The U.K. economy is already flagging, and some fear that tariffs on exports to the U.S. could push it into recession.

European Union economic data show that Germany and France are likewise in dire financial stress, with major manufacturing sectors shrinking and with potential for significant job losses this year.

This background is affecting markets far and wide but is especially rough on the EU, where government budgets are squeezed by support for Ukraine in its war against Russia and calls to increase defense spending.

In the Middle East the peace between Israel and Hamas is holding amidst exchanges of prisoners for hostages. The question is whether it continues as the sides confront issues such as who will govern Gaza. At the same time, there is much speculation about whether Israel or the United States will launch an attack against Iran’s nuclear program.

All these factors are holding back commercial enterprise, including purchasing of base oil to produce finished lubricants for a variety of end uses. For example, Middle East Gulf exports of finished lubricants are under pressure going into East African markets, whilst other areas such as North Africa and Turkey are being economically squeezed by high interest rates and rising prices.

Over the years, base oil trading has been shielded in the sense that there has usually been nearly constant demand for lubricants, but the current downturns in major economies are causing enough turmoil that some companies are questioning their long-term prospects.

This undermines investment and capital projects going forward as reflected by a number of new initiatives being put on hold and others outright cancelled.

Refiners with aging facilities are not prepared to invest in new units if they may never run at full capacity. Some older refineries producing API Group I base oils – a number of which are operating around Europe, the Middle East and Africa – could close.

Will oil majors be willing to invest in new facilities to produce premium base oils such as Group II and III, or has the market already seen all the updates and improvements required to move forward into the next phase of base oil market development?

In Europe very few upgrades or plans for new construction are being considered for the base oil scene, and many older refineries are being serviced and maintained on an ad hoc basis. If major problems develop at any of these units, might the operators decide not to sink in more money?

Units in Portugal, Italy, the U.K. and Germany have closed in recent years, while capacity to make premium base oils was added in the Netherlands and Spain. Africa lost plants in Morocco and South Africa and has otherwise been static. The Middle East Gulf gained significant new capacity in the United Arab Emirates, Bahrain and Saudi Arabia, but older units in Iran and Iraq will require major reinvestment to bring production up to date, and with these economies struggling, that seems unlikely to happen.

If more Group I is lost that isn’t necessarily a major problem as it could be replaced by Group II and III.

Fundamentals have remained weaker across the regions, with crude and feedstock prices softer. Indicators show lacklustre demand for base oils and finished lubricants. Availabilities remain more than adequate across all base oil groups and geographies.

There are changes to trading patterns, with smaller quantities of base oils moving from Asia-Pacific to the Middle East Gulf and India while increasing support comes from U.S. and Saudi Arabian producers.

Dated deliveries of Brent crude fell about $2.5 the past week to $75.80 per barrel, now for April front month settlement, while West Texas Intermediate slid to $72.80/bbl, still for March front month.

Low-sulfur gasoil moved in the opposite direction, rising $12 to $717 per metric ton, still for February front month. All of these prices were obtained from London ICE trading late Feb. 3.

Europe

Group I availabilities in Europe are ample, but demand is lacking, tempting some producers to explore potential export sales. Nevertheless, few suppliers have the requisite quantities of all grades to make up a cargo for the export markets.

There have been no more reports of low-priced deals for FOB sales ex Spain, but the trader involved in the last small cargo, which went into Turkey, is apparently looking to lift a second parcel that presumably would be sufficiently discounted to appeal to Turkish buyers.

The source refinery has been lacking SN500 or SN600, but now has availability for delivery or FCA sales. The refinery makes SN600 but can cut back on that grade in favor of SN500, which is often preferred for certain formulations.

It is doubtful whether quantities of the heavier neutrals would go to export.

Nigeria remains a possibility for export sales, but no European supplier has the availabilities to cater a large Group I base oil cargo in excess of 10,000 tons. With SN900 being required to form a large part of a cargo, a significant quantity of bright stock would be necessary to blend this grade. This could make the exercise uneconomic, since the SN900 grade has to compete against Russian blends that may not include bright stock. Russian SN900 can be blended using SN1200 and lighter grades such as SN500 or SN150.

