EMEA Base Oil Price Report

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Base oil markets in Europe, the Middle East and Africa are very quiet as the small number of would-be buyers, sellers and traders express frustration at not being able to find partners. Even placing inquiries is reportedly difficult in some cases. With normal business not to resume until September, the next few weeks could be lackluster to say the least.

Even crude and feedstock trading appear to be slow, and values declined during the past week. Dated deliveries of Brent crude retreated slightly to $73.71 per barrel for October front month, approximately $1.50/bbl lower than last week. West Texas Intermediate crude also fell – dipping to $69.25/bbl, also for September front month. ICE LS gas oil dipped around $10 to $655 per metric ton, still for August front month settlement.

Europe
Prices for API Group I exports in Europe are unchanged at $780/t to $799/t for light solvent neutrals, $875/t-$910/t for SN500 and $925/t-$950/t for bright stock. These prices refer to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points.

Domestic Group I sales are minimal and only reflect contract or emergency supplies. Very few reports signal major activity around the markets with some blending operations actually closed, and others on short-time working. Prices really did not move after Aug. 1, with some buyers saying that they will re-negotiate prices at the end of the month rather than have a two-stage process the first part of which could turn out to be meaningless, with low offtake figures forecast for the rest of this month.

The differential between local prices and export numbers remains unaltered between 50/t-75/t

European Group II markets are still perceived as relatively tight with no length to supplies coming into the market from producers. Demand is still healthy for these grades, and even with large imports from the majors, it cannot be described as a market where buyers can shop around for better deals. The message being sent out from buyers is to stick with what you have in hand, and don’t try to be clever by playing different suppliers against each other.

This segment of the base oil market appears to be surprisingly brand loyal from a customer/supplier standpoint, with most buyers remaining with the same supplier over the few years in which this market has been exposed within the European arena.

With no reports of any source increases on the cards, and even against a softer sentiment running through the market, supply remains critical at this time, with this market forecast to expand greatly over the next couple of years. FCA and delivered prices remain at current levels, with light vis grades from 70 neutral through 220N between $875/t-$920/t (745/t-785) and heavier-viscosity 500N and 600N ranging from $955/t-$975/t (815/t-820).

Group III base oils ex Middle East Gulf have been confirmed moving into Turkey through Gebze, Turkey, port, with a part-cargo discharging for receivers. The remainder of the cargo is understood to be bound for hub supplies in Northwestern Europe. Demand appears to be rising for Group III base oils with a steep offtake curve showing a growing awareness and acceptance for these grades.

FCA prices are re-assessed this week with levels between 760/t-765/t ($875/t-$885 ) in respect of the 4 centiStoke material and with 6 cSt material around 770/t-775/t ($885/t-$890). Eight cSt grades are selling between 775/t-785/t ($895/t-$900). These prices are in respect of supplies of partly-approved Group III base oils. Group III base oils carrying full ACEA and European OEM approvals are maintained between 805/t-820/t for 4 cS, with 6 cSt material around 810/t-830/t, and 8 cSt grades at 815/t-835/t, on the basis of sales FCA Antwerp-Rotterdam-Amsterdam.

Prices are based on ex-rack or truck delivered smaller lots of Group III base oils, and do not reflect prices for material which is delivered in bulk cargoes to larger users such as major blenders or additive manufacturers. Prices in respect of those trades may be considerably lower than levels above.

Baltic and Black Seas
Baltic trade has regressed back to quieter times, after the two large cargoes for Nigeria were announced last week. The short-sea trading into Antwerp-Rotterdam-Amsterdam and the United Kingdom continues on a lesser scale than at its peak with only a couple of cargoes being fixed for loading this week.

FOB prices applicable to the two large parcels have been suggested as being below ‘market’ and are suggested from alternative sources this week to be around $695/t in respect of the smaller quantities of SN10 and the larger quantities of SN500 at $765/t. Bright stock is indicated at around $855/t, not as low as the $810/t suggested last week. However ultimate confirmation of suggested FOB rates will possibly only be established post arrival into Lagos, when CFR/CIF landed prices are declared. SN900 may have been loaded at around $785/t, but no evidence can be established of this price at this stage.

Notional FOB prices in respect of smaller trades into Antwerp-Rotterdam-Amsterdam are assessed between $725/t-$745/t in respect of SN150, and between $785/t-$820/t for quantities of SN500.

The Black Sea supplies ex Kavkaz, Russia, alluded to in last week’s report have now been confirmed with almost 25,000 tons of Russian export grades being loaded in three cargoes. The supplies ex Kavkaz, Russia, are arranged for delivery into East Mediterranean, with the other larger parcels for United Arab Emirates and transhipment through Rotterdam.

Group I Mediterranean supplies are slow at the moment perhaps reflecting either the holiday period, or a growing dependence on locally produced Group I base oils which had been out of the markets for some time, but are now back with availability out of the refinery at Izmir. For the sake of good order the indication prices are maintained for Mediterranean supplies with indications for the light solvent neutrals at around $785/t-$810/t and SN600 and SN500 between $850/t-$885/t CIF.

