EMEA Base Oil Price Report

API Group I base oil prices are stable throughout Europe, the Middle East and Africa, as supply and demand fundamentals are balanced. Producers, of course, would like to bolster prices wherever possible, but the current economics are not affording any opportunities.

Group II markets seem steady with still a hint of price pressures in this sector, due mainly to the copious quantities of material becoming available. There appears to be growing potential for this segment to tilt towards over-supply, as other already over-saturated regions are looking to sell into Europe and Middle East.

Group III prices are already under severe pressure in Europe, the Middle East and Africa, and that pressure is growing due to the large quantities of material available and supplier efforts to protect market share.

Crude oil and feedstock prices rose the past few days with as dated deliveries of Brent reached $61.60 per barrel for December front month settlement - up around $3 from last week. West Texas Intermediate increased to $56.00/bbl, now also for December front month. ICE LS gas oil climbed $10 to $593.00 per metric ton for November front month. These prices were obtained from London ICE trading late Monday.

Europe

Group I export prices around Europe are stable, with availabilities neatly meeting demand for the few export destinations available in this sector. With a number of refineries coming back onstream following maintenance turnarounds, supply surpluses could develop during November, although there are a number of large inquiries for areas such as West Africa.

Prices remain between $555 per ton and $580/t for solvent neutral 150 and at $565/t-$585/t for SN500, both on an FOB basis. The premium for bright stock is lower than in quite some time, and the super-heavy cut is at $625/t-$660/t.

These prices refer to large cargo-sized parcels of at least 2,000 tons of Group I offered on an FOB basis ex mainland European supply points, always subject to availability.

Values for Group I sales within Europe are also unchanged amid talk of demand rebounding as buyers exercise their ability not to use Group II. The considerable differential in price between Group I and Group II, and the relatively low prices of Group III, is promoting the continued use of Group I and Group III instead of a switch to Group II.

The differential between domestic Group I levels and export pricing is maintained, with prices for intra-regional sales assessed 85/t-100/t higher.

Group II prices have come under pressure, not least because of the widening gap between Group I and Group II values. With European Group II price levels being higher than most other international markets, there is an attraction for any surplus barrels from Far East and the U.S. to penetrate the European scene. This course of events could ultimately pull prices downwards, so eroding European levels and bringing prices down for Group II in Europe.

The operator of the Group II plant in Rotterdam, has been moving large quantities (in excess of 20,000 tons per cargo,) to hub storage in Valencia. These quantities will service the Mediterranean markets for Group II grades.

Group II selling prices are again unchanged this week, but note is to be taken of the underlying weaker sentiment running through the market which may start to have an effect of current pricing.

FCA levels remain at $695/t-$800/t (645/t-735) for 100 neutral, 150N and 220N, with 500N and 600N at $775/t-$825/t (710/t-755). These prices pertain to a wide range of Group II base oils, with or without full slates of finished lubricant approvals, regardless of origin.

Prices for Group III base oils continue to come under pressure from the number of alternative suppliers reaching the European market. New suppliers, in addition to established players are vying for a share of the European scene, where sellers foresee considerable demand growth in the future.

The incidence of some blenders returning to purchase Group I base oils instead of moving to Group II is also supporting the use of Group III as a diluent. This 'artificial' demand factor may help to employ some of the excess barrels now being floated on to the market, and may ultimately support current prices by limiting the over-supply situation.

Prices for Group III grades with partial slates of approvals are down slightly this week to 670/t-720/t for 4 centiStoke grades and 680/t-720/t for 6 and 8 cSt, all on an FCA basis ex hubs in Northwestern Europe. Prices for fully-approved grades dipped this week to 765/t-825/t for 4 cSt, 800/t-875/t for 6 cSt and 770/t-840/t for 8 cSt, FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic activity remains subdued with only a couple cargoes moving out of this region to mainland Europe. Other contracted sales have been made and loaded for Singapore, and additional supplies are being made from the Black Sea from the same supplier. A cargo of approximately 6,000 tons was loaded out of Kaliningrad, Russia, and with freight costs being relatively high for this quantity and voyage, the nominal FOB prices attached to this cargo would have had to be lower than currently reported levels to make economic sense for a CIF number going into Singapore - therefore estimated at around $473/t for SN500.

There remain a couple of inquiries for large 10,000 tons parcels for Nigeria to be loaded during the first half of November, although no firm news has emerged on fixtures or final quantities for these potential cargoes.

There are rumors that bid prices for quantities to cover these cargoes are too low for the Russian refineries, and that suppliers are looking for numbers that would prevent these parcels working into West Africa. Negotiations continue.

Apart from the Far East cargo mentioned previously, Baltic prices remain stable at $470/t-$500/t for SN150, $475/t-$510/t for SN500 and $595/t-$620/t for low-quality bright stock transported in flexi-bags. Bright stock in bulk ex Gdansk is unchanged at $630/t-$655/t FOB.

