The upward pricing pressure that seemed to be building in recent weeks reached a boiling point the past few days as offers from base oil suppliers jumped amid suggestions that some grades are tightening in Europe, the Middle East and Africa.
Maintenance turnarounds in Europe and cutbacks in API Group I production have contributed to a lack of availability for some Group I grades, and the Group III segment still faces its own disruptions. Price hikes appear driven by supply only since crude and feedstock prices fell on unexpectedly high crude inventories in the United States and a report that most OPEC members reduced crude production in January but by less that agreed at a key December meeting.
Prices for dated deliveries of Brent crude fell some $4 per barrel to close Tuesday at $51.60 per barrel in May front month settlement. West Texas Intermediate crude fell to around $48.50/bbl for April front month, widening the crack to around $3/bbl. Market sources suggested rising global inventories may cause further retreat. ICE LS Gas Oil also fell to $457 per metric ton, down some $30 in the past week.
The Group I segment in Europe has become a sellers market. Solvent neutral 500 was reported to be in heavy demand but short supply. SN150 also continues to be tight, and with suppliers are taking advantage.
Offered prices are being accepted without counters, which leads prices quickly upwards. Offers for SN100 and SN150 jumped $30 to $40 per metric ton to $630/t-$655/t, while SN500 climbed $60/t-$75/t to $685/t-$720/t. Bright stock offers were said to have increased $25/t-$40/t to $775/t-$810/t for large volumes, depending on specification and accompanying grades.
The prices above refer to large parcels of Group I base oils supplied or offered FOB ex-mainland European supply points.
Prices for local sales within mainland Europe, Scandinavia and the United Kingdom were unchanged this week, although sellers are preparing hikes that will probably be implemented before the end of March. Again buyers do not appear to be negotiating, fearing that some grades are becoming short.
Finished lubricant blenders throughout Europe have taken the opportunity to increase their own prices in an attempt to recoup the raw material cost hikes.
The differential between local base oil values and exports expanded this week to 75/t-120/t due to the lag in implementing the local markups.
Although Group II sellers have not advised of any markups, importing suppliers have announced increases for their home markets, and these normally make their way to Europe sooner than later. With feedstock values weakening, though, and few shortages reported for Group II grades, some say new Group II markups would not be justified. Some refiners have begun or scheduled temporary shutdowns for maintenance, and it remains to be seen if these affect availability.
Large cargoes (35,000 to 40,000 tons) of Group II arriving in Europe are priced at $690/t-$710/t for light-viscosity grades and $810/t-$825/t for 600 neutral, CIF. These CIF prices translate into FCA levels of 695/t-720/t for light oils and 830/t-865/t for 600N.
Group III values are also unchanged, though some believe they face upward pressure because of the continuing halt to production at the giant Pearl gas-to-liquids plant in Qatar. Four centiStoke oils are $755/t-$780/t (720/t-740/t) and 6 cSt grades $765/t-$790/t, FCA Northwestern Europe. Fully approved Group III supplies FCA Antwerp-Rotterdam-Amsterdam are assessed at 785/t-815/t for the two main grades and 755/t for 8 cSt.
Baltic and Black Seas
Reports indicate that at least one large cargo has been fixed to load around 12,000 tons of Russian export grades from two ports in the Baltic. This trade was indentified last week and has now been completed for discharge into Apapa port in Nigeria. Other smaller movements into Antwerp-Rotterdam-Amsterdam and the east coast of the U.K. continue as before, and as with Group I prices in mainland Europe, prices have escalated this week. SN150 is tight again, and SN500 is in demand and difficult to find in large quantities. One parcel has been part-loaded in a Baltic port, with additional quantities of Group I base stocks being added from Northwestern Europe for receivers in Algeria.
SN150 is now offered at $590/t-$610/t FOB with smaller quantities of around 1,000-2,000 tons of SN500 at $655/t-$685/t. SN900 has been offered and accepted at around $720/t FOB. Small quantities are offered in flexitanks at correspondingly higher prices, taking account of extra costs involved n handling and packing.
Black Sea trade has been confined to smaller movements out of Kavkaz, Russia, bound for Israeli and Turkish receivers. One large parcel is still being discussed by traders looking to load between 15,000-25,000 tons ex-Kavkaz, on an STS basis. Whether this quantity is achievable both from a supply angle and also operationally remains in doubt, although similar large parcels have previously been loaded out of this region. It is confirmed that this cargo would be for March loading, and SN500 is believed to be priced around $625/t.
