EMEA Base Oil Price Report


Base oil prices in Europe, the Middle East and Africa seem stable this week, with demand undergoing a seasonal slowdown. Producers sounded content about current values, raising the possibility that current levels could last at least through the end of August.

Crude oil costs have stabilized as dated deliveries of Brent posted yesterday at $77.95 per barrel for September front month. West Texas Intermediate crude was also little changed from last week, trading at $73.85 for August settlement. ICE LS gas oil was static at around $672 per metric ton, still for July settlement. All these prices are based on ICE trade in London late yesterday.

Export prices for API Group I base oils in Europe were unchanged this week in calm trading. There are a number of offers for large parcels to go into deep-sea markets, but buyers and sellers described them as leisurely. Validities on offers were extended, indicating sellers do not anticipate sudden price movements.

Light solvent neutrals were pegged between $785/t and $810/t, heavier solvent neutrals at $885/t-$925/t and bright stock at $945/t-$965/t. These levels pertain to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always wherever and whenever available.

Group I trading within Europe epitomizes the season, with few buyers looking for extra inventory at this stage. Numerous blending operations are cutting back operating hours to schedules that will continue for some six weeks. Buyers are reportedly in no rush to complete Group I purchases, and one expressed confidence that prices will stay steady through the end of summer.

The differential between local prices and export numbers is assessed this week at 50/t-75/t, the same as last week.

Group II trading likewise showed no upward pricing pressure, and sources said that a supplier that imposed hikes three weeks ago started offering discounts this week. It does appear that Group II demand in Europe is strong and that it offers better netbacks than some other regions.

FCA and delivered prices for smaller quantities are relatively stable at $875/t-$920/t (745/t-785) for light neutrals and $955/t-$975/t (815/t-820) for 500N and 600N.

Pricing news for Group III oils was mixed this week, with some sellers pushing levels higher even amidst reports of discounts and rebates being reintroduced. FCA prices are maintained this week, although it has been around one month since sellers last moved levels upwards. Euro prices for oils with partial slates of finished lubricant approvals remain 770/t-785/t for 4 centiStoke oils, 790/t-810/t for 6 cSt and 790/t-800/t for 8 cSt. Group III oils with ACEA and European OEM approvals will be priced higher, between 805/t-830/t for 4 cSt, 825/t-850/t for 6 cSt and 830/t-855/t for 8 cSt, all on an FCA Antwerp-Rotterdam-Amsterdam.

Prices are based on ex rack or truck-delivered smaller lots of Group III and do not reflect prices for bulk deliveries to larger users such as major blenders or additive manufacturers, which may be considerably lower.

Baltic and Black Seas
Around 30,000 tons of Baltic-sourced material was loaded and distributed the past week to European destinations in Antwerp-Rotterdam-Amsterdam and the United Kingdom. No more large parcels for West Africa have emerged this week, but there are claims that receivers or traders have made serious inquiries for at least two large cargoes in excess of 10,000 tons for Nigerian discharge. Sources confirmed that supplies of Russian export grades are continuing unabated, and the summer months may prove the be the busiest for traffic out of the Baltic for some time.

FOB prices for the main grades are unchanged at $740/t-$775/t for SN150, $830/t-$850/t for SN500, $855/t-$870/t for SN900 and $845/t-$920/t for various grades of bright stock, depending on quality, source and loadport.

There is a rather intriguing shipping inquiry this week for a large parcel of Group I base oils being sought from a U.S. East Coast supplier for delivery into the Baltic region. This is an oddball inquiry and will be followed closely over the next week.

In Black Sea markets there is no further word of the two large cargoes of Russian exports previously reported being discussed on an STS basis ex Kavkaz, Russia. The first of these parcels should have loaded by now, and the second, of around 7,000 tons, by mid-July. There may be supply hold-ups since one Turkish source said supplies of all petroleum products were interrupted due to low river levels.

The route for cargoes of Mediterranean material imported into Turkish ports also seems to have dried, at least in the short term. Receivers said they have sufficient inventory to take them through August, with the market running slow due to holidays. Greek and Italian sources are still positive regarding this business, and sources have indicated that this trade will return to normality after the summer recess. Prices are unchanged from previous indications at around $795/t-$825/t for light neutrals and $890/t-$920/t for heavier grades, available on a CIF basis.

Middle East Gulf
Red Sea reports are that a large number of shipments of both Group I and Group II base oils are planned to load out of Yanbu and Jeddah in the next few weeks, maintaining the large quantities of Saudi Arabian material which will find its way into markets such as United Arab Emirates, Oman, and the west coast of India. Sudanese receivers appear to have elected to take a cargo ex Mediterranean sources although at the time of this report this could not be confirmed.