The Group III parcel of partly-approved grades is noted for discharge into Gebze, Turkey, with other offers for material ex Spain being considered by receivers in Turkey, the latter material carrying full European OEM approvals.

Middle East Gulf
Red Sea reports contain news that large cargoes of both Group I and Group II base oils are to be shipped out of Yanbu and Jeddah over the next few weeks, and with another enquiry for a quantity of Group II material to be shipped to receivers in the west coast of Italy, this trade may start to become a regular activity. A regular ‘milk-run’ cargo of Group I base oils looks like being bound for Oman and U.A.E., whilst a large parcel of what is considered to be both Group I and Group II is being prepared for two ports in W.C. and Southern India.

Middle East Gulf Group I imports are also now to include the parcel of 11,000 tons of Russian export material loading STS out of Kavkaz, Russia. U.A.E. receivers have also confirmed that a regular supply on contract from Yanbu and/or Jeddah will be forthcoming during August. U.S. Gulf Coast supplies are again on offer to buyers in U.A.E., although it appears that the Russian material may have been bought to cover any problems with supplies from Iran and may also have covered the need for a further import ex U.S. Gulf Coast.

There have been no reports this week of further availabilities coming out of Iran, although locally, traders in Hamriyah have acknowledged that they are still looking to take small parcels out of Bandar-e Emam Khomeyni (BIK) and BB over the next month, even with sanctions starting to kick-in. Some sources based in U.A.E. have indicated that Iranian prices moved upwards, but any such movement is difficult to comprehend given the total situation applying to exports from Iran. SN500+ grade is assessed between $835/t-$850/t delivered into local U.A.E. ports in Sharjah.

Group III exports from Bahrain and Abu Dhabi continue to make the news with two large cargoes being planned out of Al Ruwais for Indian receivers. Notional FOB levels in respect of Group III base oils leaving Middle East Gulf are re-assessed in light of selling prices in global markets, although it is stressed that different grades sell at varying levels of price depending which market is being used for data. For example 8 cSt base oils sell at a small premium to the other grades in markets such as Europe and the U.S., whilst in markets such as Far East and India, the 8 cSt material sells below 4 and 6 cSt base oils.

FOB numbers are now assessed between $775/t-$800/t basis FOB Al Ruwais and Sitra in respect of the total range of the three grades being exported. This figure pertains to partly-approved Group III grades, whilst Neste Group III material from Sitra refinery is estimated to netback higher at between $835/t-$865/t. 8 cSt material being exported to India and Far East may show lower netback levels which are estimated to be around $75/t-$100/t lower than those quoted above.

The numbers above refer to FOB levels established on a notional 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.

The Group II base stocks from Yanbu to Europe appear to be looking at a repeat cargo with shipping enquiries being issued in for a vessel to take material into Italian receivers. Sources have confirmed that the CIF prices are very competitive against traditional supplies. The parcel being one-off does not appear to hold water according to European Group II sources.

Prices of Group II base stocks FCA, truck or flexi delivered from U.A.E. sellers have shown slightly lower levels this week according to sources in U.A.E., competing with prices for barrels coming out of Al Ruwais which are being offered in truck deliveries at around $880/t in respect of the 4 centiStoke and 6 cSt grades. Prices in respect of the fully approved light grades 100N/150N/ 220N are maintained around $995/t-$1040/t, with 500N/600N between $1085/t-$1125/t, all Middle East Gulf delivered prices pertain to small quantities.

Africa
West Africa markets are said to be looking for supplies to move into Guinea and Senegal with the usual suppliers apparently not being included in the ‘tender list’. The most obvious route would be to combine with other Group I grades going into Tema covering the Ghana tender, but this appears to be overlooked.

Nigerian receivers have also confirmed another large cargo of some12,000 tons of Group I grades coming out of U.S. Gulf Coast. And again the rumors are that a part of this cargo is made up with Group II grade(s), although evidence is unsupported as yet. This cargo appears to have been delayed for more than one month, with some confusion as to whether this is the same parcle or a further parcel which has been subsequently renegotiated.

On the whole Nigerian markets are quiet with only the two Baltic cargoes programd for arrival later this month. Further rumors are around regarding the prices for these cargoes with suggestions that these cargoes were negotiated at exceptionally low prices. Landed prices may offer some clues as to the FOB numbers although one source said that exceptionally low freight rates were achieved for these two shipments.

Indication prices are maintained as per last in respect of Group I base oils landed into Nigeria, with light solvent neutral SN150 between $795/t-$820/t, and SN500/600 between $865/t-$890/t. Bright stock is estimated to land between $910/t-$935/t. An indication for SN900 ex Baltic is considered around $885/t. These prices may be one-off and may not apply to other cargoes ex U.S. Gulf Coast or Europe.

Prices pertain to large parcels in excess of 10,000 tons total of API 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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