EMEA Base Oil Price Report

Base oil prices appeared to stabilize the past week across Europe, the Middle East and Africa as only API Group III stocks still show signs of weakening.

Group I prices did dip the prior week but appear to have settled for now. Supply and demand seem to be more balanced after some producers cut back on base oils by moving feedstocks to output of distillates and other fuels. Maintenance turnarounds now underway have snugged the supply side, although there are no reports of shortages of Group I grades.

Group II prices stabilized as a few major sellers withdrew price hikes that were due to take effect from Oct. 1. This segment is showing length in supply terms, and this is helping to keep a lid on any markups that sellers might consider. Suppliers are concentrating on preserving market share in what is turning into a very competitive scene. Buyers have resisted any talk of increases.

Group III are now clearly oversupplied throughout the European market, if not globally. Supplies from many new sources is hitting the area, causing severe downward pricing pressure.

Brent crude oil prices moved very close to the psychological barrier of $60 per barrel before falling back to almost the same level as last week, $58.60/bbl for December front month settlement. West Texas Intermediate crude is also stable at $52.95/bbl, still for November front month. ICE LS gas oil slid by some $5 per metric ton to $578.00 per metric ton, also for November settlement.

These prices were obtained from ICE trading in London late Monday.

Europe

Group I export prices throughout Europe stabilized after falling the previous week. Some sources claim that margins have disappeared. Demand is balanced with the supply side, but with Group I volumes substantially lower than in years past. The number of export destinations may be fewer than in the past, and at the same time these locations are also being targeted by sources from the Americas, limiting opportunities for European traders and producers.

Prices are unchanged this week, with solvent neutral 150 between $565 per ton and $590/t, SN500 at $575-590/t and bright stock at $640/t-$665/t, all on an FOB basis. These levels refer to large cargo-sized parcels of Group I offered on an FOB bais ex mainland European supply points, always subject to availability.

Prices for Group I sales within Europe are stable, though demand is sadly lacking. Prices are unchanged and remain 85/t-100/t higher than exports.

When Group II suppliers tried to implement an Oct. 1 price hike, there were doubts as to whether the market would accept such a move when other base oil prices were falling, when demand was entering a seasonal lull, and when there appeared to be ample Group II base supply. The answer became clear the past few days with refusals to accept any form of markup. Prices appear to have reverted to September levels.

Those prices are $695/t-$800pmt (645/t-735) for 100 neutral, 150N and 220N, while 500N and 600N are at $775/t-$825/t (710/t-755), all on an FCA basis. These values apply to a wide range of Group II oils, with and without finished product approvals, from sources in the Far East, the Middle East, Europe and the United States.

Group III prices are under severe pressure, with a plethora of suppliers providing abundant availability of all grades. Holding market share has become the main focus of these suppliers, and price is one of their few tools, apart from finished product approvals held by some players. Discounting by refiners and distributors is rife. The European Group III market is not expanding fast enough to cope with the influx of material from new sources, compounded by increasing quantities from existing suppliers.

Prices for partly-approved Group III base oils are unchanged this week at 685/t-735/t for 4 centiStoke oils and 690/t-730/t for 6 and 8 cSt, all on an FCA basis ex hubs in Northwestern Europe. Values for fully-approved Group III unchanged at 775/t-840/t for 4 cSt, 810/t-900/t for 6 cSt and 780/t-855/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic trading is dull, with few reported cargoes. There are still some smaller movements servicing contract supplies into Antwerp-Rotterdam-Amsterdam, although buyers in the United Kingdom seem to have covered most pre-Brexit purchases. Russian export barrels continue to be made available into the Baltic, but more and more of these supplies are being exported through Black Sea facilities, where prices remain exceedingly low. There are talks again of a large parcel for Nigerian buyers, although alternative sources are being checked by traders engaged in this business.

Cargoes continue to be loaded out of Kaliningrad, Russia, for Antwerp-Rotterdam-Amsterdam, but volumes are much lower than in past years, and some players are opting to stay out of the trade for the time being.

Prices remain relatively stable at $470/t-$495/t for SN150 and $475/t-$510/t for SN500. There are reports of some quantities of Russian bright stock being made available for export out of the Baltic at very low values. Some sources reported prices that would equate to FOB levels of around $595/t-$620/t, but specifications and quality for these products is not known. Bright stock ex Gdansk, Poland, remains unchanged at $640/t-$665/t, basis FOB.