Group I demand within Europe is softer this week as sellers strangely opt to offer discounts as they try to move larger quantities of material out of storage. Sellers are trying to kick-start the market with “special deals,” but buyers are taking their time and are in no hurry to commit to large purchases. In their opinion, there is plenty of material around, they can pick and choose when to buy and can purchase in smaller quantities.

Group I solvent neutrals are being offered at €835/t for SN150 and €860/t for SN500, on an FCA basis.

Bright stock values are firmer due to limited availability, although a number of suppliers said last week that they have ample quantities of bright stock. Such comments allude, however, to truckloads as opposed to large cargo quantities of 1,000 tons or more.

FCA European euro prices are taken lower from Feb. 1 to between €825/t and €875/t for SN150, €855/t-€880/t for SN500 and €1,165/t-€1,200/t for bright stock.

The euro’s exchange rate against the dollar dipped to $1.02851 Monday. The average price differential across all grades between Group I exports from Europe and sales within the region is unchanged at €20/t-€45/t.

European Group II prices are relatively stable, but there does seem to be downward pressure. Buyers are looking to take increasing quantities of light-viscosity grades out of consideration for quality differences from Group I SN100 or SN150. Additive treat rates are lower for the Group II 100 neutral or 150N.

With Group I prices weakening, the price differential between Group I and Group II is a negotiating point, leading to discounted numbers for Group II grades. The price differential between Group I and Group II light-vis grades is not large, although Group I prices have dropped further than Group II.

European Group II prices are adjusted downwards to €1,035/t-€1,065/t for 110N and 150N, €1,050/t-€1,080/t for 220N and €1,125/t-€1,175/t for 600N. These levels apply to a wide range of Group II base oils produced in Europe or imported from the U.S., the Red Sea and Asia-Pacific. In the case of imports the prices mentioned apply to bulk shipments.

Prices for Group III sales in mainland Europe are coming under extreme pressure for distributors trying to sell forward into February and March. Appointed distributors are having to compete with lower prices from certain traders, some of whom may not be in the European market for the long haul. Premium for Group III base oils over Group II are quite low, though not the lowest ever since your columnist has seen Group III grades run at a discount to Group II.

Exceptionally low prices are being offered from one trader – or perhaps a team of them – who won a sale tender for Group III base oils from a Middle East Gulf producer. Another tender has been announced, seemingly for a larger quantity, but that deal depends on availability of a vessel to transport around 12,000 tons. There could also be problems finding tank space for this quantity in at discharge port in Antwerp-Rotterdam-Amsterdam, although part of the cargo could be sent to the U.K. for distribution by a trader.

The lowest number heard for 4 centiStoke is $1,040/t, or €1,011/t at the current exchange rate.

More cargoes of Group III base oils are sailing from Middle East Gulf sources in the U.A.E., Bahrain and Qatar, adding to growing European inventories for these grades – which now qualify as an oversupply.

Four cSt oil with a partial slate of finished lubricant approvals is offered from one appointed distributor at €1,100/t, whilst other suppliers maintain higher rates of €1,115/t-€1,125/t for 4 and 6 cSt, on an FCA basis ex Antwerp-Rotterdam-Amsterdam.

Overall then, European levels for Group III oils with partial slates of approvals are at €1,011/t-€1,125/t for 4 and 6 cSt and at €1,100/t-€1,155/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

This report is still awaiting an update of prices from its referenced rerefiner in Germany, so for now prices are unchanged at €1,085/t-€1,135/t for 4 and 6 cSt, basis FCA ex the rerefinery.

Prices for Group III oils with full slates of approvals are moving lower and are now at €1,675/t-€1,725/t for 4 and 6 cSt and at €1,735/t-€1,755/t for 8 cSt, on an FCA basis ex hubs in Antwerp-Rotterdam-Amsterdam, Northwestern Europe and Spain.

Baltic and Black Seas

Reports keep hitting this desk base oil prices inside Russia continuing to rise, but there is still little to no evidence of the same happening for base oil exports from the country. Receivers in Gebze, Turkey, of base oils from Lukoil and Rosneft suggest that prices are moving lower.

There is some confusion because some players are quoting ex tank prices in Turkey implying FOB levels at a Russian loadports such as Taganroc or Temyruk of around $565/t. Netting these levels back to the refinery gate would suggest rates around $495/t – which would be well below feedstock numbers and therefore seems improbable.

