The EMEA base oil markets are largely closing down for around 20 days due to the main mid-week holidays, with some leaving this Friday and returning around Jan. 6.
This planned exodus throughout Europe, the Middle East and Africa may mean that not much new business will be decided before New Years, although a number of export cargoes are still loading the next few days, taking stocks out of storage conveniently for year-end inventories.
Crude oil markets are trading slightly weaker following five days of relative stability. Dated Brent shed around $1 per barrel to around $108.50 for front month settlement, while WTI slightly lowered to $97 per barrel, maintaining the approximately $12 crack. ICE gas oil had a steady week, gravitating down some $10 from last week to around $923 per metric ton.
European Group I base oil prices have remained weak to stable, almost without any real movement. Some sellers have offered discounts to move specific parcels out of storage prior to year end, but market prices have remained where they have been for around the last month. Levels are almost as last weeks with light solvent neutral grades between $935/t and $950/t, with heavy neutrals around $965-$975/t. Bright stock offers have been pitched at $1110-$1135/t but with few takers. There are rumors that certain deals have been done for parcels of bright stock specifically going to West Africa which have been discounted by some $40-$50/t from the range mentioned. These appear to be one-off sales which must be loaded and out of tank by Dec. 31.
Prices refer to cargo-sized parcels of Group I base oils offered or loaded ex mainstream European or North African terminals where availability allows.
Local or domestic sales of Group I base oils are decreasing by the day, with most lubricant manufacturers in Europe now fully covered for the remaining part of December. Many premises are closing down for the holiday period, with skeleton staff maintaining plants the next two weeks. With few deliveries planned, most terminals are quiet with trucks delivering the last contract volumes this week. Group I products delivered in trucks, barges or railcars are pitched 60-75/t higher than export numbers.
Baltic and Black Seas
Baltic sellers have gone into limbo with few enquiries and even fewer offers. There have been a few enquiries for Russian and Belarus material loading in the new year, but sellers appear to be keeping their powder dry, saying they dont have enough information on their stock positions yet to make firm offers for January or February loading.
Prices have remained under buyer pressure, but with a break in business looming, sellers may use this time to take stock of prices and may look for higher numbers in the new year. Levels for deals and cargoes which are being loaded 2H December and early January are left unchanged at $850-$860/t for SN 150 and SN 500, along with tongue-in-cheek offers around $880-$990/t. SN 900 has been offered in small quantities in flexies at around $975 FOB, but larger quantities have been heard concluded at around $935/t FOB equivalent.
With only small parcels moving around the Black Sea, base oil trade has been exceptionally slow the last few months. Sellers of Uzbek grades report no business into Turkey. One small parcel of Spanish spindle going into Gebze appears to have been the total of base oil trades this week. The large cargo loading out of Theodosia appears to be either loaded or imminent, but with receivers in both west coast India and United Arab Emirates still to confirm deals, this cargo may sail before all sales finalize. The levels for this cargo have not been disclosed, but suggestions are that SN 500 and SN 150 was sold around $820-$825/t FOB.
Middle East
Near Middle East reports few new base oils trades, with the new Egyptian General Petroleum Corporation bright stock tender not forthcoming until early 2014, market sources say. Yanbu and Jeddah loadings continue with one cargo around 4,000 tons touted for Singapore. Other destinations are U.A.E. and Oman as usual.
Middle East Gulf will possibly be the only area with some action over the next few weeks, although the almost-global holiday period will certainly have some effects on trade. Group I markets are almost saturated and whilst healthy demand continues, no new business for extra Group I production is forthcoming. Hence the market may be reaching a point at which it cannot absorb further Group I material.
Iranian material ex BIK has been offered to India and receivers in Vietnam and China, but responses have not been confirmed. Prices remain under pressure since Indian buyers stated this week that for them to consider Iranian imports, the material will have to compete against local production and also offers of Russian exports from Black Sea sources. This may mean that prices have to be pared back by $10-$20/t to around $900-$910/t basis FOB.
Standard production of Group I base oils in Middle East Gulf locations is maintained around $990-$1025/t in respect of the range of solvent neutrals. Bright stock, whether imported or locally produced, is assessed at $1100-$1125/t basis CIF Middle East Gulf ports.
Africa
East African and South African buyers appear to have vanished this past week. No news has been received from blenders, many of whom closed offices and were running plants on a low scale basis over the past week due to staff taking leave, perhaps reflecting the scale of events going on within South Africa.
West Africa continues on the quest to import what may be record quantities of base oil. Estimates so far indicate that some 54,000 tons of Group I base oils found its way into the region in the last four weeks. With further cargoes on the water and others being loaded out of the Baltic, U.S. and Europe, January could see a further influx of material into ports such as Apapa in Nigeria.
Prices remain competitive, with numbers falling in line with lower FOB levels at source. Levels for the range of solvent neutrals, mainly heavier products such as SN 500 and SN 600 arriving into these shores, is now between $985/t and $1045/t depending on source and specification. SN 900 has been quoted in one cargo at around $1035/t basis delivered CIF Nigerian ports, but prices depend on quantity loaded and whether Baltic sourced or blended ex mainland Europe, with some prices as low as $995/t. With many variations in the market, not all SN 900 grades carry the same quality or specification.
Group II/III
Group II prices are maintained with no reported moves. As with Group I s, business is slowing almost to a halt, and with European demand still relatively healthy, the market is awaiting 2Q 2014 when the additional production from U.S. Gulf Coast sources hits the European supply scene.
At the moment prices for mainstay suppliers grades — i.e. those carrying full industry approvals — are unchanged, but show signs of softening. Some comment that numbers weakened the past month due to lower demand kicking into European base oils sales across the board. Some other importers servicing the smaller end of the market with limited approvals appear to be selling at $20-$30/t less than major players.
Light vis grades are between $1065/t and $1090/t for 150N grades, with high vis 500N and 600N grades between $1125/t and $1185/t.
Middle East Gulf Group II business is competitive, with a number of sellers trying to push sales both for January and February imports from Far East sources. January prices remain volatile with some offering discounted deals for volume offtake and contracted sales.
The market remains firmly in the hands of buyers with prices quoted and offered at the same levels as last week, but with more than one party commenting that prices must fall if producers want to offer all material, which appears to be growing for February and March.
At the moment prices are intact, but with buying confidence rising, review and re-adjustments may be forthcoming for this segment.
Numbers are $1030-$1045/t for light viscosity grades, with heavy vis Group II base oils between $1120-$1145/t basis CIF Middle East Gulf ports.
European Group III selling and buying has almost come to a standstill as most buyers and blenders have stocks to see them through New Years. As with Group I, many plants will be operating on a lights on only basis the next few weeks, with new production of finished lubricants not re-starting until the second week of January.
With few parameters to gauge this market, prices are unchanged, reported at 910/t for 4 cSt with 6 cSt grades at 920/t basis ex tank 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 at pumacrown@email.com.
