EMEA Base Oil Price Report

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Base oil markets throughout Europe, the Middle East and Africa are desperately quiet, with weak demand across the board. Until now, there have always been some positive areas, such as the Middle East Gulf or parts of the African continent, but even those locations are seeing less base oil procurement now.

There are a number of large cargoes fixed by majors that are constantly repositioning inventory and adjusting stock levels of various grades in their regional hubs around the world.

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Other than these cargoes, there are few genuine export parcels being transacted. Even more local business is slow, and sources said last week that inflation, workplace unrest and the war in Ukraine were all taking their toll on markets. There are few signs of economic recovery, and it is assumed that that many countries are tipping into recession. It is unknown how deep the curve will dip, so market participants are hoping for the best.

All types of base oil are being affected, but API Group I oils are taking the biggest hit. Had refiners not reduced run rates, the market would now be flooded with unwanted material. Producers and other sellers are still looking for an uptick in buying to bolster the year-end picture. Some are talking up the possibility of a demand uptick leading to increased trade in the new year, but few are very optimistic that things will significantly improve that soon.

Group II and Group III demand has also fallen away due to drastically diminished demand for finished lubricants.

Crude prices had rallied last week but have now reverted to almost the same levels as last reported. Dated deliveries of Brent crude are at $82 per barrel, down $1 from last, still for January front month settlement. West Texas Intermediate fell $2 to $74.10 per barrel, also for January front month.

Low-sulfur gas oil dropped to its lowest level since early February – $884 per metric ton, still for December front month. All of these prices were obtained from London ICE trading late Nov. 28.

Europe

Prices for Group I exports from Europe appear to have stabilized – mainly because few true transactions have been recognized in the market. As mentioned above, a few oil majors have shipped large cargoes that were recorded as internal sales, but only to reposition stocks.

Real export cargoes to West Africa, the Middle East Gulf and India are simply not happening for varying reasons in each of those destinations. Nigeria’s banks are still suffering from a lack of available foreign currency which prevents the opening of letters of credit, necessary for cargoes to be imported. India and Middle East Gulf markets are attracting imports from Asia-Pacific and the United States where Group I prices have been lower than Europe, opening up arbitrages.

Freight rates remain at all-time highs and show few signs of retreating. Bunker bills have dropped considerably, but owners and operators maintain that other costs – for items such as port calling rates, crew wages and insurance – have increased in increments that more than offset the dips in fuel costs, leaving vessel operators no option other than to hike freight rates to their current levels. 

Group I export prices are again unchanged, with solvent neutral 150 between $980/t and $1,025/t, SN500 at $1,055/t-$1,095/t and bright stock at $1,155/t-$1,220/t, all on an FOB basis.

Prices for Group I sales within Europe are also unchanged, with sources saying that few sellers have tried to increase prices for December, instead rolling over November prices that had been discounted heavily at the end of October. There are talks of special deals for blenders prepared to take their full monthly allocation, since many have not been doing so. The practice has put additional pressure on some sellers that saw their own inventories swell to the point that they could not accept replenishment cargoes.

December is forecast to be slow in the run-up to the holiday period in Europe, when many blending operations are going to seize the opportunity to save costs and close for an extended holiday.

Europe is in the grips of an inflationary spiral and will have to come out of that before the tempter of markets improves. The Ukraine situation is causing much of the pain to trade throughout Europe, and the imminent imposition of a near total embargo on Russian hydrocarbons will not help in the short term.

The euro although still relatively weak, has remained above parity with the U.S. dollar, moving to $1.04268 on Monday this week.

The price differential between Group I exports and Group I sales within the region is unchanged at €95/t-€165/t, exports being lower.

Group II base oil prices have been steady since dropping a couple weeks back. Sellers hope those realignments last until the New Year, but some buyers said they are tackling suppliers this week to try to negotiate lower numbers for December onward. Again there appears to be a lack of enthusiasm among Group II buyers, who are facing a lack of demand for finished lubes.

Euro prices for Group II base oils are unchanged at $1,420/t-$1,490/t (€1,386/t-€1,455/t) for 100 neutral, 150N and 220N, while 600N is at $1,595/t-$1,670/t (€1,558/t-€1,630/t). These prices apply to a range of Group II oils from Europe, the U.S., Asia-Pacific and the Middle East Gulf.

