The Europe, Middle East and Africa markets are mostly back to work after the holidays, but attitudes toward base oil appear to have changed little during players absences.
With some respite from weaker crude and feedstock prices, theres less pressure for trying to raise base oil prices, although some sellers are still trying. More than one European supplier is determined not to sell below cost. Some cargoes which were paid for prior to year-end are still being loaded. This may confuse the market since some of these parcels were sold very low to achieve inventory status.
Dated Brent has retreated to around $107 per barrel, down some $4 from last week. An inherent bounce in crude prices is reflected in West Texas Intermediate levels of around $94 per barrel, possibly due to some elements being overplayed. On the back of improved German employment figures and a possible Iraqi conflict between Sunni and Shiite factions, levels edged up, then retreated again late Tuesday. ICE gas oil and VGO levels have also fallen with gas oil to around $911 per metric ton for front month trade. However, Baltic and Black Sea base oil numbers are languishing around the mid-$800s.
API Group I numbers are almost unchanged, although many suppliers commented this week that the low points of the ranges are unacceptable to most. However these spreads are factual, since business has been transacted at these numbers.
Light solvent neutrals are still $930-$945/t, but heavier neutrals have moved up some $5/t at the lower end of the range. Prices are now $960-$970/t with some suppliers trying to push for $10-$15/t increases, particularly for these heavier grades. Bright stock is strangely falling to $1065-$1090/t, perhaps reflecting cargoes that were purchased before year-end and are loading now. A true picture should emerge this week.
Local European markets re-opened with a number of new enquiries for Group I, with some trying to buy Baltic material at low prices ex tank Antwerp-Rotterdam-Amsterdam. Sellers are resisting discounting however, since they feel that prices may start to move up over the next few weeks. Mainstream supplies from northwestern Europe and Mediterranean have all indicated 20-25/t increases, which many say are required to attain satisfactory realizations. If sufficient numbers of suppliers maintain this wave, then perhaps some spin-off will occur.
Domestic levels for truck and barge deliveries are therefore pitched at around 80-100/t higher on an ex tank basis versus export FOB.
Baltic and Black Seas
Baltic levels appear unchanged. Most with material are offering at pre-Christmas levels of around $850-$865/t in respect of the two main grades SN 150 and SN 500. Some sellers are stating that they have no inventory and that it may be late January or even early February before replenishment. Prices are likely to be higher, they suggest, but no offers for material, other than stocks in tank, have been received. SN 900 avails are scant, and February is identified as the earliest for large quantity avails.
Black Sea reports are that Turkish buyers are looking at the market to see if this is the time to buy. Some are suggesting that Uzbek levels may fall further, and that it is too soon to make assessments. Others say that they are actively looking for Russian SN 500 offers, since they arent expecting further falls. No offers have been reported, with indications expected to arrive later this week for importers consideration. From local Turkish comments received there have been a number of small enquiries for material delivered into Syria by road, but confirmation of quantities, grades, etc., are not yet forthcoming.
A requirement for bright stock to be delivered into a Syrian port has been rumored, but whilst there may well be requirements to fulfill, the problems of shipping into these ports should not be underestimated. Some Russian supplies of SN 150 and SN 500 have apparently been delivered from Black Sea sources, but again quantities and specifics regarding this trade are missing.
Middle East
Egyptian trade has taken further knocks the past few days with the uncertainty of military rule reappearing. Sources in Alexandria and Cairo insisted that any transition will make no difference to supplies of base oil and other petroleum products, and that payment systems and available funds may be improved by such a move. Egyptian General Petroleum Council imports of bright stock have been dogged by late payments or the lack of secured payments over the last year or so.
Red Sea trade has been quiet with no reported cargoes loading out of Saudi Arabian ports this week, although reports are still forthcoming.
Middle East Gulf regions report business as usual; including a spike in demand for both Group I and Group II base oils. United Arab Emirates traders comment that more Iranian material, predominantly SN 500, is coming on the market and that offers for relatively large quantities are being posted for FOB sales of around 3,000 – 4,000 tons of this grade. Prices are blurred, but in U.S. dollar equivalent it would appear that FOB numbers equate to around $890-$910/t, suggesting that re-exported barrels from U.A.E. could be made available at around $915-$920/t.
Two receivers in U.A.E can confirm having received indications from traders for Russian SN 500 and SN 150, at or just below $900/t. This material may have been loaded out of the Black Sea in December, and may be on the water now. Similar indicative offers have been made to Indian receivers for around the same arrival dates.
Bright stock from Far East supply points is being offered into U.A.E. at relatively high levels of around $1145/t, basis CIF, but no takers are rushing to buy this material, with rumors of U.S bright stock avails being offered much lower, at around $1085/t. Quality of the U.S material is not disclosed although it has been suggested that it may be lower in spec than local or other imported material.
The number of local blenders in U.A.E. continues to expand with more than 40 licenses being issued or held for blending of finished lubricants within this region. Other parts of the Middle East Gulf would have a similar number of operations, with many specializing in products such as transformer oils and greases.
Africa
South African reports are that a cargo of Group I base oils has arrived in Durban from sources in northwestern Europe or Baltic. The cargo quantity is still being verified. Landed price for SN 500, according to local sources, was around $1030/t CIF. Other imports of SN 500 ex U.A.E. in flexies have been confirmed arriving into Durban port, with delivered prices of this material to inland plants at around $1185/t. FOB levels are suggested at around $1095/t.
West Africa is receiving cargoes almost daily with the last of the material loaded before year-end still en route to Nigeria and Ghana. The Ghana cargo loaded out of the Mediterranean, with further material on the same vessel to be discharged into Lagos port. Prices for material arriving into Nigeria have not materially changed from previous reports with numbers as follows. Solvent neutrals are between $965-$1040/t, with European bright stock levels where loaded along with other Group I grades between $1145-$1175/t. SN 900 ex Baltic load ports have been confirmed at below $1000/t CFR for one parcel, with others ranging between $1010-$1035/t. All basis CIF or CFR depending on contract.
Group II/III
European Group II prices are maintained as per previous since with few trading days since end of December, no new price levels have been reported. Levels remain unaltered at $1065-$1090/t in respect of the range of light vis grades with heavier 500N and 600N between $1125 and $1185/t. The next few weeks will announce the commencement of production and the planned arrival of material from new production ex Pascagoula.
Group II within the Middle East Gulf regions have not changed for January although some receivers have mentioned that sellers in the Far East are trying to move prices upwards for February. This naturally is being met with firm resolve by receivers in the Gulf, and so battle commences. Further clarification is expected soon.
Prices are still $1030-$1045/t for the grades 150N and 220N, with heavy vis 500N and 600N between $1120-$1145/t, basis CIF U.A.E.
Early this week some Group III sellers had tried to move prices up for both usual grades, but buyers are countering by saying that they now have more choices and do not have to commit to one or two approved merchants. However it is too early to make price changes since buyers have not accepted new levels, and from what the market can tell, sellers are still delivering at existing levels. Therefore European Group III prices remain at 910/t in respect of the 4 cSt grades and 920/t for 6cSt material. 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.