Base oil markets throughout the European, Middle Eastern and African regions have almost gone into a form of limbo, with large API Group I export trades dwindling to almost zero, both on the enquiry front and the completion of cargo negotiations.
Very few spot deals are being completed, with many reported cargoes being majors inter-affiliate business, which has little effect on third-party export traffic. A lot of product is re-positioning between Far East, Europe and the United States. The European position is that most parcels covering all types of base oils are coming into the arena, rather than leaving.
Crude and feedstock rates saw minor positive vibes during the last few days, with dated deliveries of Brent crude moving upwards to $75.10 per barrel in respect of September front month, around $1.25 higher than last reported a week ago. West Texas Intermediate crude managed to break through resistance at $70 per barrel and now posts at $70.15, also for September front month. ICE LS Gas Oil moved in tandem with crude values and is quoted at $664 per metric ton for August front month settlement, $12/t higher than last week.
There are still major on-going discussions as to where crude prices will eventually land, and even which direction crude values will take. We are seeing a see-sawing effect from one week to another, relatively small changes being reactions to snippets of news and politicians' actions or inactions. The bottom line from a base oil viewpoint appears to be that producers are not in any hurry to start moving prices in either direction, perhaps waiting to assess the situation at the end of summer.
Group I export prices within Europe were tweaked with small changes to main grades. The market appears to be adopting a softer stance. Some sellers indicate they have lengthening stocks in tank, and would welcome a small boost to move inventory, making way for replacement stocks which will be forthcoming during August. However, there is little buying interest in most of these stockpiles at present, even with some sellers prepared to offer temporary discounted prices to encourage sales.
Prices are almost maintained as per last week, but with some adjustments to the ranges this week. Light solvent neutrals are now gauged between $780/t and $799/t, along with heavier grades SN500 and SN600 between $875/t and $910/t. Bright stock also moved lower to be quoted between $925/t and $950/t. Some sources maintained that further pressure to decrease prices will continue through August due to lack of buying interest, with buyers aware that there may be scope in waiting before committing to purchase quantities of Group I base stocks.
The above prices refer to large cargo sized parcels of Group I base oils FOB ex mainland European supply points, always subject to availability.
Local sales of Group I grades in the domestic market only reflect contract and previously arranged supplies from producers, resellers and traders. Few major purchases were recorded during the last couple of weeks, with many blending operations using the holiday period to perform routine maintenance to lines and storage.
Some but not all sellers will change prices slightly effective Aug. 1, with some sources commenting they would rather concede small adjustments at the beginning of August rather than be faced with possible larger discounting at the beginning of September. Prices are reported as coming off July levels by around 10/t-20/t, perhaps with further adjustments to be made at the end of August. Producers and sellers point out that fundamentals could change in favor of pressuring prices to move upwards, hence all options are kept open.
Due to relative softening in both sectors, the differential between local prices and export numbers remains unaltered between 50/t and 75/t.
European Group II reports are that prices are steady, with small concessions made in some cases to hold on to market share. As recently as one week ago, some sellers looked to move numbers higher particularly for the lighter vis grades, which in some cases were deemed too close to Group I price levels.
With few reports of any intended source increases or decreases, the market may be in for a period of relative stability. With similar sentiment to Group I base stocks, there may be a softening undercurrent running through some parts of the market.
FCA and delivered prices therefore remain stable at current levels, with light vis grades from 70N through 220N maintained between $875/t-$920/t (745/t-785), and heavier 500N and 600N grades ranging between $955/t and $975/t (815/t-820).
As per last week's comments, some buyers maintain that they are paying lower numbers, but these are yet to be substantiated.
Further large cargoes of Group III base oils were identified as offered into European fringe destinations such as Turkey, Romania and Bulgaria, whilst at the same time incumbent Russian supplies are maintained into these markets. Prices are stable, with no obvious signs of weakening levels for any of the grades produced or imported into European markets.
FCA prices remain unchanged this week, with levels maintained between 775/t and 790/t for the 4 centiStoke grades and with 6 cSt material around 795/t-815/t. Meanwhile, 8 cSt grades are between 795/t and 805/t. These prices are in respect of various supplies of partly approved Group III base oils. Group III base oils conforming to full ACEA and European OEM approvals are also maintained and remain between 805/t and 830/t in respect of the 4 centiStoke grades, with 6 cSt material around 825/t-850/t and 8 cSt grades at 830/t-855/t, all on the basis of sales FCA Antwerp-Rotterdam-Amsterdam.
There have been some reports of minor shortages for some of the approved grades, although sources say that any potential problems in this area appear to have been overcome, and there are ample supplies of all required grades. Prices are based on ex-rack or truck delivered smaller lots of Group III base oils, and do not reflect prices for material that is delivered in bulk cargoes to larger users such as major blenders or additive manufacturers. Prices in respect of those trades may be considerably lower than the levels listed above.
