Europe-MidEast-Africa Base Oil Price Report


A somewhat indifferent week has gone past, with little real business taking place.

Perhaps due to the restrictions on travel within Europe, or the greater concerns and issues surrounding the volcanic eruption in Iceland, players have been difficult to find at their desks, and a certain frustration is being felt within the base oil camp. It also appears that many buyers could have reached a peak on inventories and are not actively pursuing further quantities of base oils at this moment in time.

Another hypothesis is that buyers have taken the brunt of substantial rises over the past three months and are now calling time on these increases in price. One source announced that they would not be buying any further supplies of base stocks at the current levels, since they believed, rightly or wrongly, that the current crude and feedstock price levels did not accurately reflect the numbers now being asked for base oils from the main producers.

Producers on the other hand are expressing caution, saying that they are all but sold out of the main grades of API Group I base oil for at least this month, and possibly for May as well. This could be due to the heavy buying witnessed over the past few weeks, with buyers trying to beat the forecast of prices moving upwards, and also to strong demand for Group I base oils from the Far East. (This demand appears to have waned during the past few days, however.)

Crude has retreated from its highs of last week, with WTI showing currently at about $82.40 per barrel, falling below Dated Brent for the first time in some weeks.

Dated Brent is around $83.70/bbl, showing a fall of $3 to $4 from last weeks numbers. This fall is echoed throughout the product ranges. Vacuum gas oil as a feedstock has retracted sufficiently that base oil producers could call a halt to further price hikes in the short and medium term.

Prices in mainland Europe are estimated to be around the same levels as last week, or perhaps a tad higher. Without a great deal of activity to substantiate new levels, numbers are seen to be static. Prices for Group I solvent neutrals are put at $805 to $830 per metric ton for light neutrals, $825 to $860/t for SN 500/600, and $960 to $995/t for bright stock. These prices pertain to FOB sales ex European mainland and North African ports.

There has been some discussion of late regarding domestic prices as opposed to export prices for base oils in Europe. Traditionally there has been a perceived pricing differential between these two categories of sales. It is the opinion here that there has been a large degree of merging between these two classifications, where, for example, some larger European blenders are able to purchase base oils at prices which are lower than published export levels. With this level of integration, it is difficult to draw a distinction, other than to admit that there will be premiums applied to small lots of base oils delivered infrequently, by means of truck or rail.

In the Mediterranean, after the award of the Egyptian bright stock tender, and the Syrian short term requirements being covered from traditional sources, the market has gone quiet. Most producers in this area are sold out of prompt barrels for cargo lots.

Russian barrels have all but dried up from the market, although there was talk earlier this week of some 2,000 tons of Belarus material available for sale. Whether this quantity would be exported or utilised within the Russian/Belarus domestic system remains to be seen. The FCA auction price for this material will probably be in the range of 540 to 560/t with additional transport and storage costs being applied to reach FOB status.

Prices for exports, were these to come about, would be in the range of $785 to $810/t basis FOB Baltic ports. With all viscosities being sold on this basis, any differentials will be based on viscosity index, colour and flash point.

In the Middle East Gulf area, Iranian Group I heavy neutrals have reportedly been sold at $800/t FOB Bander Bushire, but only one small cargo of 3,000 tons has been recorded as loaded to date. Other talk is of higher prices for future liftings out of this area, with levels of $860/t mentioned by sellers. Whether these are achievable remains to be seen.

Saudi Arabian prices were confirmed as rising in line with last weeks expectations, and are now in the spread of $810 to $825/t for SN100/150, $825 to $845/t for SN 500, and bright stock is being offered at $965 to $980/t, all basis FOB Red Sea ports.

In South Africa the monthly pricing system has meant numbers have not yet moved and will not move for another week or so. Expectations in this region are for another round of increases, for local producers to play catch-up. This has opened the doors to an arbitrage for European stocks to move to South Africa as well as to the Far East, and although the market is much smaller, importers are poised to take advantage of a continuous arbitrage differential between the areas. The market is extremely quality conscious, limiting the types of material which can be brought from Europe.

Elsewhere within Africa, all has been relatively quiet during the last few days. Nigerian enquiries are still moving around the trader circles. With only one confirmed loading still to take place and others waiting in the sidelines, this market is not moving particularly quickly. Price levels are estimated in the range of $870 to $915/t for Group I solvent neutral grades, and $1,020 to $1,050/t for quantities of bright stock, for material arriving next month.

Group II and Group III material continues to flow into Europe and the Middle East Gulf from east and west, but now at higher prices than for March. Suppliers say that they are mindful of Europe being a separate market from the United States and Far East. Whilst pricing should reflect acceptable netbacks to source production, suppliers are keen to promote Group II and Group III material in this relatively new market. As a result, prices are laid out in wide spreads depending on quantity, location for delivery, etc.

Levels for Group II grades are $890 to $1,075/t, and for Group III (in Euro equivalent), around $975 to $1,300/t, all dependent on where, when, and how delivery takes place. The lower end of the pricing ranges mostly pertains to lower vis material.

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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