Middle East Gulf news suggests that imported Group I material seems to be one favored option for receivers in U.A.E., with a number of U.S. Gulf Coast cargoes being considered for import during July and August. There are other options for these parcels, one of which is going into the west coast of India, or discharging into both U.A.E. ports and also the west coast of India.

It has been mooted that there is some form of ‘political’ bias to take U.S. base oils into U.A.E. rather than rely on Iranian material which may be blocked in the near future due to sanctions which are about to be unleashed. U.S. prices would have to be very keen to compete with both Iranian and Russian SN500 ex Black Sea, and many believe that this will not be possible. Landed prices would have to be around $825/t-$850/t CIF U.A.E. ports.

An Iranian Group I cargo has been confirmed coming out of Bandar-e Emam Khomeini for receivers in Mumbai. The premium SN500 cargo is due to discharge this week and will be the first Iranian cargo to move out of the region for some time. The U.S. sanctions do not appear to have stemmed the flow of this supply totally and Indian receivers are more than prepared to accept Iranian cargoes without any apparent concerns.

Iranian SN500 is also loading in smaller quantities for buyers in Hamriyah and premium SN500 is indicated at between $835/t-$855/t delivered into this port and other Sharjah receivers.

Group III indications are that the Al Ruwais supply will have topped the 50,000 tons figure for exports during July and notional FOB prices are increased slightly this week taking account of new delivered prices into Europe, U.S. and Far East. Levels are pushed marginally higher to between $830/t-$860/t basis FOB in respect of the three main grades being marketed by suppliers out of Al Ruwais and Sitra.

This pertains to partly-approved Group III grades, meanwhile Group III material from Sitra refinery marketed by European major Neste is anticipated to netback higher at around $865/t-$895/t. These figures are notional and are totally dependent on cost allocation carried out by each individual marketer.

These numbers refer to FOB levels established on a netback basis using published shipping freight rates, and taking into account advised local selling prices, plus notifications of bulk CIF/CFR cargo prices from various sources.

Yanbu Group II cargoes are gaining ground on a market share basis, and having started from zero, this production has established itself with many end users who are now buying these grades instead of opting for supplies from Far East production sources. One exception appears to be a Korean cargo which will be discharged into buyers in Sohar in Oman, a market where the Saudi Arabian sellers may have been expected to have the edge.

There have been talks around the markets this week regarding the supplies from the Yanbu source making their way into the European market where prices may be more attractive than U.A.E., India or Far East. This however, would be in the face of the large increase to production expected in Rotterdam from next year, and also higher transportation with a Suez transit and hub storage expense at a European port.

Imported supplies of Group II base stocks are available on either FCA, truck or flexi delivered basis from U.A.E. sellers with prices which are maintained this week after the small increases of the last report. Prices in respect of the light grades 100N/150N/ 220N are unaltered at around $1,035/t-$1,070/t, with 500N/600N between $1,130/t-$1,175/t.

South African imports can count on another large parcel of Group I base oils leaving northwestern Europe for Durban arrival around the beginning of August.

West African reports this week carry news of the regular Ghana tender cargo being loaded out of the incumbent supplying point in Italy. Three grades of Group I base oil are to be supplied as usual to Tema. Buyers in Senegal are looking to take a small cargo of Group I base stocks in bulk, but traditionally these supplies have been made in flexies which can be more efficient both in handling and economics.

U.S. Gulf Coast is back in the frame as possibilities for parcels going into Nigeria, although a cargo out of two northwestern European ports has been booked for receivers in Apapa. This cargo may be destined for one of the majors operating and blending in Nigeria. Baltic sources have confirmed that there is firm interest to take at least one, and perhaps two, cargoes from sources in that region.

Prices in respect of Group I base oils going into Nigeria are unchanged this week, awaiting input from one of the third party cargoes either from European or U.S. Gulf Coast sources. The prices attached to the northwestern European cargo may not be pertinent, since this may be classed as an inter-affiliate deal with subsequent internal pricing.

As indications only light neutrals such as SN150 or SN180 are assessed between $855/t-$880/t. SN500/600 between $955/t-$975/t with bright stock being priced between $980/t-$999/t. SN900 ex Baltic is estimated at around $935/t.

Quoted prices refer to large parcels of more than 5,000 tons of Group I base oils delivered CFR or CIF into Apapa port, Nigeria.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.

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