Russian export prices are heavily discounted to ensure they remain attractive wherever sold. Rosneft barrels loading in Taganroc and Temyruk are being sold at extremely low levels into Turkish and Middle East Gulf markets. Lukoil barrels ex Baltic ports remain are still priced higher and sell into markets such as Turkey and Nigeria.

Some buyers have implied that the quality of Lukoil oils is more reliable, but experience says the quality of Russian base oils is very similar, with only small differences in parameters such as color and viscosity index.

FOB prices ex St Petersburg or Vyborg are estimated from prices offered and delivered into receivers in Lagos. These levels are estimated at $645/t-$660/t for SN150, $665/t-$680/t for SN500 and $710/t for SN900 blended specifically for the Nigerian market. Prices for Russian export barrels are only published as indication prices since your columnist has had no reliable reporting recently on cargoes from the Baltic.

Every week there are new reports of more Russian Group I base oils dominating the Turkish market, leading to excess quantities of material that is being offered and sold around the Black Sea regions by traders based in Turkey and elsewhere, often to receivers in the EU.

Some lubricant blenders in Ukraine are among the purchasers. These companies had previously used Russian base oils following the cessation of base oil production at the domestic Kremenchuk refinery. After Russia invaded the country in 2022, those still working had purchased EU material by road from Poland and Hungary, but now it seems that they are supplementing or even replacing those supplies with Russian exports shipped to Turkey, Moldova or Georgia and then transported to Ukraine by road or smaller tankers operating in the Sea of Azov and the Black Sea.

Russian barrels are being bridged from Black Sea ports such as Taganrog and Turkish ports to Egyptian ports such as El Dekheia, then re-exported to markets such as Nigeria and even the the United Kingdom.

Russian levels for SN900 delivered into Nigeria are heard at $1,080/t, on a CFR basis. A Turkish trader is offering Russian and Uzbek SN150 for $775/t, SN500 at $790/t and SN900 at $1,055/t, suggesting the use of bright stock. All of these prices are basis ex works Gebze.

Tupras prices for base oils sold in Turkey are 33,553 lira/t for spindle oil; Tl 27,405/t for SN150; Tl 32,716/t for SN500; and Tl 42,953/t for bright stock. These values are ex rack and incure a standard loading charge of Tl 8,199.20/t. The loading charge has risen from a previous rate of Tl 5.500/t, perhaps because of exchange rate fluctuations.

Group II prices in Turkey, advised by a local trader, are again unchanged at $890/t for 110N and 220N and $1,100 for 350N, on a CFR basis. Group II oils from Formosa Petrochemical in Taiwan, which are of European quality, are priced at $1,150 for 150N and $1,500/t for 500N.

Group II imported from the Red Sea, the U.S. and South Korea are also available in Turkey.

The Turkish market for Group III oils with partial slates of approvals includes 4 cSt from Tatneft in Russia, now priced around €1,075/t, as well as material from other sources, which have declined to €1,225/t-€1,285/t. Fully approved Group III from Cartagena, Spain, is at €1,845/t-€1,865/t for all viscosity grades, on an FCA basis ex Gemlik.

Middle East

December records show the busiest month yet for cargoes moving from Yanbu and Jeddah. The mainstay of the cargoes appears to be Group II base oils from Yanbu discharging in Mumbai anchorage to multiple receivers.

Quantities moved into the United Arab Emirates declined during December but resurged in January to record levels of both Group I and Group II.

In Yemen, Houthi rebel stance after the ceasefire between Israel and Hamas remains unclear. Some UAE sources said it is now safe to transit the Bab al Mandab Strait in the southern Red, but major container shipping lines Hapag Lloyd and Maersk said they continuing to re-route vessels around South Africa and have no intentions of returning to a Suez transit.

The latest information from Yemen is that the Houthis say they will cease attacking Israeli and allied vessels once the final part of the Gaza ceasefire arrangements have been completed. Some reports say that in the meantime the rebels will only attack Israeli flagged vessels. More information is being sought.

Sepahan Oil in Iran continues to export base oils, but levels are much less than in the past. Indian buyers have started using domestically produced Group I, which is in surplus leading some to be shipped to the UAE and other Middle East Gulf receivers.

Cargoes from the U.S. Gulf of Mexico and Atlantic coasts have now arrived in the UAE – some vessels also discharging on the West Coast of India.

