Its a time of disparity and even confusion in the Europe-Middle East-Africa base oil market. Some producers have started to increase prices, particularly for API Group I solvent neutral grades and bright stock, while others, particularly the majors, have not.
Some European refiners have tried to hoist prices by up to $50 per metric ton, but these amounts have been resisted by buyers who have managed to negotiate smaller increases, in the range of $20 to $35/t, depending on grade and cargo complexity.
The Group I range has significantly widened to take account of these changes, with prices now seen in the range of $425 to $495/t basis FOB mainland Europe, with bright stock around $600/t.
Domestic prices are confusing, with some suppliers offering temporary discounts whilst at the same time increasing contract prices, and with others trying to move numbers on a post-dated basis, say for July 1st instead of during June. This has resulted in a number of buyers shopping around for spot availabilities at lower current prices, which is giving a false picture of rising demand in an otherwise dull marketplace.
Others have decided to keep prices as they are, stating that they were not under any netback pressure to make an upward move. They appear to be satisfied with current levels, and felt that buyers would not stand an increase at this time. They also stated concerns regarding demand, and were particularly aware of market share. This was particular to the majors.
Russian export grades of Group I material are at the forefront of the increases, and instead of being the cheaper option for many flexible blenders in Northwest Europe and the Black Sea, these oils are now commanding a large premium over previous levels. SAE 10 and SAE 30 with typical Russian specs are being offered in limited quantities at $390 to $460/t FOB, an increase of some $50 to $75/t over the last two months.
Feedstock and crude levels have not moved significantly during the last week, and if anything are slightly weaker. Both crude markers have come off by about $1 per barrel, and are holding at levels of $58 for Dated Brent, and $59 for WTI. Gas oil International Commodity Exchange front month levels have retreated from last weeks highs and are down at $466 for June, although low sulphur vacuum gas oil is still trading at around $415 and showing some strength, perhaps due to gasoline production perking up.
In the Middle East Gulf, prices have started to move upwards from all suppliers based in the region, and others who are importing into regionstated yesterday that they have begun to adjust price levels to accommodate the market trend. In other words, they are increasing prices.
As an interesting aside, it would appear that base oil prices in this area are far more responsive to crude and feedstock movements than in mainland Europe (and elsewhere for that matter). There seems to be a faster adjustment to prices when changes occur. This of course could be due to awareness of the local production of crude, and the prices of petroleum products and their importance to the region.
Iranian export levels for SN 500 are now around $500 to $525/t, or slightly higher for small quantities, basis FOB Iranian ports on the Middle East Gulf. This price level is in line with delivered prices into the west coast of India.
It has been reported over the last few days that Group III grades are gaining a significant foothold in the whole Europe-Middle East-Africa region, particularly in South Africa and mainland Europe, where continuing production of Group I grades is helping Group III sales. As well as new on-stream indigenous production, larger quantities than ever before are now being imported, mostly from Korea and now Malaysia.
Prices of the Group III grades are around $800 to $850/t, basis ex tank, and with the increases in Group I prices, these grades will only become more attractive to use, versus Group II and Group II+, which appear not to have moved in price at all and are still available on the broad range of $630 to $860, reflecting the differentials between the lighter.material and the higher vis grades.
There has been another flurry of enquiries for West Africa, predominantly for Nigeria, since there could have been some small relaxation to the credit lines and available finance for the traders in that area. However, there still exists a problem of foreign exchange within the country, with a shortage of hard currency in the central bank hampering some imports.
Only time will tell if these enquiries will materialise into actual cargoes, but there does seem to be definite demand in this area, albeit on a localised basis. Prices are now being seen in the range of $615 to $645/t for SN 150 and SN 500, and for bright stock around $685/t, all basis CFR.
Base oil numbers should be firmer for the next month or so if crude and feedstock levels maintain their current levels, and with less negative talk regarding the global economy, there may be a period of stability around the corner, where the EMEA market prices hover in the ranges now being set under the current price moves.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.