European, Middle Eastern and African base oil markets are going through a period never before experienced, with product exceptionally short in all markets with little or no possibility for short or medium term relief from the current situation.
Due to the lack of sufficient feedstocks to produce base oils, the market is facing a totally new set of problems in accessing raw materials to produce finished lubricants. Blenders and lubricant manufacturers across the regions are facing logistical problems involving supplies of base oils.
The alarm bells have only started to ring, with some blenders unable to meet contractual commitments to end-users of finished lubricants, and others moving to allocation procedures where supplies are being limited to basic requirements.
This situation came about due to the refinery cutbacks that were initiated last year in response to the lack of demand for transportation fuels. This in turn has limited the quantities of feedstocks available to produce base oils and waxes.
Prices are moving at an incredible rate, reflecting demand versus availability in all sectors of the base oils market, and unfortunately, because this report is only being made available every two weeks, this is becoming ever increasingly difficult to reflect in the differences in numbers.
Crude prices remained in the same ballpark as last month, at least bringing an edge of stability to external factors affecting base oil prices. Dated deliveries of Brent crude remains around $63.70 per barrel, for June front month. West Texas Intermediate crude also maintains values at $60.40 per barrel, for May front month settlement. ICE LS Gas Oil records at a price at $505 per metric ton weaker than last reported, by some $50/t.
Prices were obtained from late London ICE trading on April 5.
European Group I FOB export prices surged since last reported, with offers for some grades in excess of $2,000/t. Buyers continue to struggle to find any material to fill requirements. Some receivers send out signals of desperation, trying almost anywhere to source pockets of available material that can meet needs.
Prices firmed again, with increases of more than $250/t-$400/t. Indication numbers for quantities of bright stock breached $2,000/t, although few deals concluded at these rates. SN150 prices have been seen at $1,350/t-$1,425/t, with SN500 raised to $1,475/t-$1,625/t. Bright stock saw new highs at levels of $1,850/t-$2,100/t. However, it should be noted that there are no availabilities for any of these grades around the markets for spot trades.
Bulk API Group I export prices refer to cargo sized (minimum 2,000 tons) parcels of Group I base oils, FOB from mainland European supply points, always subject to availability.
Rapidly moving export prices ultimately affected domestic or regional prices throughout Europe, since these local prices lagged behind export levels up to some three weeks ago. Things changed, with this market playing catch up to exports.
Domestic Group I prices in Europe have also moved skywards with increases of up to $400/t-$500/t, with the option of spot availability missing from the market. Buyers are susceptible to index linked prices which are either lagging behind realistic prices, or are ahead of actual numbers being offered in the local markets. These prices are open to large fluctuations and are now being questioned by many buyers in the European scene.
The differential between export and domestic pricing has changed with export levels moving sharply ahead and domestic prices taking some time to adjust. Export levels have risen faster, therefore the differential is assessed at €50/t-€85/t, with export levels remaining the higher price.
Group II prices moved higher, with availability becoming extremely tight. Prices are hiked, with levels moving upwards to $1,425/t-$1,500/t (€1,205/t-€1,270) for the three lighter vis grades – 100N, 150N and 220N – with higher 600N vis grade at $1,465/t-$1,530/t (€1,240/t-€1,295).
Prices are for a wide range of Group II base oils, including European, and U.S. fully approved grades, but also unapproved or partly-approved grades from Middle East, Far East and U.S.
European Group III markets are becoming strained, with very little material entering the market that has not been pre-sold to buyers always looking for extra product. Even with large replenishment cargoes from the Middle East Gulf and Malaysia covering sales from hubs, these supplies will not be enough to cover demand requirements through the next few months. Prices have remained in “sane territory” so far, but sellers are looking to raise prices again, with levels increasing to the highest seen for all time in the Group III market. Producers of these grades are torn between selling into alternative markets and supporting distributors in regions that are yielding lower returns.
