EMEA Base Oil Price Report

The Europe, Middle East and Africa regions have seen base oil trade pick up in some areas, whilst other parts reported mundane activity with few new deals and transactions. The Baltic region appears to have been replenished with more Russian export API Group I material flowing from that hub than seen for several weeks previously. Middle East Group III supplies may be affected by a turnaround or at least significant maintenance work at Adnocs facility at Al Ruwais, U.A.E., with fewer cargo movements being announced out of that source.

The overall sentiment throughout the markets remains one where prices are firming, with renewed pressure from crude and feedstock gains which may ultimately be converted into higher numbers for of all types of base oil. Producers and sellers are keen to maintain the upward impetus of the last few weeks, and are seizing every reason possible to keep the momentum going.

This week has seen rising crude values as a result of geopolitical difficulties around the globe, not least of which are the current actions and reactions to events in Syria, and the escalating tensions between Russia and its allies, and the Western alliance. This situation is having a de-stabilizing effect in the Middle East and is contributing to mounting pressure on Iran.

Dated deliveries of Brent crude have moved off last week's levels to record at around $72.40 per barrel in respect of June front month. West Texas Intermediate crude has also moved forwards by some $4 against last week's values to around $67.25 but still for May settlement. ICE LS Gas Oil has also assumed higher levels and has quickly moved upwards by some $25 per metric ton this week to post at around $641/t, again for May front month. Prices reflect late London trade on Monday, 16 April.

Europe

Even amidst the Syrian turmoil and the increases in crude and feedstock numbers, European Group I export prices are maintained this week as few deals show higher levels. Prices of the last couple of weeks are being repeated but with most suppliers and producers indicating that they are seeing supply and demand tighten and raw material costs swelling.

Light neutral prices remain between $820/t-$840/t, with heavier neutrals SN500/600 between $875/t-$895/t. Bright stock continues to be offered between $955/t-$1020/t, subject to loading location and discharge destination. These levels pertain to large cargo sized parcels of Group I base oils FOB ex mainland European supply points, where and when available.

Local or domestic markets for Group I supplies within Europe also remain unchanged this week, having been set around the turn of last month. Buyers seemed to accept those upward price moves, but may be steeling themselves against further increases. Availability appears to be easing this week with blenders and resellers saying that they are able to lay hands on almost all requirements with relative ease.

Light neutrals remain very tight, with few suppliers able to offer incremental supplies over and above contracted or arranged quantities, with the result that a number of blenders are still pursuing inquiries to use re-refined base oils or investigating their options for using Group II.

The differential between export and local sales prices is maintained this week, with prices remaining stable to firm, and is assessed between 40/t-65/t.

European Group II levels are also pegged as previously reported, with suppliers not having moved source prices as yet. While hoping to hold the premium between Group I and Group II grades, sellers are concentrating more on retaining and protecting market share, in light of the large increase in European Group II production due around a year from now.

Levels in respect of FCA sales are assessed between $920/t-$940/t (740/t-755) in respect of light vis grades, with heavier vis grades between $990/t-$1015/t (795/t-820). There may be variations, with larger buyers able to command more advantageous price levels.

Group III markets throughout mainland Europe are again reported as relatively stable but distributors and agents indicate that they are trying to push prices higher, prompting some buyers to counter that they have options when purchasing Group III and should one supplier try to move prices to unacceptable levels then it becomes simple to move to another provider.

Imported Group III prices are maintained between $910/t-$930/t CIF for the 4 centiStoke and 6 cSt grades discharging into Antwerp-Rotterdam-Amsterdam and northwestern Europe. Euro based FCA sales are around 865/t-880/t in respect of 4 cSt and 6 cSt grades for partly approved product. Fully approved ACEA and European OEM oils are between 895/t-920/t for those same grades, with 8 cSt material at around 880/t-895/t FCA Antwerp-Rotterdam-Amsterdam.

The latter prices are in respect of FCA, or truck delivered smaller lots being sold to local blenders, not for bulk cargoes going to large users.

Baltic and Black Sea

Baltic availability appears to have improved over the last couple of weeks with a number of short-sea trade cargoes loading during the first half of April for Scandinavia, Antwerp-Rotterdam-Amsterdam and the United Kingdom markets. There may be more parcels than normal coming out of the Baltic, perhaps playing catch-up due to the lack of material seen over the past few weeks. A large program cargo of some 13,000 tons, loaded out of this region in late March/early April, confirms one of the large inquiries which was on the table for Nigerian receivers, suggesting that selling prices were deemed acceptable for the Nigerian market.

The product being delivered into Nigeria and into Antwerp-Rotterdam-Amsterdam, yields unchanged FOB levels, with SN150 between $750/t-$785/t and SN500 between $800/t-$840/t. SN900 is estimated between $885/t-$920/t FOB with various grades of bright stock indicated between $955/t-$1000/t.

