EMEA Base Oil Price Report

Rising prices for base oils within the European, Middle Eastern and African regions appeared to slow their pace a little during the course of last week, although the underlying sentiment is still bullish with some grades and types of base oil showing strength, depending purely on demand. With crude and feedstocks remaining positive in pricing terms, this scenario may be set to continue into the summer period.

The supply/demand picture is still finely balanced, particularly for the Group I grades, with Group II material remaining relatively snug although imports from the U.S. and Far East continue to open up more and more possibilities. With the marketing groundwork taking place for the new European Group II production facility due to stream early next year, the shape of things to come is already forming. Group III markets are also picking up using both European production and Middle East Gulf and Russian exports.

Dated deliveries of Brent crude have reached recent highs oft around $75.20 per barrel for June front month. West Texas Intermediate crude has also rallied and pitches in at $68.70 per barrel, also for June settlement. ICE LS Gas Oil remains firm at around $659 per metric ton still for May front month settlement. Prices are from late London trade on Monday 30 April.

Europe

European API Group I export prices are largely maintained this week, at or near to previous levels, but with an undercurrent which suggests that prices may start to move upwards again should demand remain healthy and raw material costs keep rising. Producers comment that base oil levels have not caught up with recent feedstock increases and may yet have some way to go.

Light neutral prices remain between $845/t-$870/t along with heavier neutrals which have moved marginally higher at the top end of the range and are now between $895/t-$930/t. Bright stock is maintained between $970/t-$1050/t, reflecting the wide range of specs and locations from where this grade can be loaded. These levels pertain to large cargo sized parcels of Group I base oils FOB ex mainland European supply points, as available.

Local European Group I markets are seeing prices moving upwards from May 1. Increments of between 30/t-70/t reflect raw material cost increases which took place during April and are now being recouped by traders and resellers, who are assessing replacement stock costs and trying to gauge the extent of the new pricing. Buyers who expounded on being able to purchase Group II stocks at lower prices than available Group I material, have reversed their attitude on the news that Group II prices will continue to rise during May, taking account of source increments which have been announced by producers who form the rump of the importers into Europe.

The differential between export and local sales prices is adjusted to take account of the latest round of price increases, and is assessed between 50/t-80/t with export prices being lower.

Group II throughout Europe is also facing upward moves, with a number of importers announcing source increases to refinery gate prices which will ultimately gravitate through the market. Various increases are being levied at this stage, with import numbers rising by between $30/t-$60/t, but the general trend sees all sellers probably striving for the higher end of this pricing spectrum.

Levels in respect of FCA sales are assessed higher this week and are now between $955/t-$975/t (775/t-790) in respect of light vis grades, with heavier vis grades between $1010/t-$1040/t (820/t-845).

Group III markets throughout Europe are again buzzing with these base oils being offered around at very competitive levels, prompting buyers to evaluate them against Group II for applications that can utilise Group III grades.

Imported prices are raised this week to between $965/t-$985/t CIF for the 4 centiStoke and 6 cSt grades discharging into Antwerp-Rotterdam-Amsterdam and northwestern Europe. Euro based FCA sales are around 885/t-900/t in respect of 4 cSt and 6 cSt grades for partly approved product. Fully approved ACEA and European OEM oils are assessed between 910/t-940/t for the 4 cSt and 6 cSt grades with 8 cSt material at around 865/t-885/t FCA Antwerp-Rotterdam-Amsterdam.

The latter prices are in respect of FCA, or truck delivered smaller lots of Group III base oils, not material which is delivered in bulk cargoes to large users.

Baltic and Black Seas

Baltic trades have recorded a large cargo loading for West Africa which had been priced prior to the latest round of increases, which some say would have made the material uncompetitive against imports into that region from U.S. Gulf Coast sources. This is being argued by suppliers operating out of the Baltic, who maintain that other parcels are being assessed by traders and receivers in West Africa for supply during May and June. There are also reported cargoes moving down to Antwerp-Rotterdam-Amsterdam and the east coast of the United Kingdom, with contracted barrels being delivered into break-bulk storage in these regions for onward sales to those markets. Prices have moved upwards and continue to trend in that direction with Baltic numbers closely following mainstream pricing within Europe-or vice versa, some players suggest, with Baltic sellers calling the trend and mainland Europe responding.

FOB levels for Russian export main grades are again moved upwards with SN150 rising by around $10/t-$20/t to record between $805/t-$830/t and SN500 between $855/t-$885/t. Where available SN900 in larger bulk quantities is between $930/t-$955/t with various grades of bright stock indicated FCA between $940/t-$1030/t.

