Now the industry is gearing up for spring in the northern hemisphere, when oil change numbers rise ahead of the peak driving season.

The one piece of bad news is that crude prices started to rise and feedstocks to follow suit, exerting upward pressure on base oil values.

Overall, however, base oil prices seem to be weakening across all the groups. API Group I oils seem most affected, with availabilities surging while demand from major buyers declines. Manufacturing is sagging as main economies such as Germany, France and the United Kingdom reel.

Borrowing in these countries has reached new highs, and with tax revenues not meeting requirements, further tax hikes or cost cutting is inevitable. Core industries such as automaking and consumer staples are not functioning as commercial entities, and with political problems rearing their heads, there seems to be no short- or even medium-term relief coming to resurrect markets.

Economic downturns have a massive effect on sales of lubricants, base oils and chemical additives. Some blending operations are finding it tough to stay afloat while providing jobs and security for staff and employees.

Brent crude retreated a bit from last week’s surge to above $80 per barrel, bringing the value back to below $80 that benchmark. The crack between dated Brent and West Texas Intermediate crude remains narrow, around $2.50, perhaps reflecting strength in the U.S. economy compared with Europe.

Dated deliveries of Brent crude were quoted at $79.90 per barrel, Monday, still for March front month settlement. West Texas Intermediate crude was at $76.25/bbl, now also for March front month.

Low-sulfur gas oil remained relatively stable at $750 per metric ton, still for February front month, down just a few dollars. All of these prices were obtained from London ICE trading late Jan. 19.

Europe

Poor demand and healthy availabilities of Group I base oils around Europe are providing ample choice for buyers looking for bargains. A couple of large inquiries have been placed by traders looking to capitalize should suppliers opt to enter the export market.

There are possibilities for material to go into Turkey, where some blenders are desperate to lay hands on any lower-priced availabilities of European quality base stocks. Russian export barrels have swamped the market, but some blenders require higher spec base oils to produce certain grades required for export markets.

There are also other possible destinations for export sales, such as West Africa, but so far no supplier has positively responded to inquiries for relatively large parcels of Group I.

Having had restricted availabilities of heavy neutrals during the fourth quarter of last year, one Spanish supplier has offered a large parcel of solvent neutral 600 or 500 at $980/t, on an FOB basis. The problems is that there is no offer for bright stock to accompany this grade, making the quantity difficult to place into the Nigerian market, where SN900 is almost mandatory in large bulk cargoes.

The next couple weeks could see availabilities at attractive prices for traders to consider for export receivers. Nigeria as an option could have an open arbitrage for supplies from Europe should these become available. Alternative sources, such as the United States have increased FOB prices for January and February offers.

The market for Group I sales within Europe is seeing increased prices for some offerings, but these are sporadic and appear to come randomly from sources that until now offered at higher levels. Group I neutrals have been quoted at €850/t for SN150 with SN500 at €880/t, basis FCA. Sellers maintain that they haven’t capitulated to buyers demands but have been realistic in assessing the market as it stands currently.

With vacuum gasoil prices stabilizing and with slightly narrower margins for base oils, Group II suppliers may push to win over Group I business.

There are no signs of upward pressure on Group I prices, and some sellers seem to be considering discounts just to move quantities out of tank. Prices for bright stock remain firm, however, due to restricted availability. There are fewer refiners now producing this grade. There are availabilities from North African producers, but these oils often lack approval for the European Union’s REACH regulation.

FCA prices for Group I sales in Europe are unchanged this week at €850/t-€910/t for SN150, €880/t-€925/t for SN500 and €1,195/t-€1,245/t for bright stock, though the latter depends on quantity and availability.

The euro’s exchange rate with the U.S. dollar rose to $1.03819 Monday. The average price differential across all grades between Group I sales within Europe and a hypothetical export market widened to between €20/t-€45 due to reductions in estimated values for export sales.

Group II busines around Europe is steady but prices are certainly coming under downward pressure from buyers pushing to maintain the same differential to Group I that was in effect late last year. Group I prices have fallen, and are being used to exert pressure on Group II availabilities – both imports and European production.

European Group II prices are unchanged this week at €1,075/t-€1,100/t for 110 neutral and 150N, €1,095/t-€1,120/t for 220N and €1,155/t-€1,195/t for 600N. These values apply to a wide range of oils including European production and imports from the U.S., the Red Sea and Asia-Pacific. For imports these prices refer to bulk shipments.

The European Group III market is subject to sole traders sending out signals of lower prices that cannot be sustained with follow-up cargoes. But by then the damage has been done because the market adjusts to those lower numbers, and other suppliers at least take discounting action to compete with the ow offers. Some Group III base oils now being offered at prices lower than some Group II grades.

There are rumors of exceptionally low offers from traders with access to Group III sourced from a Middle East Gulf producer, which have been shipped to Antwerp-Rotterdam-Amsterdam for resale on an FCA or delivery basis. Numbers heard for 4 centiStoke are at $1,050/t (€1,009/t) for prompt sales during January. When this cargo was purchased under a sale tender, the price was established at the mean of Middle East Gulf gas oil for five days around bill of lading date, plus a premium of $200/t. This provided an exceptionally low FOB rate, at something like $835/t. With a freight rate of around $125/t, the economics work very favorably.

