Base oil markets have entered the summer recess period, with demand tailing off, inquiries at a seasonal low and no real impetus for prices to rise or fall. More normal activity may not resume until the end of August or early September.
Crude oil and feedstock values rose the past week, with dated deliveries of Brent crude rising around $2 per barrel to $73.90/bbl for September front month. West Texas Intermediate crude climbed to $68.75/bbl, also for September settlement. The outlook is very uncertain, though, as new supplies are coming out of Libya and Nigeria while Saudi Arabia announced it will restrain production during August. There are so many unknown variables such as ongoing diplomatic rows with Russia and Iran that forecasting the future is a dubious undertaking.
ICE LS gas oil gained $20 during the week and now is being quoted at $651 per metric ton still for August front month settlement.
This report received news this week that the INSCX exchange that opened its doors to base oils trading five years ago has been totally revamped to make the platform more meaningful. Organizers are attempting to introduce real-time pricing and say they now are also able to offer terms and conditions that are competitive with traditional banks. Further details about the United Kingdom-based exchange are available on request.
Export prices for API Group I oils in Europe are unchanged from last week, with little activity other than a smattering of inter-affiliate shipments. Third party trader business is at a low due to receivers in deep-sea markets slowing down for the summer months. There is no real pressure on buyers to act at this stage, and some say they expect prices to weaken in coming weeks due to low demand and high inventories stocks. As a result, sellers may be more flexible.
With little data to go by, prices are maintained between $785/t and $810/t for light solvent neutrals, $885/t-$925/t for heavy solvent neutrals and $945/t-$965/t for bright stock. These prices refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points.
Sales of Group I base oils within Europe have dwindled for resellers and major suppliers. Contracted pick-up and delivered quantities continue to move, but most sellers are resigned to the fact that trade will not pick up again until the end of August.
Prices are reported as static, and with requirements low, buyers appear content to roll over prices from one month to the next. The differential between local prices and exports remains unaltered at 50/t-75/t.
Group II prices in Europe are steady. Both buyers and sellers appear satisfied to let summer pass with prices remaining as they are. Some buyers said conditions can then be reassessed after the recess. FCA and delivered prices for light-viscosity grades from 70 neutral through 220N are $875/t-$920/t (745/t-785), and 500N and 600N are at $955/t-$975/t (815/t-820).
Some buyers pointed out that they are paying less than those values, but it must be stressed that these prices refer to truck- and small barge-delivered volumes.
Group III base oils are also on summer break, described as stable with no news of pricing changes throughout Europe. Following last week's slight upward movement, FCA prices remain unaltered this week at 775/t-790/t for 4 centiStoke grades, 795/t-815/t for 6 cSt and 795/t-805/t for 8 cSt. These prices apply to Group III base oils with partial slates of finished lubricant approvals.
Group III oils with full slates of ACEA and European OEM approvals are also maintained at 805/t-830/t for 4 cSt, 825/t-850/t for 6 cSt and 830/t-855/t for 8 cSt, all on an FCA basis at Antwerp-Rotterdam-Amsterdam.
These prices are based on small ex-rack or truck-delivered lots and do not reflect material delivered in bulk cargoes to larger users such as major blenders or additive manufacturers, which may be considerably lower.
Baltic and Black Seas
Activity outgoing from the Baltic slowed this week with only a couple of short-sea trade cargoes finding their way into Antwerp-Rotterdam-Amsterdam. Sellers acknowledge that trade will slow to just contracted barrels going into traders' and resellers' storage in Antwerp-Rotterdam-Amsterdam and the U.K. Previous reports of large cargoes being worked for West Africa appear to have either been misheard or these negotiations are still ongoing, although most suppliers deny any input to Nigerian inquiries.
Prices are left unchanged this week with FOB levels for SN150 at $730/t-$765/t, SN500 at $830/t-$850/t, SN900 at $855/t-$870/t and different specs of bright stock at $825/t-$895/t, depending on quality, source and loadport.
Black Sea markets are extremely quiet with few reports of any new trades being organized. Sources said large cargoes are still being worked ex STS Kavkaz, Russia, but precise details remain elusive on these parcels.