Levels are now assessed at price levels of €1,280/t-€1,350/t for the range of partly-approved Group III base oils. Prices are placed at €1,290/t-€1,350/t for the 6 centiStoke and 8 cSt grades, with 4 cSt grades at €1,280/t-€1,400/t. Prices are for FCA supplies from Antwerp-Rotterdam-Amsterdam hubs.
Group III base oils holding full European OEM approvals are posted higher, with prices at €1,325/t-€1,375/t for 4 cSt base oils, with 6 cSt and 8 cSt grades at €1,395/t-€1,445/t.
Baltic trading shows some increasing movements. In sync with European trade, there does not appear to be a plethora of material available from Russian refineries. The information gathered is that Russian exports face the same problems as European refineries, those being that not enough feedstock is available to add to base oil production. This limited the exports of base oils from producers such as Gazprom and Rosneft, although there appears to still be export material coming out of the Lukoil facilities at Sveltly.
A number of cargoes are issuing from Kaliningrad for receivers in Antwerp-Rotterdam-Amsterdam and the United Kingdom.
Prices rose again, with levels moving upwards in line with mainstream European levels. FOB numbers are assessed with SN150 at $1,225/t-$1,295/t, and SN500 offered at $1,385/t-$1,425/t. Quantities of blended SN900, if at all available, are put at around $1,500/t.
Baltic and Black Seas
Black Sea news has one Mediterranean cargo of 3,500 tons loading out of Livorno for receivers in Izmit, but buyers are wary of the new prices asked for by sellers. Problems on exchange rates and the weakness of the Turkish lira against the U.S. dollar are of major concern.
Offers for Group I base oils from the Mediterranean have been established higher at around $1,445/t for SN150, with SN500 at around $1,550/t. Prices are for offers basis CIF Marmara ports.
The local prices for Group II and Group III base oils on basis of ex-tank Gebze, Turkey, are higher, these are now at €1,295/t-€1,345/t for the low vis Group II grades, with the higher vis 600N at €1,445/t-€1,500/t.
Group III grades are price advised by importers to distributors; hence, these levels were increased and assessed at €1,395/t-€1,445/t for partly-approved and fully-approved 4 centiStoke material, with 6 cSt and 8 cSt grades at €1,455/t-€1,475/t.
With the Middle East Gulf becoming the new base oil export hub, large Group III base oil cargoes out of Al Ruwais in United Arab Emirates and Sitra in Bahrain moved to Europe, China and Singapore.
Netbacks are indicated higher at $1,305/t-$1,410/t for 4 cSt, 6 cSt and 8 cSt partly-approved Group III base oils. The grades sold by Neste from Sitra in Bahrain, which carry full-approvals, will netback higher due to the pricing differential in export markets. These grades may netback at $1,365/t-$1,475/t for 4 cSt, 6 cSt, and 8 cSt Group III base oils.
Notional FOB prices on a netback basis are based on prices derived and informally assessed from regional selling levels, less marketing, handling and estimated freight costs.
Group II base oil prices FCA U.A.E. storage moved upwards in ranges at $1,320/t-$1,445/t for light vis grades 100N, 150N and 220N, with heavier 500N/600N grades at $1,335/t-$1,475/t.
The wide range takes account of various base oils supplied from different sources such as the United States, Far East and Red Sea, and which were delivered into U.A.E. in both bulk and in flexies.
West African prices took another step upwards, with offers for Group I grades going into Nigeria at their highest ever seen. Whether the local markets are able to absorb the increases for raw materials when it comes to buying finished lubes remains somewhat of a mystery.
CFR/CIF offer levels for Group I base oils landing into Apapa in Lagos during April were hiked further to reflect the latest FOB levels available in Europe and the U.S. Gulf Coast, and are now around $1,375/t for SN150, SN500 at $1,575/t, with higher specification SN900 with minimum viscosity index of 95, at around $1,650/t. Bright stock remains unavailable, but if small quantities of this grade were to exist, then prices would exceed $2,200/t.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at firstname.lastname@example.org.
Historic and current base oil pricing data are available for purchase in Excel format.