Group III prices are reportedly stable. Sellers are perhaps only too aware that with lower feedstock costs filtering down to product prices, buyers may only want to discuss base oil markdowns

Less material is being imported to Europe from the Middle East Gulf, and some market insiders claim suppliers in that region are targeting U.S. markets. At the same time, a large cargo will load out of Sitra, Bahrain, around the end of December, bound for Antwerp-Rotterdam-Amsterdam. This would suggest that the refinery at Sitra has restarted production after a shutdown for catalyst repairs.

Suppliers appear to be maintaining market shares, but some market participants are forecasting that volumes will drop in the first quarter of next year just because of the economic downturn. Many are hitching their hopes to new automotive engine oils coming into the market next year – products that will rely heavily on Group III characteristics to meet performance specifications.

Prices for Group III oils with partial slates of finished lubricant approvals appear unchanged going into December. Values are at €1,780/t-€1,795/t for 4 and 6 centiStoke oils and at €1,755/t-€1,875/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam or Northwestern Europe.

Prices for Group III oils with full slates of approvals are also unchanged at €1,825/t-€1,875/t for 4 cSt and at €1,840/t-€1,885/t for 6 and 8 cSt, all on an FCA basis from hubs in Antwerp-Rotterdam-Amsterdam or Northwestern Europe and for deliveries into France and Italy from Cartagena, Spain.

Baltic and Black Seas

Baltic Sea reports contain news of potential cargoes being produced for receivers in Turkey, with up to 6,000 tons mooted to load out of Riga, discharging into Gebze. This cargo could be planned for this week or next. Another potential charter is for 2,500 to 3,000 tons to also load promptly from Riga, delivering this parcel into Hull on the east coast of the United Kingdom. This is a rather oddball situation because many of the buyers in the U.K. have opted to avoid Russian material, which surely this cargo must be. There is a company that is run by an expat Russian family based in the U.K., which may have title to this cargo, although the break/bulk market for such material in the U.K. is much more limited than before the Ukraine situation.

FOB prices for SN 150 as indications only are assessed at $865/t-$885/t, with SN 500 at $895/t-$925/t.

There are no confirmed reports of cargoes or shipping inquiries for vessels to load material out of Svetly terminal in Kaliningrad. As an indication only, SN 150 loading out of Svetly would be estimated at $845/t-$870/t, with SN 500 at $885/t-$910/t.

Two cargos of Group I grades loaded from Gdansk. The first was for 2,500 tons, and the second was for 3,000 tons, both loaded during mid-November and were to discharge into Dordecht. The multiple loading, which was an inquiry last week, appears to have drifted off the map.  

FOB prices from Gdansk remain in line with European mainstream numbers. As an indication, SN 150 is placed at $975/t-$1,020/t, with SN 500 at $1,050/t-$1,095/t. Bright stock is assessed at $1,145/t-$1,210/t.

Apart from the new cargo from the Baltic for receivers in Gebze, another 5,000 ton-parcel is earmarked to load out of Taganrog in the Sea of Azov to discharge into Gebze port. The origin of the cargo is not disclosed, but this material may have come out of Volgograd refinery, or alternatively the material could be of Azeri origin.

Lukoil have arranged a large 13,500-ton cargo of Volgograd base oils that will load during the first week of December from Limas terminal. This cargo is bound for regular receivers in Singapore. Often this size and type of cargo could load out of Kaliningrad for the same receivers.

The base oils from Limas terminal are estimated at FOB prices at $875/t-$895/t for SN 150, with SN 500 at $895/t-$925/t. Prices refer to bridged product transported from Volgograd refinery and stored in Limas terminal in Marmara.

Tupras, the Turkish refiner from Izmir refinery continues to offer supplies of Group I grades ex-rack. Prices were taken lower and are believed to be around $1,060/t for SN 100 and SN 150 grades, with SN 500 around $1,245/t. Bright stock is said to be offered at around $1,420/t.

Imported Group II prices ex-tank are maintained this week following the run of discounting in Europe, and will now lie at €1,610/t-€1,655/t for the three lower vis products, with 600N at €1,675/t-€1,730/t. These base stocks are still relatively highly priced compared to the mainland markets, but these oils have been moved to storage in Gebze and resold on an ex-rank basis by distributors.

Group III base oils, sold on an FCA basis for partly-approved grades, are assessed at €1,795/t-€1,825/t. Fully-approved Group III grades that are delivered from Cartagena in Spain or from South Korea will be priced at around €1,865/t-€1,920/t on an FCA Gebze basis.

