Crude oil prices are down to the low U.S. $70s per barrel and look as if they could sink lower. Base oil prices have stabilized around levels reached toward the end of November, which means that margins versus crude and feedstock prices remain attractive to producers. While refiners are not currently looking to increase stocks of base oils at this time, any sales at current levels are welcomed.

 However, refinery runs may be limited so as not to build inventories prior to the year end. Due to relatively low demand, present activity is muted and will probably remain so until well into January.

Sizing up the general state across the EMEA regions, Europe is floundering as a number of the main economies hover just above recession and the Middle East has its own set of problems. That leaves Africa  as the bright spot. Many parts of the continent are experiencing a late year boost to trade.

West Africa, particularly Nigeria, has seen a number of large cargoes of API Group I base oils arriving from the Middle East and the U.S. South Africa is importing large quantities of all types of base oils from European and Asia-Pacific sources, and East African importers are taking large quantities of both Group I and Group II base stocks from Red Sea and Singapore suppliers.

With the onset of the holiday season in Christian countries, and with Christmas and the New Year being celebrated by many in the various regions, the next few weeks will probably be exceptionally quiet for both buyers and sellers of base oils. Some blending operations will close their doors toward the end of this week, with some not reopening until Jan. 10.

Sources contacted early this week were at pains to point out that staff would be paid and covered for the duration of the closures, but that it was more economic to save power and expenses by not opening plants during this extended spell. The comments received were unanimous in saying that demand was expected to remain dull even moving into January and that sales of finished lubricants were not expected to pick up until February at the earliest.

There are rumors brewing around crude markets that major producers such as Saudi Arabia are considering returning to full production quotas early next year. The International Energy Agency has postulated that this could cause crude prices to plummet to between $30$40 per barrel. Such a move apparently came in for consideration after a large year-on-year production increase of 230,000 barrels per day in November from countries such as Libya and Kazakstan.

A collapse of oil prices would be disastrous for Russia, which is already selling oil at a significant discount, so Vladimir Putin’s fate is partly in Riyadh’s hands.

Dated deliveries of Brent crude were at $73.30/bbl Monday, for February front month settlement, almost exactly in line with levels published a week earlier. West Texas Intermediate rose marginally to $70/bbl, still for January front month.

Low-sulfur gasoil prices, trading in a narrow range, hit $678 per metric ton, now for January front month, only $15 higher than last reported. All of these prices were obtained from London ICE trading late Dec. 16.

Europe

The European market for true Group I exports remains dormant, with no supplier in the region able to amass the quantities required for receivers in export destinations such as West Africa. There are two barriers to the re-establishment of a European export scene, one being that inability. The other is the attractiveness of prices within Europe, which remain higher than in alternative source markets such as the U.S. To compete with material flowing from the Gulf of Mexico and the U.S. East Coast, selling prices from Europe would have to fall by around $100/t-$130/t.

With little evidence of year-end discounting to clear inventories, producers appear content to concentrate on the local markets, where prices have remained attractive to refiners.

Those prices are stable. A number of blenders purchased stocks during late November and early December to hedge against sudden price movements during the festive period, when businesses will be closed. Buyers see the market as remaining steady with little movement over the next month. With availabilities sufficient to cover current requirements, there is no pressure to invest in large quantities of Group I oils.

There are exceptions in a number of blending operations located on the Upper Rhine, which are laying down stocks to cover against water levels rising during January. If levels do rise enough, they could prevent barges from navigating a series of bridges.

Bright stock remains firm in pricing terms, and is also in relatively tight supply, with fewer producers actively involved in manufacturing this grade. However, those producers having stocks available are enjoying margins that are at their highest in a number of years.

FCA euro prices for Group I sales in Europe are unchanged through December at between €885 per metric ton and €910/t for SN150, €920/t-€955/t for SN500 and €1,200/t-€1,255/t for bright stock depending on quantity and availability.

The euro’s exchange rate against the U.S. dollar weakened to $1.04872 Monday. The average price differential across all grades between Group I sales in Europe and hypothetical exports narrowed to €5/t-€15.