Black Sea region deep-sea exports are in the limelight again with two new STS cargoes from Kavkaz, Russia. One parcel is loading to go United Arab Emirates, whilst the other is discharging in Rotterdam, each around 6,000 tons. Prices are very difficult to track but the U.A.E. parcel is assumed to be landed into Hamriyah at around $820/t-$845/t CIF, suggesting STS numbers around just $740/t-$760/t, perhaps to encourage further deals.

Multiple Mediterranean supplies of Group I base oils are moving into various Turkish ports such as Gebze, Derince and Aliaga, with material even loading out of northwestern Europe for these destinations. Prices in respect of the Group I are index-linked and indicated to be around $875/t-$890/t for light neutrals, with SN600 and SN500 between $910/t-$935/t CIF. Fully approved Group III prices ex Mediterranean and part-approved ex northwestern Europe delivered into Gebze are indicated on a landed basis at around $945/t-$970/t CIF.

Middle East Gulf

Red Sea regions show a few new inquiries. Aqaba is back in the market for another supply of Group I grades which may be supplied ex an Atlantic/Mediterranean source, whilst Sudanese buyers are again in the market (and traditionally supplied by their local incumbent in the Red Sea). There are a number of shipping inquiries issued by suppliers out of Yanbu and Jeddah, Saudi Arabia, for Group II and Group I cargoes to move to the west coast of India and Sudan.

Iranian Group I availability is a rarity out of southern Iranian ports, with only RPO being exported at this time. With fewer Iranian cargoes, prices are not being disclosed on a week-by-week basis, and the lack of availability of these grades, particularly SN500, may be opening the door for Black Sea material to come into U.A.E. as a substitute. Another enquiry involves a large parcel of Group I base oils to load out of a Greek source in the Mediterranean for receivers in the west coast of India: The roughly 12,000 ton parcel may be large enough to benefit from freight economies of scale, and certainly can be seen as an indicator that no Iranian material appears to be forthcoming.

Group III exports from two Middle East Gulf sources continue in full flow, but with maintenance rumored to be taking place at Al Ruwais, avails out of that plant may be limited for the next few weeks. Sitra (Bahrain) and Ras Laffan (Qatar) cargoes are reported to be moving as normal, with Bapco-owned cargoes increasingly going into U.A.E.

Local U.A.E. sources point to intense competition for Group III cargoes; where one supplier moves out another rapidly takes their place. Group III prices moved upwards over the past few weeks, but appear to have stabilized for the moment. Numbers are indicated to be around $785/t-$800/t basis FOB in respect of 4 cSt and 6 cSt grades for part-approved Group III ex Sitra being marketed by Bapco or its distributors. Fully approved Neste barrels from the same location are deemed higher between $845/t-$870/t FOB. These nominal FOB levels are established on a netback basis using published shipping freight rates as well as landed prices from a variety of sources.

Group II base oils ex Yanbu are sowing confusion among some potential buyers due to the various prices heard around the market. West coast India delivered price levels apparently do not apply to U.A.E. or other Middle East Gulf delivered material, with some Indian entrepreneurs commenting that they could import into the west coast of India and then re-export into U.A.E. locations.

Local sales of Group II within the Middle East Gulf, mainly ex U.A.E. on an FCA or truck delivered basis, are assessed with prices for the light grades around $855/t-$940/t in respect of 100N/150N/ 220N, and with 500N/600N between $945/t-$1065/t. These prices are based on imported material sourced from U.S. and Far East producers and also new locally available material being sold ex rack or by truck.

Africa

West Africa reports contain the news that finally a cargo has been booked and loaded out of the Baltic, at the beginning of April. This is the first availability of such a large quantity for some months and may mark the start of more Russian base oils finding their way into West Africa markets, and Nigeria in particular. With the cargo from U.S. Gulf Coast a total of some 25,000-30,000 tons of Group I base oils will be arriving into Nigerias Apapa port in the next few weeks.

Meanwhile the Ghana tender requirement appears to have been loaded out of an Italian source, topped off with around 4,000-5,000 tons of extra material which may be bound for Guinea and Cote d' Ivoire. It was originally mooted that the Ghana cargo would be delivered on a stand-alone basis, but this has obviously been re-appraised in light of other requirements and the advantages of lower freight. Alternatively, some sources have suggested that the top-off quantities for this cargo are going to Nigerian receivers.

Current pricing in respect of Group I base oils going into Nigeria, taking into account the U.S. Gulf Coast loaded cargo and the more recent Baltic parcel, are indicated by local receiving sources in Apapa at around $885/t-$920/t in respect of SN150/180 or other light neutrals, coupled with SN500/600/700 at around $925/t-$955/t, with SN900 ex Baltic at around $975/t-$995/t. Bright stock with various specifications may land between $1025/t-$1095/t. These prices refer to large parcels of Group I base oils delivered into Apapa port, Nigeria.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.