Base oil from Greek sources is moving into Gebze, Turkey, this week, but nothing is due into Derince, Turkey, until later this month. Mediterranean prices rose this week, and SN150 is now offered at $665/t-$690/t, SN600 at $720/t-$745/t, CIF Turkish ports. Russian SN150 is priced at $585/t, FOB/STS, SN500 at $700/t.
Red Sea shipping inquiries include two large cargoes totaling almost 20,000 tons being planned to load ex-Yanbual Bahr and Jeddah, Saudi Arabia, for contract buyers in Oman and Fujairah, Sharjah and Jebel Ali, United Arab Emirates. Traders have again described an inquiry being issued for Aqaba, Jordan, but so far no further details are available except that 5,000-6,000 tons of Group I grades is required.
Group III volumes out of Al Ruwais, U.A.E., are increasing, with another 25,000 tons in three or four cargoes moving out of the region. These shipments are bound for the West Coast of India, where around 18,000 tons will be discharged, while the balance is destined for Chinese receivers. Group III shipments are also departing from Sitra, Bahrain, but changes in marketing arrangements are imminent for the output from that location.
Prices will have moved upwards again for the new raft of Group III and although no firm confirmed rates have yet been heard for cargoes into Mumbai, netback suggestions have provided levels of $765/t-$790/t FOB for 4 centiStoke and 6 cSt grades, with 8 cSt at around $765/t.
Group I Iranian exports are missing from the slate of base oils moving out of the Middle East Gulf, with no reports of either new cargoes or new prices for such material. As suggested last week, a small parcel of around 3,000 tons of Russian export material is being assessed for import into Iran, loading from Kavkaz. This option may still be open, with prices for Black Sea material considerably lower than Iranian exports, which for the SN500+ grade would now be $760/t-$780/t FOB. With prices rising quickly, exports from Iran may have priced themselves out of the market for the moment.
Prices for the Black Sea barrels have been assessed at around $695/t in respect of SN500, with SN900 now around $745/t CIF Middle East Gulf ports.
U.S. cargoes of Group I base oils are again being offered into the U.A.E., and with prices lower than European or regional supplies, this trade might finally take place, although prices are starting to firm from these sources as well.
Future contract barrels of Group I supplies from Yanbu and Jeddah into Oman and Fujairah are assessed higher again this week, with estimated CIF levels around $690/t for SN150; around $735/t for SN500; and in the ballpark of $955/t for bright stock.
Group II prices in the Middle East Gulf have increased further, reflecting increases in FOB levels from sellers in the Far East and the U.S. Light vis grades are offered at $685/t-$700/t and 500N is $860/t-$880/t. 600N is assessed at $880/t-$895/t CIF. Deliveries of smaller parcels to other ports outside U.A.E. but within Middle East Gulf will carry premiums of $45/t-$90/t depending on quantity and distance from storage terminal.
A further cargo ex northwestern Europe is to load for Durban, South Africa, comprising of some 11,000 tons of mixed grades. With a lack of any competitive Group I base oils from Iran into the U.A.E., Russian export barrels appear to making inroads in South Africa. Buyers in East Africa have bought a number of containers of Russian supplies, and are looking to establish a regular trade.
Buyers have acknowledged purchasing the large Baltic cargo that traders purchased for resale into Apapa, Nigeria, which is one of the few of its kind. Having bought this cargo prior to FOB prices escalating, either traders or receivers will appreciate decent margins on the transaction.
The Ghana tender supply is programed for loading out of an Italian port during mid-March, but with index-related pricing, receivers will be looking at higher CIF numbers than those of previous supplies.
Offers for Nigeria are $730/t-$785/t for Group I solvent neutrals and $890/t-$925/t for bright stock. Russian SN900 ex Baltic in bulk is being offered at $840/t-$865/t. Prices are in respect of CFR/CIF levels Apapa port.
Quantities of SN150 in flexies are confirmed at $748/t, with SN500 at $808/t. Baltic-sourced SN900 is offered at $858/t, all basis CIF Lagos.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly firstname.lastname@example.org.