Russian export barrels are being loaded from the STS facility in KavKaz, Russia, for discharge in Greece and then Singapore. Prices for this supply remain as previously advised: around $455/t for SN500 and $435/t for SN150, basis STS Kavkaz. These prices are exceptionally competitive and continue to be close to raw material costs for the production of these grades. After taking account of storage and handling, margins for these sales must be minimal.

Mediterranean Group I cargoes continue to move into Turkish ports, taking the place of any Russian cargoes that could be loaded either STS or FOB Azov. There are more offers for more Group I supplies to be made during November, with receivers holding off until the end of this week to make decisions. Mediterranean Group I prices are indicated at $566/t for SN150 and $569/t for SN500. SN600 is heard around $585/t and small quantities of bright stock at $695/t, basis CIF. Prices from the Izmir refinery dipped a little this week as the operator tried to continue using truck deliveries to compete with shipped imports.

Group II and Group III base oils being sold ex-tank in Gebze, Turkey, are priced around $795/t-$840/t for Group II grades and $785/t-$845/t for partly approved Group III. Prices vary and depend on terms and quantity.

Middle East Gulf

Red Sea activity includes reports that the EGPC contract for bright stock cargoes is being serviced out of Yanbu with one cargo of 2,500 tons loading prompt, another program for November and a further supply during December. Around 42,000 tons of Group I and Group II base oils for Pakistan, India and United Arab Emirates have already loaded or are loading this week out of Yanbu and Jeddah.

Iranian parcels of Group I SN500 and SN150 are again reported out of Bandar-e Emam Khomeyni (BIK) and BB going into Mumbai. There are no substantiated reports on quantities, but sources still indicate price levels for Iranian SN500+ at around $510/t-$520/t FOB. Reports are that 15,000-20,000 tons of base oils have been moved out of Iran during November, although this isnt documented as accurate.

Prices for parcels of Group I out of the U.S. Gulf Coast and U.S. Atlantic Coast have been indicated at around $540/t CIF U.A.E. for SN500 and around $537/t for smaller quantities of SN150. Bright stock is also indicated at around $695/t CIF. Freight rates for these cargoes have increased over the past few weeks, perhaps reflecting the onset of IMO 2020, which will affect fuels being used as bunkers for ships carrying these cargoes.

Notional Group III FOB prices ex Al Ruwais and Sitra ports are maintained this week with a number of cargoes being identified the last few days. Parcels are being loaded for U.A.E., India and the Far East, although following a shipping enquiry for a 6,000 tons parcel to load out of Al Ruwais for Brazil, no further news has been heard.

FOB prices are assessed at $665/t-$700/t for the three Group III viscosity grades of partly approved base oils moving into Europe or U.S. markets. Eight cSt grades going to India or the Far East will go lower by as much as $100/t due to lower local selling prices. Partly approved Group III base oils are sold on an FOB basis by Adnoc from Al Ruwais, and FOB and CIF by Bapco from Sitra.

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 for these grades are also maintained at $775/t-$875/t for 4 centiStoke, 6 cSt and 8 cSt grades delivered into western 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 oil prices are also maintained this week, with levels FCA ex U.A.E. hub storage assessed at $795/t-$910/t for the light viscosity grades 100N/150N/ 220N, with 500N/600N at $810/t-$925/t.

Africa

Mediterranean and North African base oil markets are busy this week with a number of cross-Mediterranean cargoes going into Morocco and Algeria. Israel is considering a hike in import tariffs which would affect base oils after the end of the year. Many are saying this will limit the opportunities to service this market, but blenders within Israel will still require imports due to ceases in local production.

The restart to the Egyptian refinery which has been down for the last two years is progressing according to local sources, although full running of the base oil plant may not re-commence until early 2020.

South African shipping agency reports that the cargo of just under 11,000 tons of Group I and Group II base oils is loading in Augusta then lifting further quantities of base oils from hub storage in Valencia before sailing to Durban for discharge. This movement follows a number of other similar cargoes which have originated in Rotterdam, the United Kingdom or Sicily for the same oil major, all of which have been imported into South Africa.

West African reports confirm that another Group I cargo of around 7,000-8,000 tons will load ex U.S. Gulf Coast for discharging in Apapa, Lagos.

There are other enquiries for large parcels of Russian export base oils to load for Nigeria out of the Baltic. Another enquiry is for 10,000 tons to load out of Italy. The two 10,000 tons parcels from the Baltic will possibly load Russian origin base oils, and also bright stock which will be loaded from Gdansk.

Prices are maintained again this week subject to receiving information on the U.S. Gulf Coast cargo where prices may be higher than previously seen. Group I base oils are indicated at $675/t-$695/t for SN150, SN500 at $665/t-$685/t and bright stock at $720/t-$745/t. SN900 is indicated at $675/t-$695/t. Prices are for cargoes of minimum 7,000 tons being delivered into Apapa port, Lagos, 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.