Baltic and Black Sea
The major pieces of Group I trade this week both emanated from the Baltic region, where one 10,000 ton cargo loaded out of a southern Baltic port, possibly taking a large quantity of bright stock from this source, whilst additionally loading Russian export grades SN150 and SN500 out of storage in Riga. The other 11,000 ton cargo loaded out of Ventspils, where larger quantities of Russian base oils can be loaded due to adequate draft facilities, the vessel first loading in Liepaja. These are the two large cargoes for Nigeria in the offing for some time, and which were identified in previous reports. Some parties suggest that special prices were applied to make these cargoes work. Some suggestions have been that FOB prices as low as $695/t and $765/t were paid for the two Russian export grades, SN150 and SN500, whilst the bright stock may have been as low as $810/t in respect of a relatively high quantity product. These levels are not confirmed and will only come to light after the cargoes arrive into Lagos and local agents declare CFR/CIF landed prices. On one cargo SN900 may have been loaded at around $785/t.
Notional FOB prices in respect of smaller trades into Antwerp-Rotterdam-Amsterdam are reckoned to fall into ranges between $725/t and $745/t in respect of SN150, and between $785/t and $820/t for quantities of SN500.
Black Sea reports contain information regarding supplies ex Kavkaz, Russia, being arranged for delivery into East Mediterranean receivers which as far as is know may be a first. No further disclosures have been released regarding large parcels for United Arab Emirates and the west coast of India, or for transshipment through Rotterdam.
The movement of Group I Mediterranean material is dull at the moment, but there are enquiries for other types of material to come into Turkey from northwestern Europe and Baltic. Some may consist of naphthenic base stocks used in these markets previously. Indication prices are maintained for the Mediterranean supplies of light Group I grades, with indications around $785/t-$810/t in respect of light neutrals, but with SN600 and SN500 now slightly lower between $850/t and $885/t CIF.
Red Sea shipping activity appears to be intensifying with cargoes to the west coast of India and Egypt under evaluation, whilst the routine Group I supplies into Oman and U.A.E. are also planned for August - totaling almost 25,000 tons of Group I and Group II grades exported from this source. There is no further information regarding Group II supply into the Mediterranean, but this may start to become a regular trade from Saudi Arabian sources in Yanbu.
Middle East Gulf imports of Group I appear to be confined to U.A.E. receivers taking material on contract from Yanbu and/or Jeddah. Whilst some offers for U.S. Gulf Coast supplies were made to the west coast of Indian buyers, U.A.E. does not appear to be on the agenda for these supplies. Meanwhile, Iran still maintains a presence in the market, with smaller parcels offered into U.A.E., Pakistan and India. Prices are ill-defined, and since these are smaller parcels, prices may be in local currencies. Rumor has it that Iranian prices firmed over the last month or so, although this is difficult to fathom, with almost all other sources showing softer numbers. Iranian SN500+ grade is re-assessed between $835/t and $850/t delivered into local U.A.E. ports in Sharjah, for example.
Group III exports from Bahrain and Abu Dhabi remain the mainstay of material flowing out of the Middle East Gulf, with one large parcel in excess of 10,000 tons arranged for dispatch into the European Mediterranean. Notional FOB levels for all Group III base oils are maintained between $830/t and $860/t basis FOB Al Ruwais and Sitra. This figure pertains to partly-approved Group III grades, whilst Neste Group III material from Sitra refinery is estimated to netback higher at between $885/t and $925/t.
Under the marketing agreement between Bapco and Neste, the former would take responsibility for 55 percent of the output from Sitra refinery, but local sources suggested part of this allocation was re-sold to Neste, giving this company the majority share of production from Sitra. This information is being corroborated.
The numbers above refer to FOB levels established on a notional netback basis using published shipping freight rates, and take into account advised local selling prices, plus notifications of bulk CIF/CFR cargo prices from various sources.
The supplies of Group II base stocks from Yanbu going into the European market have alarmed some of the incumbent suppliers within Europe, who did not consider that this product would flow into this region. From sources, landed prices appear keen and very competitive against traditional supplies. Other sellers have said that this parcel was one-off cargo and that receivers were dealing with a quantity which may have been perhaps larger than ideal for their immediate purposes.
Prices of Group II base stocks FCA, truck or flexi delivered from U.A.E. sellers have shown slightly lower levels this week according to sources in the U.A.E., perhaps competing with barrels out of Al Ruwais that are being offered in truck deliveries at around $880/t in respect of the 4 centiStoke and 6 cSt grades. Prices in respect of the fully approved light grades 100N/150N/ 220N are at around $995/t-$1,040/t, with 500N/600N between $1085/t and $1125/t, all Middle East Gulf delivered prices in small quantities.
Further news of Group I parcels moving from Europe to South Africa were announced this week with around 9,000 tons loaded during July. This parcel is anticipated to arrive into Durban around the end of August.
Nigerian buyers independently confirmed purchase of two large cargoes moving out of the Baltic region. Nigerian markets are still quiet, with other parties electing to remain on the sidelines until a clearer picture evolves after the summer break. Some suggested that the two cargoes loading or loaded now were done at exceptionally low prices. One seller intimated that whilst delivered prices may be very competitive, FOB numbers stood the test because prices were only achievable due to very keen freight rates.
Indication prices are re-aligned for Group I base oils landing into Nigeria, with light solvent neutral SN150 being assessed between $795/t and $820/t. SN500/600 is re-appraised at between $865/t and $890/t, with bright stock being landed between $910/t and $935/t. SN900 ex Baltic is indicated at around $885/t. These prices may be one-off and may not apply to other cargoes ex U.S. Gulf Coast or Europe.
Prices pertain to large parcels in excess of 10,000 tons total 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 firstname.lastname@example.org.