Europe-MidEast-Africa Base Oil Price Report


With crude oil coming off highs around $82 per barrel for WTI on Monday, it could be that the downward spiral is starting again. However, this time the starting point was somewhat greater than the $80 barrier which has applied over the past six months or so, while crude was vacillating between $70 and $80/bbl. Some players have advocated that the spread is now between $80 and $90, so the market is seeing the bottom end of the possible range.

Interesting though this argument might be, the overall effect of the general increase in crude oil values will be to place pressure on feedstock values, and ultimately on base oil prices.

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With low sulphur vacuum gas oil breaking through the $600 level during the last few days, the writing is on the wall. The average value of this feed stock has risen by more than $150 per metric ton over the past six months, and as a percentage of current value, a 25 percent gain cannot be ignored by refiners producing base oils.

There are many noises of increases throughout the EMEA base oil market this week, but without posted prices in this region, these price rises will take time to realise in the market and will only be evidenced when base stocks are actually purchased at new higher levels. Mainland European producers all seem to be reading the same page of the book, and are looking for prices which may be as much as $100/t over the mean of the last reported range.

Prices are now being established between $775 and $840/t, basis FOB, for API Group I solvent neutral grades, with a report of one cargo-sized parcel purchased at the lower end of this range.

These increases reflect the anticipated rises of $40 to $65/t mentioned in last weeks report. The upper end of the spread reflects the price levels at which new enquiries are being offered by producers, whilst it must be emphasised that there are still negotiations being pursued by buyers which might pull these top levels back down a little.

Bright stock is somewhat of an anomaly this week, due to reports of one parcel of BS 150 offered at close to $985/t FOB mainland Europe. The bright stock was part of a mixed cargo with other solvent neutrals, and buyers were left with very little choice other than to pay a premium level for this additional grade from the same load source. Another larger parcel was transacted at closer to $910/t, which must now be seen as the low end of the bright stock pricing range.

Russian barrels have been noticeable by their absence this week, and this may be the start of diminished avails coming from Russian and Belarus refineries, as both turnarounds and the domestic market take up the slack. There have only been a couple of small cargoes offered out of the Baltic, whilst this report has seen no movements in the Black Sea this week.

Russian prices have moved in line with other European levels are now deemed to lie between $730 and $780/t, the spread showing the differences between the lower quality material and the higher graded European standard material. The cargoes sold this week were not low quality, hence the lower end of this spread is an estimation as to where the relative value of the inferior material would be established.

There have been no reported cargoes physically coming out of Iran in the Middle East Gulf this week, perhaps due to the Iranian holiday season coming up. But more likely, producers are aware of price rises and are waiting to sell their material at higher levels than before. Offers have been made during the last few days at $730/t for up to 9,000 tons of heavy neutral SN 500, but these appear to have been declined. One Iranian producer was looking for prices in excess of $800/t basis FOB southern ports, but realistically admitted to being ready to accept a price closer to $785 for some 5,000 tons of mixed solvent neutrals.

This market is somewhat confused with the material being available at relatively low prices while demand in the Far East and India is running high. These cargoes should have been snapped up by buyers. However one seller explained that some banks were have difficulties assessing country risk, and also were not approving U.S. dollar transactions with Iran, which could be limiting the purchasing capability of a number of buyers.

Saudi Arabian producers have increased selling prices for Group I grades by around $20 to $25/t, perhaps siding more with European mainland numbers than Middle East Gulf levels.

Group II/II+ numbers appear to be gradually moving upwards and are maintaining the gap with Group I grades. Light vis material is trading in the band of $880 to $925/t, whilst heavier grades are realising prices at between $915 and $1,040/t , all on basis of delivered mainland Europe. There may be further increases to come on these grades, given the noises coming from source producers in the U.S. and Far East.

Group III prices in Europe were largely unchanged, with numbers for small deliveries at just over $1,000/t for light vis grades, and as high as $1,290/t in one case in Southern Europe, for higher vis material.

West Africa has seen the arrival of a number of intra-company cargoes into Senegal, Cote dIvoire and Mauretania. These tend to be multiple discharge cargoes using the same vessel loading out of the majors terminals in Europe.

Base oil business into Nigeria was relatively quiet this week after the fluster of activity over the last month or so, with one deal being confirmed for April delivery into Apapa port. It is understood that higher pricing levels will apply to this next cargo, and that these numbers will be in the region of $870 to $890/t, for solvent neutrals, delivered CFR. Bright stock will be landed at $1,015 to $1,030/t same basis for delivery. These target spread levels are dependent on freight costs being negotiated to meet arrival dates into Nigeria.

Demand is rising for Group I base oils from the EMEA area, but not particularly from within the region itself. There are many enquiries being floated from Far East, India, and Southeast Asia.

This demand has been created by turnarounds and a general lack of high quality Group I material in Far Eastern countries. It will benefit the EMEA Group I producers, with their spare capacity, lower prices and relatively liberal availabilities. This has seen the creation of a European-Far East arbitrage, which could be one of the life lines for the European Group I market, at least in the short term. The question now is, how long will this situation last?

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at

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