European Group II prices have been steady and appear to have stabilized following small downward adjustments in late November and early December. Importers keep tabs on the dollar-euro exchange rate and are trying to maintain euro prices at current levels. To compete with local production, importers sell in euros within the EU, leading to potential currency losses, since final accounting is completed in dollars.

European Group II prices are unchanged this week at €1,085/t-€1,120/t for 110 neutral and 150N, €1,125/t-€1,150/t for 220N and €1,175/t-€1,210/t for 600N. These prices apply to a wide range of Group II oils – some produced within the region and others imported from the U.S., the Red Sea and Asia-Pacific.  imported material. For imports prices pertain to bulk shipments.

If one were to add up all Group III quantities currently stocked for sale in Europe, it would probably reveal the largest quantities of this material ever recorded. By sheer chance, a number of cargoes have arrived from various sources in the Middle East Gulf, Malaysia and South Korea during the past few weeks, and more supplies are on the water now following a tender from one of the Middle East Gulf sources. At the same time, demand is falling ahead of the holiday period.

An oversupply situation is becoming grave, with a number of distributor receivers actively seeking additional storage facilities to accommodate stocks. Demand is forecast to remain weak even after the New Year, with a number of large consumers of lubricants announcing cutbacks and reductions in output. For example, automotive manufacturers in main markets such as Germany, France and the United Kingdom have all announced curbs on production next year in the face of pressure to shift to electric vehicles.

Group III producers from other regions have commented that they are still keen to move larger quantities into the European market. One driving factor is that established markets in locations such as China have had new local production come onstream during 2024, and this availability is limiting requirements for imports.

With demand weak across the main European markets in Germany, the Benelux countries, France and the United Kingdom, prices remain weak. One seller is offering 4 centiStoke material at €1,135/t, while others are higher, in a range of €1,185/t-€1,225/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam. European prices for Group III oils with partial slates of finished lubricant approvals or without approvals are therefore pegged at €1,135/t-€1,225/t for 4 and 6 cSt and at €1,195/t-€1,225/t for 8 cSt, basis FCA ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III grades are unchanged at €1,135/t-€1,175/t for 4 and 6 cSt, basis FCA ex rerefinery in Germany.

Prices for Group III oils with full slates of approvals remain high at €1,775/t-€1,810/t for 4 and 6 cSt and at €1,820/t-€1,835/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

Prices for base oils supplied out of the Baltic seem to be tracking domestic values in Russia, which rose in November by around the rouble equivalent of $60/t. Most of the Baltic barrels are sourced from Lukoil’s refinery in Perm refinery, whereas in the past much was quantities that Gazprom supplied to third-party traders and resellers.

Lukoil exports to destinations such as Turkey and Singapore. From investigations in Turkey, Lukoil prices are higher than Rosneft oils arriving into Gebze, Turkey, and offered on a CFR/CIF basis.

Information about cargoes loading in the Baltic remains difficult to obtain. Your columnist would welcomes any information that would help identify vessels employed to load base oils out of this region and can be reached by email at pumacrown@email.com

Baltic FOB prices for SN150 and SN500 ex St. Petersburg or Vyborg, Russia, are calculated from prices offered and  delivered into Nigeria and Singapore. These numbers are assessed around $760/t-$780/t for SN150, $790/t-$810/t for SN500 and around $845/t for SN900, which would be blended specifically for Nigerian receivers.

Base oils from Europe and other locations continue to move into Baltic ports in Lithuania such as Klaipeda and also Riga and Liepaja in Latvia.

Still no confirmation of a new Tupras tender, but there have been some talks of availabilities flowing from the refinery in Izmir. Whether these availabilities will be sold locally or formed into another tender loading out of a Marmaras port remains to be confirmed.

Russian barrels are still being advertised and sold around the Black Sea by a few traders supplying to many receivers, some based in EU countries. Material is being imported into Turkey and then re-exported to a number of destinations, but remains billed as Russian origin.