Black Sea sources describe perhaps two large cargoes of Russian export barrels being prepared to load from the STS facility at Kavkaz, Russia. One is said to be offered to receivers on the West Coast of India, but the destination of the other is undetermined, though it may be bound for West Africa. Prices remain very attractive - at $455/t for SN500 and as low as at $435/t for SN150, basis FOB.

Group I offers from Mediterranean sources for material going into Turkey are few this week, but prices were cut to incentivize Turkish buyers to take cargoes of 3,000 to 4,000 tons from Greek and Italian sources. Mediterranean Group I prices are at $557/t for SN150 and $562/t for SN500. SN600 is heard around $575/t, sometimes with parcels of bright stock at around $695/t CIF. The plant at Izmir, Turkey, will restart this week after halting for around three weeks due to rising inventories.

Group II and Group III base oils are available ex-tank in Turkish ports, serviced by relatively small cargoes of Group III base oils from Spanish sources. Traders and resellers are offering Group II base oils from various sources in flexitanks, along with ex-tank supplies from appointed distributors representing major suppliers of Group II base oils.

Ex-tank Group II prices are at $800/t-$840/t and partly-approved Group III grades at $775/t-$825/t, depending on sale terms and quantities.

Middle East Gulf

Red Sea shipping reports indicate that an approximately 18,000-ton parcel was loaded out of Yanbu, Saudi Arabia, and Jeddah, Saudi Arabia, for United Arab Emirates and two main Indian ports. There are also other enquiries for Group I and Group II base oil cargoes to load in late October and early November for Indian and Middle East Gulf receivers.

Iranian cargoes of Group I SN500 and SN150 are still moving to receivers in India and competing against Russian and U.S. shipments of Group I. How these cargoes are being moved, and by whom, is not clear, although local reports say base oil parcels from Iran are loading out of Bandar-e Emam Khomeyni and Bandar Bushehr. Iranian prices for premium SN500 prices are at $510/t FOB.

Two offers, one for a Group I cargo ex Kavkaz, Russia, and another loading out of the U.S. Gulf Coast, are heard at $544/t CIF U.A.E. for large quantities of SN500 and $525/t for smaller quantities of SN150.

Group III FOB values ex Al Ruwais, United Arab Emirates, and Sitra, Bahrain, ports are maintained this week, and with a global oversupply scenario building by the day these levels may start to come under pressure from lower selling prices.

FOB price levels remain at $670/t-$710/t this week for the three Group III viscosity grades of partly approved base oils. Eight cSt grades sold on an FOB basis through Adnoc and FOB and CIF by Bapco going east will go around $100/t lower due to lower local selling prices. The news that Shell will market Bapco non-approved and partly approved base stocks in Europe and North America has added another supplier to the already crowded marketplace, and with considerable volumes of material to sell ex Sitra, the Americas and Europe are going to get overcrowded.

Branded Nexbase Group III base oil also loading out of Sitra refinery in Bahrain, marketed by Neste, will contribute higher notional netbacks due to these oils achieving higher selling prices because the Nexbase brand holds the full range of European OEM approvals. Practically these base oils will be sold to Neste at the same prices as the non-approved or partly-approved grades sold by Bapco and Shell. Notional netback levels are maintained between $780/t-$885/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades which may be delivered into the global markets.

Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.

Group II base oils going into the Middle East Gulf are maintained this week, with the possibility of lower levels. Prices FCA ex U.A.E. hub storage are at $795/t-$910/t for light viscosity grades 100N, 150N and 220N, along with 500N and 600N at $810/t-$925/t.

Africa

North African trade has seen a 15,000-ton Group I cargo made available from Algeria. With no base oil production coming out of Algeria, this quantity has likely originated from the Sonatrach refinery in Sicily, along with shore storage. The supplies of bright stock to cover the EGPC requirements may be sourced out with Europe for the Q4 supply under this tender.

South African shipping circles have indicated that another cargo of around 10,000-12,000 tons of Group I and Group II will ship from the Mediterranean into Durban, South Africa. The cargo may load prior to the end of October with an arrival around early December.

West African cargoes are the subject of enquiries this week, with a possible fixture being arranged for either a Baltic or Black Sea sourced parcel of Russian origin base oils, or alternatively a cargo could be loaded out of the Mediterranean for the same receivers in Lagos. Further cargoes are being sought out of the U.S. Gulf Coast, where FOB prices remain competitive against alternative sources in Europe and South America.

Prices are maintained this week for Group I base oils at $675/t-$695/t for SN150, SN500 at $665/t-$685/t, and bright stock at $725/t-$760/t. SN900 is at $675/t-$695/t. These values pertain to cargoes of at least 7,000 tons being delivered into Apapa.

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