Some base oil prices in European, Middle Eastern and African markets have started to rise by up to 15 percent after crude and feedstock levels moved to new recent highs.
Dated deliveries of Brent crude levels for March front month vaulted to $70.15 per barrel in late Monday trading in London. West Texas Intermediate crude also moved to a new recent high of $64.70/bbl for February settlement. ICE LS Gas Oil moved to $621 per metric ton for February front month, possibly due to low temperatures in Europe influencing demand.
European API Group I export prices for FOB sales are continually escalating in offers, with mostly short-term validities. Sellers are playing it safe, with re-offers for the same cargo occurring within a matter of days rather than weeks. Light solvent neutrals SN100 and SN150 have moved up by $20/t-$30/t, to $725/t-$760/t. Heavier neutrals SN500 and SN600 have also increased, to $795/t-$825/t in offers. In response to healthy demand, bright stock is lifted by $30/t across the range to offers of $895/t-$925/t.
Yet with feedstock levels moving upwards, increased pressure to raise prices further is almost inevitable, most sellers noted. Many buyers have moved quickly on offers in anticipation.
The above levels pertain to large, cargo-sized parcels of Group I base oils offered FOB ex mainland European supply points.
Group I local prices have also started to rise on the back of levels for replenishment stock, which will be purchased ex refinery or from resellers at higher numbers.
Local prices are being fixed on either a weekly basis, or index-linked against published prices. Sellers in Europe indicated over the last few days that they have already raised FCA and delivered prices by 20/t-30/t (U.S. $25/t-$37/t), and will constantly review these levels against replacement stocks that are continuously being made available from European supply hubs.
Differentials between higher-priced FCA sales and spot export levels are maintained at 65/t-80/t, as both sets of prices have moved forwards by the same relative amounts.
Whether in response to a number of source increases announced last week by almost all producers of Group II imports, or as a result of increases being applied to Group I base oils, Group II prices have started to move sharply upwards. Some blenders confirmed that levels moved on Jan. 15, and are now under constant review to keep apace with producer increases and other market factors. Most Group II producers have announced increases of around $30/t-$50/t across all viscosities.
Yet the quantum of increases already applied within European markets is not simple to establish, since different customers buying these grades have varying terms and conditions in their sale contracts.
Prices delivered into European hubs are $710/t-$740/t for light vis grades, with heavier 500 neutral and 600N at $865/t-$885/t. These prices refer to cargoes into Antwerp-Rotterdam-Amsterdam on a CIF basis. FCA or locally delivered prices from distributors are pushed higher to reflect imported numbers and increased costs, to between 810/t and 850/t in respect of light vis oils, with higher vis grades between 880/t and 920/t.
Group III selling prices were hiked from previously low levels and sellers are trying to establish new tariffs.
Local distributors have applied significant increases to Group III sale prices, perhaps on the basis that future replenishment cargoes will be pitched that much higher in terms of delivered prices, which will ultimately have to be passed on to end-users.
Notional imported prices are $810/t-$840/t CIF in respect of 4 centiStoke and 6 cSt grades landed into northwestern Europe, with local euro-based FCA sales having to rise by 20/t-30/t to 735/t-760/t FCA northwestern Europe. Grades carrying full European approvals on basis FCA Antwerp-Rotterdam-Amsterdam will be priced higher, at 825/t-855/t in respect of 4 cSt and 6 cSt grades, with 8 cSt material at 795/t-820/t.
The latter prices refer to FCA or truck-delivered quantities of Group III base oils, and do not apply to material delivered in bulk cargoes to large users such as major blenders or additive manufacturers, where prices are expected to be proportionately lower.
Baltic and Black Sea
Baltic sales reports include a large number of cargo movements which would have been completed commercially prior to talks of prices having to increase. A number of identified cargoes are coming out of the Baltic for Antwerp-Rotterdam-Amsterdam and the U.K., perhaps not taking the full effect of increases evident in current offers.
There are also reports of some unusual cargoes booked for destinations not previously considered economically feasible for Baltic suppliers, such as the United Arab Emirates, India and North Africa. One large cargo is loading out of a southern Baltic port, presumably taking heavy vis material such as bright stock to the west coast of India. The assumption from multiple sources is that these parcels were negotiated based on existing stock in tank, prior to price adjustments.
Current FOB levels moved upwards again, to $25/t-$50/t depending on grade and specification, with SN150 at $710/t-$725/t and SN500 between $765/t and $780/t. Indication prices for SN900 are $800/t-$840/t, with bright stock of varying specifications and quality between $875/t and $910/t.