An offer from a blender/trader in Turkey for SN900 going into Nigeria remains priced at $1,100/t, ex works Gebze. This price is unworkable against Russian SN900 blends, which will use SN1200 rather than bright stock. Russian levels delivered into Nigeria are estimated at around $1,080/t on a CFR basis. It is assumed that the grade offered would be blended using bright stock, hence the relatively high price. Grades blending Russian and Uzbek oils are priced at $790/t for SN150 and $800/t for SN500.

Taking estimated costs for handling, storage, and a margin for the seller, then the CFR prices for both grades landed into Gebze could be close to $640/t. These grades could be Rosneft production to allow such a low delivered price.

Tupras recirculated local prices for the Turkish market: 35,285/ lira per ton for spindle oil; Tl 31,104/t for SN150; Tl 33,253/t for SN500; and Tl 44,962/t for bright stock. All prices are in lira, are ex rack and incur an addition loading charge of Tl 5,150/t.

Group II FCA levels remain at $890/t-$1,100/t for 110N,  220N and 350N, the lower number applying to the two lighter grades and the upper to 350N. The two light-viscosity grades may be from Russia. Higher spec 500N is at $1,500/t and 150N is available at $1,150/t. The last two grades have been imported from Taiwan, possibly produced by Formosa Petrochemical. Group II base oils are imported from the Red Sea, the U.S., South Korea and now, Taiwan.

Partly-approved or non-approved Group III base oils offered on an FCA basis include Tatneft’s 4 cSt grade, currently heard to be priced around €1,145/t. Other partly-approved grades are priced higher at €1,360/t-€1,400/t. Fully-approved Group III grades from Cartagena, Spain, are being delivered into Gemlik, and their prices are uchanged at €1,960/t-€1,995/t, basis FCA.

Middle East Gulf

Group I and II base oils are reported loading out of Yanbu, Saudi Arabia, and Group I solvent neutrals also co-loading out of nearby Jeddah. No bright stock or Group II grades are produced from Jeddah refinery. The Group II base oils are bound for Mumbai anchorage on the West Coast of India, the United Arab Emirates and Karachi, Pakistan.

Luberef is also supplying Group II into the Turkish market, and these stocks are now being resold ex works to the local market in small quantities for blending.

Vessels are also noted loading for other ports such as Aqaba, Jordan, Dar-es-Salaam, Tanzania, and Suakin, Sudan. There have been no further reports of S-Oil loading cargoes of Group I base stocks for Northwestern Europe, perhaps due to Group I availabilities improving within Europe and the market needing less imports.

Base oil trading has continued during all the disruptions and chaos brought about following the Hamas incursion into Israel in October 2023, and there are hopes that business will return to normal should a ceasefire be signed by Israel and Hamas. The effects have not only been felt in Israel and neighboring countries but across the whole Middle East region including Middle East Gulf. The region has been an important conduit for Group I and II base oils being used in large quantities in the U.A.E. and other countries such as Kuwait, Bahrain and Qatar. Group III exports from three terminals in Middle East Gulf are critical to the international markets, and the continuance of these exports has been nothing short of remarkable, given problems caused by Houthi rebel attacks on shipping in the Red Sea.

The region also imports large quantities of base oils from east and west, with a number of large cargoes of Group I grades moving from the U.S. Gulf to receivers in the U.A.E. With FOB prices in the U.S. trading down, the arbitrage has reopened and has provided opportunities for traders to move cargoes into the Middle East.

Prices for imported Group I material arriving into Middle East Gulf ports, predominantly the U.A.E., are assessed at around $955/t-$985 for SN150, $995/t-$1,025/t for SN500 and $1,125/t-$1,180/t for bright stock, all basis CIF/CFR U.A.E. ports. These prices refer to imports from the U.S., Thailand and India. There had been talks of imports from Europe, but the logistics and hence the economics do not allow these trades to work. With vessels having to detour around the Cape in South Africa to avoid Houthi attacks, the incremental costs on top of higher FOB prices make this type of trade uncompetitive.