Black Sea regions report further suggestions of large cargoes of Russian heavy neutrals being organised on an STS basis out of Kavkaz, Russia, for loading during May and June. The usual destinations are being mooted with Rotterdam and United Arab Emirates or the west coast of India figuring among the principal possibilities. It is believed that prices in respect of this trade are highly competitive, with rumors that levels for SN500 have been quoted at around $795/t-$820/t STS Kavkaz, Russia.

Turkish importers continue to receive Group I cargoes into Gebze and Derince, and in addition Group III material ex Spanish Mediterranean is reported discharging into Gebze.

Prices in respect of Group I Mediterranean supplies are raised this week to around $895/t-$930/t for the light neutrals, with SN600/500 between $945/t-$970/t CIF. Fully approved Group III base stocks ex Mediterranean are assessed delivered into Gebze, Turkey, at around $965/t-$995/t CIF or the equivalent in euros.

Middle East Gulf

Red Sea trades include enquiries for large parcels of base oils to move out of Yanbu and Jeddah, Saudi Arabia, to the west coast of India and U.A.E., whilst the Aqaba supply of Group I material appears to have been fixed out of Livorno with loading during the last few days of some 3,500 tons.

Iranian Group I cargoes out of BB and Bandar-e Emam Khomeyni (BIK) have figured in shipping enquiries for second-half April, but no confirmation was received yet if these cargoes have actually been loaded. One of the parcels was for discharge at Mumbai whilst the other more local trade was for receivers in Hamriyah.

Group III exports from two Middle East Gulf sources (Al Ruwais and Sitra) are being lined up for trades into India and Far East, whilst the Sitra volumes are being sold into Hamriyah, probably for use as transformer oil feedstocks. To put these exports into context, almost 30,000 tons will move out of the two facilities between now and the middle of May.

Notional FOB prices are again adjusted upwards this week, mainly due to higher feedstock costs. Levels are assessed at around $825/t-$850/t basis FOB in respect of 4 cSt and 6 cSt grades in respect of partly approved Group III ex Adnoc in Al Ruwais and Bapco in Sitra. Neste 'Nexbase' branded base oils from the same Sitra refinery may carry a higher value, around $875/t-$900/t FOB. FOB levels are established on a netback basis using published shipping freight rates, and per landed prices from a variety of sources.

Yanbu barrels of Group I and Group II base stocks figure prominently in offers for India and other Middle East Gulf receivers. Whilst there is some competition between the Group II grades and Group III material, automotive lube blenders are backing the new Group II from Saudi Arabia. Many Middle East Gulf blending operations are considering these nearby supplies rather than face the extended sailing times and uncertain pricing moves which may apply to material brought from Far East.

Other established supplies of Group II base oils within Middle East Gulf, sourced out of U.S. or Far East and supplied ex U.A.E. on an FCA or truck delivered basis, are assessed with prices maintained this week: around $895/t-$965/t in respect of 100N/150N/ 220N, and with 500N/600N between $1045/t-$1100/t. These prices are based on imported material being sold ex rack or by truck.

Africa

North African trading is quiet this week with few reports of Mediterranean cargoes being loaded for any of the usual receivers in Morocco, Tunisia, Algeria and Egypt. A number of cargoes loaded out of Italian and Portuguese sources for these receivers during April, hence there may be a time gap before further Group I parcels are required.

West African markets are relatively quiet with only one large parcel ex Baltic being announced by receivers in Lagos this week. Further enquiries are being made for another two cargoes to be loaded out of U.S. Gulf Coast, although alternative destinations may be an option for around 20,000 tons of Group I to be available during May from these sources.

Buyers in Nigeria are complaining that the local resale market is unable to deal with the upswing in prices; it appears to be extremely difficult to raise finished lubricant prices to take account of both additive and base oil price increases. Nevertheless, the reality is that with crude and feedstock levels rising, base oils into this region will remain under pressure.

Pricing in respect of Group I base oils to be landed into Nigeria during May will be taking on higher delivered numbers due to rising FOB charges and also to freight rates becoming more expensive due to higher fuel costs. U.S. Gulf Coast prices for May will be higher than last month's cargoes by some $50/t-$60/t, as will material now being negotiated out of the Baltic. Levels now being indicated by sellers are around $908/t-$923/t in respect of light neutrals SN150/180, with SN500/600/700 being assessed at between $970/t-$998/t. Quantities of SN900 ex one Baltic source are being offered at $988/t and bright stock from different sources, and with a variety of specifications is offered between $1035/t-$1100/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.