Black Sea base oil trade appears to have been reignited after the seasonal break, with reports of Mediterranean Group I flowing into eastern Turkish ports, whilst large parcels of Russian Group I exports have been loading out of Kavkaz, Russia, for U.A.E. and Singapore. Two such cargoes, of around 12,000 tons each, have been booked to load within three weeks of each other on a ship-to-ship basis, showing the increased capability of the operation now in place to accommodate these movements.
Greek sources confirmed almost 10,000 tons of Group I material arriving into Derince and Gebze, despite the indication that Turkish importers might be confined to locally sourced base oils as a result of poor exchange rates. These imports are assessed higher, at $765/t-$785/t for the light neutrals and $845/t-$860/t CIF for SN600. These were likely fixed in December, before increases began ramping up.
Middle East Gulf
The Middle East Gulf, and U.A.E. in particular, reported large imported quantities of Group I arriving from multi-sourced locations such as the U.S. Gulf, U.S. East Coast, Baltic, Black Sea and Mediterranean. Many have options to discharge into the west coast of India or a secondary destination.
Sources in U.A.E. confirmed that they are concerned about sourcing Iranian base stocks, should the U.S. impose fresh sanctions.
Confirmation has been received that indication prices for the U.S. Gulf-sourced light and heavy neutrals offered are $785/t-$845/t CIF, with quantities of bright stock at $965/t-$985/t.
However, Iranian SN500 is still available, although in smaller quantities than seen some months back, perhaps due to stockpiling by local producers ahead of what may become a rather stressful period. Producers have not been communicating current prices, but based on local U.A.E. sources, FOB numbers are $810/t-$825/t.
Group III is the prominent grade coming out of the Middle East Gulf, with cargoes from all locations identified this week. Parcels for Europe and U.S. are being arranged to load out of Al Ruwais, whilst an extremely large quantity of some 30,000 tons is to load ex Ras Laffan for discharge into Hamburg, Germany, for Shell, one of the partners in this enterprise.
Further inquiries are being made to establish whether cargoes from Al Ruwais are being sold on an FOB basis to third parties.
Netback FOB prices are again adjusted upwards due to feed costs rising from the refineries involved. Group III grades ex Al Ruwais are currently assessed at $775/t-$795/t FOB for 4 cSt and 6 cSt grades. Approved base oils out of Sitra, Bahrain, will netback higher, producing relatively higher contribution levels and FOB indications of $745/t-$765/t. FOB assessments are not available for Qatar-sourced, gas-to-liquids-derived base oils.
There are a number of shipping reports outlining inquiries for material to be loaded out of Yanbu, some of which may include the new Group II grades. However without official confirmation, the assumption is that availability of these grades remains negative.
Receivers of Group II cargoes have confirmed that they were offering and delivering small quantities of these grades to Iranian blenders, who may have been trying to align with Far East suppliers. This practice may have to be put on hold for the moment due to ongoing political problems.
Prices have been raised across the board to around $765/t in respect of 100N and 150N, with 500N and 600N between $895/t and $920/t CIF Middle East Gulf. Prices in respect of local U.A.E. sales of Group II base oils on FCA or delivered basis are up too, to $875/t-$890/t in respect of 100N/150N/ 220N, with 500N/600N remaining between $975/t and $1015/t.
South African receivers have confirmed another cargo of Group I from northwestern Europe and the U.K. Some 9,000 tons will arrive into Durban in late January or early February. Prices are not disclosed, since it is believed these cargoes are intra-affiliate and will be priced accordingly.
With two cargoes totaling around 25,000 tons from the U.S. Gulf Coast to Nigeria, this market is starting to move again. Many receivers are afraid that they may have missed the boat in terms of prices starting to rise and they may now be faced with landing material into Apapa and Onne at what they believe will be inflated prices, which may make the base oils uncompetitive in what is a relatively conservative market.
There is another enquiry for Baltic supplies to be loaded in January, but offers received so far have been branded as high, and cannot be entertained. What is strange is that a great deal of Group I has been loaded out of the Baltic for destinations not normally associated with this source, whilst West Africa receivers who were dependent on this supply source until recently did nothing, or at least very little, to purchase material ex Baltic during December.
Some traders have elected to take positions to purchase cargoes on the basis that prices have only one way to move at this time, and that sooner or later buyers will have to bite the bullet.
Offered numbers are $855/t-$880/t in respect of SN150, with SN500 between $895/t and $925/t and bright stock at $1025/t-$1060/t. These levels are in respect of CIF/CFR offers for material delivered ex Baltic, which at the moment have been turned down by buyers and receivers in Lagos.
Russian SN900 is currently indicated at $985/t.
The prices above refer to quantities of Group I base oils delivered CIF/CFR Apapa, Lagos, in minimum total parcel sizes of 5,000 tons.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly firstname.lastname@example.org.