Russian base oil cargoes continue to arrive into Hamriyah port in the U.A.E., some of which have been loaded out of Azov ports in the Black Sea region and others being bridged through Limas terminal in Turkey. Prices on a CFR basis ex Hamriyah port or ship-to-ship anchorage are heard to be in the mid $600s on a delivered basis. Prices are now put in a range between $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges refer to barrels being discharged into tank in Hamriyah port.

There are talks of another sale tender from Bapco ex Sitra, Bahrain. The previous tenders have been awarded to two European traders who may be working together to procure these barrels at very low prices. The last tender was sold on the basis of FOB AG gasoil plus $200/t. This was an unusual formula to adopt but worked out to an extremely low FOB number for the buyer.

Group III base oil netbacks for material loading from Al Ruwais, U.A.E., and Sitra, moving to Europe are again unchanged at $1,125/t-$1,200/t for 4, 6 and 8 cSt grades.

Netbacks for gas-to-liquids Group III+ from Shell ex Ras Laffan in Qatar remain unchanged at $1,295/t-$1,325/t. Shell cargo economics and cost allocation are not disclosed, hence netbacks are on an indication basis only.

Netback levels are assessed from distributor selling prices, minus estimated marketing, margins, handling and freight costs.

Prices are unchanged for Group II base oils imported and resold ex tank in U.A.E., or on a truck delivered basis in U.A.E. and Oman, those prices being $1,525/t-$1,575/t for 110N, 150N and 220N and $1,635/t-$1,685/t for 600N. These grades are sold in local U.A.E. dirhams, the U.A.E. currency being pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in locations in the U.A.E. and northern Oman.

Africa

The large cargo of mixed base oils discussed recently is now believed to be on the high seas, en route to Durban after loading from Rotterdam and Fawley. Arrival in Durban is estimated during early January, when the vessel will discharge the full cargo of 18,000 tons, The  cargo consists of various viscosities of Group l, II and III  base oils and a small quantity of easychems, which could be polyalphaolefins or esters. 

In Nigeria a number of large cargoes have been delivered into Lagos over the past few weeks, and at least two more are moving there from U.S. ports. One trader has moved an 18,000-ton parcel that already discharged and has another cargo on the water that will discharge early in the new year. The second is also around 18,000 tons and made up of SN150, SN500 and SN900.

The exchange rate of the naira to the dollar steadied over the past week and was at 1,636 to 1 U.S. dollar Monday. Traders report that payments are still a nightmare, with the current cargoes being paid partly in letters of credit, partly in dollars in cash and partly cash in nairas, which have to be converted on the black market. Banks are still not bidding for dollars and are using the 125% deposit from receivers required to bid for currency to fund their own business.

Russian prices are still setting the bar in Nigeria. Margins are being squeezed, and any significant demurrage could cancel a trader’s profit. There are often two or three receivers involved in taking a large cargo of, say 15,000-18,000 tons, which complicates the payments and conversion to dollars. There are some good receivers in Lagos who will try to aide and assist sellers in accounting for a cargo, but there are also cowboys who cannot be trusted to play ball.

It has been heard that the trader involved with the Hamriyah cargo will load another cargo out of the U.S. Gulf and will sail this to Apapa port in Lagos before the year end. The quantity of the cargo is not confirmed, but it is reckoned to be around 10,000 tons in total, once again made up of SN150, SN500 and SN900.

Prices for higher specification material from the U.S. are confirmed to be at $985/t-$1,010/t for SN150, $1,040/t-$1,055/t for SN500 and $1,095/t-$1,125/t for SN900, all on a CFR basis ex Apapa. However, other traders have come with lower numbers of $940/t for SN150 and $995/t for SN500, though SN900 is higher at $1,130/t, perhaps reflecting a higher FOB tariff for bright stock.

Russian barrels are being delivered via Turkey and Egypt and are competitive for the material sold. Even with the triple handling, prices show the low numbers possible for Rosneft base oils going into Turkey. Russian oils delivered from Egypt and  the U.A.E. have delivered prices of $975/t for SN150, $985/t for SN500 and $1,035/t for SN900, on a CFR basis ex Apapa.