UAE prices for imported Group I are confirmed by local sources at $875/t-$910/t for SN150, $915/t-$945/t for SN500 and $1,080/t-$1,120/t for bright stock, all on a CIF or CFR basis ex UAE ports. These prices refer to imports loaded from the U.S., with slightly lower numbers heard for small cargoes of up to 4,000 tons coming in from Thailand, India and Indonesia.

Two Russian base oil cargoes discharged in Hamriyah port during January, and there is rumor of another Russian ship-to-ship cargo – around 15,000 tons, including a large quantity of SN900, loaded out of the Black Sea and bound for Hamriyah anchorage. This may again be transferred STS since the principal of the trading company is currently in Lagos for negotiations.

Prices for Russian base oils on a CFR basis ex Hamriyah port or STS anchorage are estimated at $645/t-$785/t for SN150 and $655/t-$795/t for SN500 on a delivered basis. How these prices are possible after shipping costs from the Black Sea is a complete mystery.

Group III cargoes continue to load out of Al Ruwais, UAE, Sitra, Bahrain, and Ras Laffan, Qatar, destined for India, Europe, the U.S. and mainland China. Volumes to China have decreased, though, after new Group III capacity in that country came onstream during 2024, and with more facilities plan to add to their Group III slate this year.

Netback levels on Group III oils from Al Ruwais and Sitra are unchanged this week at $1,125/t-$1,200/t for 4, 6 and 8 cSt grades. Netbacks for gas-to-liquids Group III+ loading ex Ras Laffan are unchanged at $1,295/t-$1,325/t, though these are on an indication basis only. Netbacks are estimated using freight rate indications and FOB assumed price levels.

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

Group II base oils imported from the Red Sea, the U.S. and South Korea are resold ex tank in the UAE or on a truck-delivered basis in the UAE and Oman. FCA prices are lower this week at $1,455/t-$1,500/t for 110N, 150N and 220N and at $1,535/t-$1,575/t for 600N. These grades are sold in UAE dirhams, which are pegged to the U.S. dollar. The highs of the ranges refer to RTW deliveries to buyers in the UAE and northern Oman.

Africa

Smaller cargoes feature in cross-Mediterranean shipments loaded from Italy and Spain for receivers in Morocco, Tunisia and Egypt. Group I base oils for the Samir blending plant in Casablanca are now all imported since the company’s local plant stopped producing base oils some years ago.

Algerian oil company Sonatrach operates a former ExxonMobil refinery at Augusta, Italy, and sends base oils from there to Algeria and in the opposite directions from a refinery operated by its sister company, national oil refiner Naftec.

Operating out of a hub in Valencia, ExxonMobil occasionally supplies parcels into Egypt and Turkey, but prices have been high for Turkish buyers. Luberef’s refinery in Yanbu, Saudi Arabia, also supplies bright stock into EGPC in Alexandria, Egypt, and regularly sends parcels of 3,000-3,500 tons to cover bright stock requirements.

Shipping agents in Durban have confirmed that another base oil cargo loading as normal out of Rotterdam and Fawley, U.K., will transit during March or April. Dates remain undefined.

The vessel that loaded out of Fawley with around 9,000-10,000 tons of Group I has made the discharge in Guinea, Cote d’Ivoire and Ghana, in the ports of Conakry, Abidjan and Tema, respectively.

In Nigeria, cargoes are being offered and negotiations taking place for deliveries during March or April, but one trader who investigated the possibility for a European sourced cargo decided that price and available quantities do not work.

Russian base oils from the Baltic, Egypt and the UAE are being offered from a collection of three traders at with extremely low prices. The cargoes are being offered sometimes to the same receivers, who may switch suppliers should price and terms suit.

The Nigerian naira’s exchange rate to the U.S. dollar fell NGN 30 the past week to NGN 1,596.

Nigerian prices for Group I imports from the U.S. 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, on a CFR basis ex Apapa port in Lagos. Other traders are offering lower numbers for SN150 and SN500 – $940/t and $995/t, respectively – but are higher on SN900, at $1,130/t.

Indicated prices are unchanged this week for Russian base oils imported from Russia, Egypt and the UAE: $980/t for SN150, $995/t for SN500 and $1,080/t for SN900, all on a CFR basis ex Apapa.

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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