Middle East

Red Sea news this week carries a report of only one small parcel of around 2,000 tons moving from Yanbu to Singapore. This cargo may consist of Group II base oils.

In the Middle East Gulf, a cargo from Taiwan will discharge into Hamriyah port with up to 4,000 tons of three grades of base oils. Smaller parcels are also identified coming into the United Arab Emirates from sources in Thailand and Singapore.

The cargo of around 4,000 tons will load out of Rotterdam and Fawley for an oil major, and the parcel will two-port discharge in Fujairah and Jebel Ali, U.A.E. It is of interest to find out what base oils are involved in this cargo since from the load ports, Group I, Group II and Group III grades could be involved. The same seller will also sail a larger parcel of nearly 10,000 tons to discharge into Jebel Ali and Fujairah. This parcel will load first from Rotterdam, then Augusta, before sailing via Yanbu to the two U.A.E. ports. It is not clear if this vessel will deliver or take on cargo in Yanbu.

Outgoing Group III cargoes are planned from Al Ruwais and Sitra, with one cargo of 8,000 tons already loaded out of Al Ruwais for receivers in Mumbai anchorage and Chennai port. The other large Adnoc cargo will load during December for distributors in Nantong, China. The cargo to load in December out of Sitra in Bahrain is for up to 8,300 tons of Group III grades, which will sail for Antwerp-Rotterdam-Amsterdam. This cargo is under the auspices of Stasco, who will put the cargo into storage, and thereafter will break/bulk the parcel and sell on an FCA basis. A smaller quantity of 1,000-1,500 tons may be sold to traders in the U.K. for distribution.

Large cargoes for Shell with gas-to-liquid Group III+ base stocks are loading out of Ras Laffan in Qatar. Cargoes will move to Asia-Pacific, the United States and Europe. For U.S. cargoes, sizes can range from 20,000 up to 55,000 tons. Cargoes to load prior to the year’s end will be destined for the U.S., China and Hamburg in Germany. Parcels are expected to be around 25,000 tons each.

Netbacks for Group III base oils out of Al Ruwais and Sitra are maintained at $1,710/t-$1,755/t, for the range of 4 centiStoke, 6 cSt and 8 cSt partly-approved Group III base oils.

Netback levels are based on local FCA prices in markets such as Europe, India and the U.S. The levels are derived and assessed from those regional selling levels, less marketing, handling and estimated freight costs.

Group II base oils on a FCA basis in the U.A.E. that are sourced from European, U.S, Asia-Pacific and Red Sea sources, are resold ex-tank, or on a truck delivered basis within the U.A.E. Prices are taken lower after general discounting across markets with levels at $1,635/t-$1,685/t for the light vis grades, with 500N and 600N at $1,695/t-$1,760/t. The high end of the range refers to product delivered via road tank wagon.

Africa

As predicted last week, South African sources confirmed that a large cargo of 16,380 tons of various base oils and chemicals will load out of Rotterdam and Fawley around Dec. 20. The mainstay of the quantity on board will discharge into Durban, while the remaining balance of the cargo will go into Mombasa.

West African reports are that the impasse between traders trying to sell into Apapa and local receivers is not getting any better. The local Nigerian banks are still unable to find foreign currency – U.S. dollars – to enable the banks to open letters of credit. Traders are biding their time and keeping out of any negotiation with sources or buyers in Nigeria. They have suggested that there is little point in getting into negotiations at this point. No offers are being made.

The Russian cargo of 12,000 tons that loaded out of Riga may be the only supply going into Nigeria before the year’s end. One assumes that the letter of credit was issued from a Nigerian bank and confirmed by a prime European bank prior to the vessel loading and sailing for Lagos. This cargo was sold by Lukoil to a local distributor in Apapa.

CFR levels for base oils to go into Apapa remain notional because traders will not commit to suppliers until the financial situation is sorted out. Pricing information is not disclosed by Lukoil, the seller of the Baltic cargo.

Levels are given as historical indications only at around $1,255/t for SN 150, SN 500 at around $1,300/t, and SN 900 at $1,345/t. Also, as an indication only, bright stock remains assessed at around $1,395/t CFR Apapa. If the banking system gets sorted out, then these levels may be on the high side. Estimates are that the market could see prices some $50/t-$60/t lower.

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.

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