This cargo may have limited time in storage, hence the move to get the material out of tank quickly. Other established sellers are trying to rely on buyer loyalty, and indeed most buyers will lend support to their regular suppliers.

One supplier of Group III oils with partial slates of finished lubricant approvals is now offering 4 centiStoke €1,110/t, while others have maintained values at €1,125/t-€1,155/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

European prices for partly-approved grades are therefore pegged at €1,110/t-€1,185/t for 4 and 6 cSt and at €1,165/t-€1,195/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for rerefined Group III oils are unchanged at €1,085/t-€1,135/t for 4 and 6 cSt, on an FCA basis ex rerefinery in Germany.

Group III grades with full slates of approvals remain at lofty levels, priced at €1,725/t-€1,775/t for 4 and 6 cSt and at €1,785/t-€1,800/t for 8 cSt, all on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

Reports have been received of Russian domestic base oil prices rising again by the rouble equivalent of $25/t, but there is little evidence of these markups being applied to export cargoes. Receivers in Gebze, Turkey, who take Lukoil barrels shipped from the Baltic, said values have if anything dropped. This could indicated government support for exports. Sales info Turkey and Singapore generate foreign currency that can be spent on foreign weapons.

Russian export prices appear to continue to be randomly, heavily discounted ensuring that these grades remain attractive and super-competitive wherever they are sold. Rosneft barrels are being sold at extremely low levels into Turkish and Middle East Gulf markets. For whatever reason, Lukoil barrels remain priced higher and sell in markets such as Turkey, the United Arab Emirates and Nigeria.

FOB prices for base oils shipped ex St. Petersburg or Vyborg, Russia, are estimated from prices offered and delivered into receivers in Nigeria and Turkey. These levels are estimated at $650/t-$660/t for SN150 and $675/t-$690/t for SN500. SN900 blended specifically for Nigerian receivers, is calculated to be around $725/t. Prices for Russian export barrels are only published as indications, since no valued reporting is available for these cargoes.

Russian Group I base oils continue to be offered and sold around the Black Sea regions by a number of traders from Turkey and other countries, some in the EU. Investigations have confirmed that Russian base oils are openly sold in Ukraine to a number of blenders having problems sourcing low-priced Group I. Some had been purchasing material by road from Poland and Hungary but appear to be supplementing or replacing these base oils with Russian material routed through Turkey, Moldova or Georgia. Transportation to Ukraine is by road or occasionally by Volganaft vessels operating around the coastlines of the Sea of Azov and the Black Sea.

Russian barrels are also being bridged from Black Sea ports such as Taganrog and Turkish ports to Egypt and Limas, stored in tank and then re-exported to markets such as Nigeria. Cargoes of SN150, SN500 and SN900 are being delivered into Nigeria by a trader.

Russian levels for SN900 delivered into Nigeria are heard at $1,080/t basis CFR. A Turkish trader is not selling Russian or Uzbek SN150 at $775/t and SN500 at $790/t, while pricing SN900 more than $250/t higher at $1,055/t, all ex works Gebze. The latter price may reflect that the blend includes bright stock.

Tupras reports that its refinery is again producing base oils. Prices for its sales in Turkey have not been updated and therefore remain at

35,285 lira/t for spindle oil; Tl 31,104/t for SN150; Tl 33,253/t for SN500; and Tl 44,962/t for bright stock. These prices are ex rack and incur an additional loading charge of Tl 5,150/t.

A trader in Turkey advised that Group II are unchanged at $890/t for 110N and 220N and at $1,100/t for 350N, all on an FCA basis. The much higher price for the latter grade may reflect that it is of Taiwanese or Saudi Arabian origin rather than Russian.

Taiwan-sourced, higher spec 500N is at $1,500/t and 150N available at $1,150/t. Group II base oils available in Turkey are imported from the Red Sea, the U.S., South Korea, Taiwan and Russia.

Among Group III oils with partial slates of approvals, 4 cSt from Tatneft in Russia is now priced around €1,095/t, while those of other origin are at €1,360/t-€1,395/t, all on an FCA basis.

Fully-approved Group III grades from Spain are delivered into Gemlik and are priced at €1,865/t-€1,895/t, basis FCA.

Middle East Gulf

Smaller numbers of cargoes of Group I and Group II base oils are being loaded from Yanbu and Jeddah, Saudi Arabia. Exports to the West Coast of India are up, but it is considered that most of this trade is Group II.

Smaller quantities moved into the U.A.E. during December, but traffic has been revitalized moving into ports such as Fujairah, Ras al Khaimah, Hamriyah and Jebel Ali. Luberef sister company S-Oil may look to increase exports to Europe of Group I and Group II base oils. S-Oil has been in the Group II market in Europe for many years, and loading out of Yanbu would save time and costs compared to shipping from South Korea. Traffic moving north from Luberef’s Red Sea facilities would also avoid the Houthi bombardment, though the rebels this week announced a halt to attacks on shipping.