Mediterranean material is reported slow going into Turkish ports such as Gebze and Derince, although there are Greek and Italian sources making offers for material to arrive during the first half of August. Prices are unchanged at $785/t-$810/t for light neutrals and $880/t-$910/t for SN500 and SN600, basis CIF.
There appears to be competition building between suppliers of Group III base stocks going into Turkey as Mediterranean sources supplied a number of parcels and Russian export barrels of Group III base oils are also going into this market. Another source may be the United Arab Emirates where a parcel is being offered delivered into the west coast of Turkey.
Red Sea may be the one area, other than the U.A.E., where base oil trading continues at pace. A number of cargoes are being planned and loaded out of Yanbu'al Bahr and sometimes Jeddah, Saudi Arabia, predominantly for receivers on the West Coast of India. One smaller parcel has been noted moving north through Suez for receivers in Italy. This small parcel may be indication that Group II is being offered ex Yanbu into mainland Europe. This movement follows another Suez transit ex Yanbu, which was a cargo of bright stock going into Egypt.
With suppliers in Europe and the United States running down during July and August, Middle East Gulf imports of Group I appears to have slowed to only one large parcel of Mediterranean material is programmed to discharge into the U.A.E. in the next couple weeks. Prices are still difficult to ascertain since there are still implied availabilities coming out of Iran. These latter cargoes have their own price agenda that is more aligned to CIF delivered numbers going into India, which have to compete against both local supplies and other alternative imports. Premium Iranian SN500 continues to be indicated at $825/t-$840/t delivered into Sharjah ports.
There are rumors around the markets which could mean a return to exports for Iraqi produced base oils. There has been talk of material being made available ex Basra or nearby, but the grades and source of this phantom product - whether from Daura or perhaps Basra refinery - remains a mystery.
In last weeks column, it was implied that production from Al Ruwais, U.A.E., could reach 80,000 tons per month. This stat is incorrect as maximum production from Adnocs plant there is 50,000 tons per month. It was also inferred that producers from this source could afford to elect the most appealing markets. This is not the case since Adnoc, is set to become a global supplier of Group III base oils, delivering to and servicing a large number and variety of markets around the world.
Notional FOB levels for partially approved Group III base oils loading out of Al Ruwais and Sitra Bahrain (marketed by Bapco) are unchanged at $830/t-$860/t, basis FOB. Fully approved oils marketed by Neste from Sitra are estimated to netback higher at between $865/t-$895/t. These numbers refer to FOB levels established on a netback basis using published shipping freight rates, and taking into account advised local selling prices, plus notifications of bulk CIF/CFR cargo prices from various sources.
The rumors attached to supplies of Group II base stocks from Yanbu making their way into the European market appear to have been confirmed, but bound for Italy rather than Turkey, as was first indicated. No pricing has been possible to assess at this time.
Prices for Group II base stocks FCA, truck or flexi-tank delivered from U.A.E. sellers remain unchanged with 100N, 150N and 220N at $1,035/t-$1,070/t, and 500N and 600N between $1,130/t-$1,175/t.
The West African base oil scene appears to be tracking the rest of the northern hemisphere and taking a break from importing further large shipments. Sources based in Lagos said they expect prices to face downward pressure over the summer months due to increased availability from European and U.S. suppliers. It may be true that stocks of Group I are increasing in both these sources, but not to the extent that some parties have imagined.
There have been a few bids from receivers in Nigeria, these being made into suppliers in the Baltic and to other traders, but some of the delivered numbers have been exceptionally low and are not being entertained at this time.
Prices for Group I oils landing into Nigeria are deemed unchanged this week, with light solvent neutrals such as SN150 or SN180 assessed at $855/t-$880/t. SN500 and SN600 at $955/t-$975/t and bright stock being offered at $975/t-$995/t. SN900 ex Baltic is indicated at around $935/t.
These prices pertain to large parcels in excess of 5,000 tons of Group I base oils delivered CFR or CIF 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 email@example.com.