. It is also assumed that the cargo was pre-blended to order, with the SN900 grade ready to be loaded.

Assuming a freight cost of around $200/t from Hamriyah to Apapa and a margin for the trader involved, prices delivered into Nigeria could be around $995/t for SN150, $1,025/t for SN500 and $1,080/t for SN900 – numbers that would be comparable to other Russian offers from traders in the Baltic.

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

Prices for Group II base oils imported and 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 will be sold in U.A.E. dirhams since that 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

News reports say the next large cargo of mixed base oils loading from Rotterdam and Fawley, U.K., has been chartered and will load in the next couple weeks. More information is being gathered from sources in Durban and will be reported next week. The cargo is heard to include multiple viscosity grades totaling around 19,000 tons.

Sources report a cargo of 9,000-10,000 tons Group I base oils loaded from Fawley for discharge in three West African ports. The cargo split will be 5,000 tons of three grades into Tema to cover the Ghana tender requirements, with the balance split between ports in Abidjan, Cote d’Ivoire, and Conakry, Guinea.

In Nigeria, the continuing saga of the naira-dollar exchange rate is still causing problems for base oil sellers trying to unload naira on the black market. The rate is up marginally from last week to 1,651 naira per dollar.

How the Greek cargo managed to compete with Russian prices for material sitting in tank is still shrouded in mystery. There are complex and complicated reports about how the cargo was accounted for, but how payment was made is simply unknown. The trader in question does a great deal of trade of other petroleum products into Nigeria and other parts of West Africa and hence may have some leverage when it comes to getting paid for base oils.

As reported previously, pricing for Russian supplies is becoming the norm with which European and U.S. suppliers are expected to compete. The trader moving a 15,000-ton cargo on board the FPMC 35, which loaded ship-to-ship at Hamriyah, and is now en route to Apapa, last reported at Khorrfakkan. It will now be in the Indian Ocean, heading for the Cape, before turning north up the western African coastline. The base oils onboard are of Russian origin. The economics remain shrouded in mystery, but the prices delivered ship-to-ship must have been exceptionally low for this shipment to compete with other Russian offers from the Baltic.

It is assumed that the original Russian cargo would have loaded out of the Black Sea, before proceeding to U.A.E. The economics of the whole cargo operation are intriguing and some research will be made into the operation. The combined freight, assuming loading in the Black Sea, and then the voyage from the U.A.E. to Apapa, would come to around $300/t. To bear this cost and still compete with other Russian grades into Nigeria is nothing short of remarkable. The FOB or CFR price levels would have had to be ultra competitive.

Prices in Apapa for potential future trades are going to be more competitive with Russian oils. Given their edge on quality and specifications, traders of oils from other markets may not have to match Russian prices, but they will have to justify higher levels.

Prices here have been adjusted to take account of possible FOB numbers plus margins, as well as the need to compete with Russian Group I oils. Levels could be around $1,095/t-$1,125/t for SN150, $1,125/t-$1,160/t for SN500 and $1,185/t-$1,200/t for SN900. Delivered prices for Russian oils imported from Russia and the U.A.E. are assessed at $995/t for SN150, $1,035/t for SN500 and $1,085/t for SN900, on a CFR basis ex Apapa.