Base oil exports from Sepahan and Iranol in Iran have been largely unaffected by hostilities in the region, but larger quantities are being retained and distributed within Iran, perhaps part of efforts to stockpile finished lubricants.

Cargoes loaded from the U.S. Gulf and East coasts are being exported to the Middle East Gulf through traders based in both areas. The supplies are heard to be relatively large quantities of Group I and Group II that are sold to third parties or placed with distributors.

The Middle East Gulf has seen a great deal of Group I and Group II base oils being imported into the U.A.E., which in turn, supplies other countries such as Kuwait, Bahrain and Qatar. Supplies of base oils have also been stocked in and re-shipped from Al Jubail, Saudi Arabia. Luberef production is delivered by RTW into Kuwait and Bahrain by contractors.

Prices for imported Group I material arriving into U.A.E. are assessed at $900/t-$925 for SN150, $925/t-$960/t for SN500 and $1,100/t-$1,155/t for bright stock, all on a CIF or CFR basis ex U.A.E. ports. These prices refer to imports the U.S., while lower numbers are heard for smaller quantities from Thailand, India and Indonesia.

Russian base oil cargoes continue to arrive into Hamriyah port in the U.A.E. from Azov ports such as Taganrog and Temyruk, and other parcels are being routed through Limas terminal in Turkey.

Sources in the U.A.E. said a potential cargo of Russian base oils may arrive for ship-to-ship transfer at Hamriyah anchorage. It has been rumored that the cargo is penciled in for February, and it may already be loaded. It supposedly will be loaded onto another vessel and then sail to Lagos to discharge. The most recent such cargo was 15,000 tons, and it is reckoned that the next will be in that range.

Prices for Russian base oils available on a CFR basis ex Hamriyah,  U.A.E., or STS anchorage are estimated to be around $645/t-$785/t for SN150 and $655/t-$795/t for SN500. The higher ends of the ranges refer to base oils discharged into shore tanks in Hamriyah port. If STS is achieved, then vessels will avoid port calling costs, making better economies for exports to Nigeria.

Group III cargoes continue loading out of Al Ruwais, U.A.E., and Sitra, Bahrain, destined for India, Europe, the U.S. and mainland China. Netback estimations remain unchanged at $1,125/t-$1,200/t for 4, 6 and 8 cSt. Netbacks for gas-to-liquids Group III+ base oils ex Ras Laffan, Qatar, remain at $1,295/t-$1,325/t. Cargo economics and cost allocation for the supplier, Shell, are not disclosed, so these 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 from the Red Sea, the U.S. and South Korea and resold ex tank in the U.A.E. or on a truck-delivered basis in the U.A.E. and Oman: $1,495/t-$1,535/t for 110N, 150N and 220N and at $1,585/t-$1,620/t for 600N. These grades are priced and sold in U.A.E. dirhams, the U.A.E. currency pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in the U.A.E. and northern Oman.

Africa

There have been a number of smaller cargoes supplied from Italy and Spain for receivers in Morocco, Tunisia, and Egypt. Group I base oils are sent to Casablanca for Samir to blend into finished lubricants. All requirements for blending needs are now imported since the local refinery stopped producing base oils some years ago.

Algerian national oil company Sonatrach, which operates a former ExxonMobil refinery in Augusta, Italy, sends base oils to and from Algeria. ExxonMobil supplies parcels into Egypt and Turkey from its hub at Valencia, Spain, and also directly from the Augusta refinery, where it reserves drawing rights.

Luberef also supplies bright stock into EGPC in Alexandria, Egypt, from Yanbu and regularly send 3,000-ton parcels to that port to cover bright stock requirements.

Shipping agents in Durban have confirmed that another base oil cargo will be sent from Rotterdam and Fawley, U.K., during March or April. Dates are still to be finalized, and no shipping details have been released yet.

There are no updates regarding the vessel presumed to have loaded out of Fawley with 9,000-10,000 tons of Group I base oils. This regular cargo will discharge in Conakry, Guinea, Abidjan, Ivory Coast, and Tema, Ghana.

In Nigeria, cargoes are being offered and negotiations are taking place for deliveries during March or April, with one trader looking at a European supply source that may be able to produce a sufficient quantity.

Russian base oils from the Baltic, Egypt and U.A.E. are being offered at extremely low prices – levels against which mainstream U.S. and European suppliers struggle to compete.

The Nigerian naira’s exchange rate to the dollar was static the past week, rising just 20 naira to NGN 1,666 Monday.

Nigerian prices for U.S. base oils have been confirmed at $985/t-$1,000/t for SN150, $1,045/t-$1,055/t for SN500 and $1,085/t-$1,120/t for SN900, all on a CFR basis ex Apapa port in Lagos. Other traders have offered lower numbers on the light neutrals – $940/t for SN150 and $995/t for SN500 but $1,130/t for SN900.

Russian Group I imported from Russia, Egypt and the U.A.E. are indicated at around $980/t for SN150, $995/t for SN500 and $1,080/t for SN900, all on a CFR basis ex Apapa.