With sellers unable to raise prices and buyers intent on keeping it that way, there have been very few tweaks throughout Europe, the Middle East and Africa, such as those in the Baltic where product is long and players are looking to move parcels prior to year-end.
With crude moving ever higher, Dated Brent front month is now trading at $112.70 per barrel, whilst West Texas Intermediate maintains the crack at around $96 per barrel. ICE gas oil levels have been boosted by crude levels and are now above $950 per metric ton. These moves will certainly not encourage base oil sellers to make further discounts, unless stocks have been already bought in from producers at lower levels over the past couple of months, which may be the case with Baltic sellers.
API Group I prices within mainland Europe are still weakening on the back of aggressive bids from positive buyers looking to move material before year-end. Some sellers are responding with offers some $10-$20 metric tons below last weeks levels and some realistic producers say they prefer to retain stocks in tank rather than sell base oils at negative margins.
FOB prices are between $935 and $950/t for light solvent neutral grades, with heavier grades proving more resistant at $960-$975/t. Bright stock has evidently dropped, perhaps as a result of recent large cargo purchases seemingly concluded at much lower levels than previously reported. Bright stock can be found at $1095-$1120/t but only from certain sources. Others appear to be holding out for around $20/t higher. In shortening the avails in this market, prices have been knocked due to reported levels becoming quoted as the norm.
Price levels above pertain to sales of cargo-sized parcels of Group I loading ex mainstream European and North African ports where availability allows.
Despite a small surge recently, local sales appear to be back to the normal pattern for this time of year. Many blenders are sated with quantities already in tank which will see them through to mid-January when requirements may start to pick up again. This slowdown in the domestic scene could be prompting some suppliers to offer more export barrels instead of relying on offtake from local buyers.
The differential between local sales made by truck and barge and export numbers is around 60-75/t in favor of the former.
Baltic and Black Seas
Russian and Belarus base oils sales in the Baltic are at a peak with both buyers and sellers intent on trying to run down inventory before year-end. Some lower levels are being discussed, but may just be buyers talking the market down. There are rumors that more than one cargo of SN 150 and SN 500 has been sold around $850-$870/t.
More conservative prices of $890-$915/t have been postulated, but with the market showing increasing signs of weakness on a daily basis, the former levels may become the norm.
SN 900 avails have been closely guarded, as have its prices, but one offer has apparently been made to traders at around $935/t FCA, which is exceptionally lower than recent quotes.
Black Sea base oil trade is almost insignificant, with few orders placed on Russian suppliers for cross-Black Sea trade. There is some confirmation that a large slug of SN 500 is close to loading ex Theodosia, thought to be being negotiated for west coast India and/or United Arab Emirates. Price is strictly private and confidential, which raises the possibility of this parcel being concluded at very low numbers FOB, far below market prices of $920-$930/t basis FOB for the Russian grades, with Uzbek SN 150 around $935/t CIF Turkish ports.
Middle East
Egypt sees the last of the bright stock cargoes being moved into Alexandria this month, with a new tender to be announced this week. It is generally imagined that the incumbent supplier will pick up the baton, due to this tenders extremely difficult conditions.
Jordanians have enquired to buy around 4,000 tons into Aqaba, without clarification as to whether this is for Group I or Group II, the latter being delivered into Aqaba in the past.
Red Sea activity is muted, with only the suggestion of European bright stock being imported through Jeddah during December. With no firm cargoes out of Yanbu and Jeddah announced, trade out of Red Sea may also be slowing for the year-end.
Middle East Gulf regions are still the jewel in an otherwise less-than-sparkling crown, showing good demand for local Group I and also Iranian exports, which appear to have resurfaced on a larger scale, perhaps due to the new accord between the U.S. and Iran.
SN 500, SN 150 and some SN 650 have all been offered for sale out of BIK, with SN 500 around $935-$945/t, but still in local currencies. U.S. dollar deals may take longer.
SN 150 is offered around $5/t higher, mainly due to demand for the relatively small avails in the region, with the poorer quality SN 650 offered around $895/t.
Local Group I prices are still buoyant with both Abu Dhabi and Saudi Arabia producers covering a large part of the quality market in U.A.E. and other Gulf Cooperation Council states. Prices are deemed to be slightly higher than European levels, with neutrals between $985-$1025/t and bright stock at $1100-$1125/t, all basis delivered.
Africa
The Baltic cargo to South Africa has been confirmed and will arrive into Durban later this month. Prices are not disclosed, but with FOB levels around $920/t for SN 500, and estimated freight of around $120/t, CIF levels can be assessed within $1085-$1100/t assuming a trading margin.
West Africa, as suggested above, is expecting a large influx of base oils within the next four weeks. Sources such as Baltic, mainstream Europe, Mediterranean and the U.S. will all feature in the arrival of more than 50,000 tons of material into Ghana and Nigeria during the next couple of months. With some of these cargoes not loading until late December, deliveries may even range into early February.
Baltic cargoes loaded during second half of November will be priced around last weeks levels of $995-$1035/t for neutral grades and heavier SN 900 landing around $1120/t. However, material loading between now and the month end could possibly land some $20-$50/t lower due to lower FOB levels creeping into the market prior to year-end.
Mainstream European material may also show $10-$25/t lower, with bright stock levied around $1140-$1165/t. U.S bright stock avails appear to have been loaded, with no further avails until 2014, hence prices will remain between $1120 and $1145/t. All basis CFR or CIF West Africa ports.
European Group I solvent neutrals will be delivered some $30 higher, between $1025-$1060/t, with bright stock from these sources at $1165-$1185/t, whilst U.S. lower quality bright stock may land at around $1120-$1145 pmt. All prices refer to levels CFR or CIF WAFR ports.
Group II/III
European Group II levels are maintained at higher levels due to crude and feedstock increases, with sellers endeavoring to raise imported numbers. Prices are subject to re-offer for many quotes being touted around, with suppliers not wanting to undersell during December, making it extremely difficult to hike prices if this has to be the case in January.
Offered levels are slightly higher than last week with light vis material between $1070/t and $1095/t for the light grade 150N, along with higher viscosity 500N between $1125-$1180/t.
The scare of Group II oversupply in Middle East markets appears to have subsided with some receivers advised of price increases w.e.f. Dec. 1. This may be a reaction to firmer crude and feedstock levels with producers taking every opportunity to raise prices. Suppliers into these regions are quoting firmer freights along with increasing production costs. Some suppliers firmly stated that they will be looking for larger increases for these grades before January.
Prices for material delivered at this time are maintained, but with offers on the table from Far East and now U.S. producers looking to breach this market, are now $25-$30/t higher than last weeks. Whether these stick is another matter, but the incentive is now firmly in place for all sellers to up by some $10/t while awaiting confirmation that levels might move even higher. Light vis grades are $1030-$1045/t and heavy Group II 500N and 600N are between $1120-$1145/t.
With demand dipping, European Group III prices are being maintained throughout December, but many suppliers are commenting that they have to find ways to increase levels starting in January. All producers of these grades are hurting from a prolonged period of low prices caused not least by a perceived oversupply. The raft of material predicted to flood the European markets has not come about, although there are more avails now than two years ago. With sellers opting to maintain levels during December, prices are at 910/t for the 4 cSt material, and 920/t for 6 cSt. All prices are on basis of ex tank sales from within Antwerp-Rotterdam-Amsterdam.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly atpumacrown@email.com.
