Europe-MidEast-Africa Base Oil Price Report

Share

Its a lightweight week on the EMEA base oil scene, with very little reported price movement and few negotiations for new business.

With most players away from their desks, plus a number of turnarounds and very little extra spot demand from receivers in the Middle East Gulf, India and Far East, very few items have come to report this week.

There is still demand from buyers in places such as Turkey and South America for API Group I material from Europe, but few suppliers are able to increase production to cover these requirements. Contracted and long term business is taking up all of the available material from the market.

Some producers who have gone into turnaround, or who have had small plant problems over the past few months, are stating that they have few availabilities for spot business for the next two or three months. One or two suppliers say they are committed on all available material until the end of this year.

No real demand pressure is coming from the buying fraternity, perhaps because there are no additional base stocks available within Europe. Those who have arrangements in place are content to stay with current suppliers rather than attempt to obtain lower priced or better quality material elsewhere.

Where there has been increased demand, such as in Turkey and Brazil, requirements appear to have been met locally after some time, or else blenders have simply backed off and have turned down the opportunities to produce further quantities of finished lubricants.

Prices have not moved, since very little business has actually been transacted.

Levels are placed in the same ranges as last week, with Group I light neutrals showing between $935 and $970 per metric ton, heavy neutrals SN500/600 between $965 and $1,010/t, and bright stock remaining at $1,100 to $1,170/t, all basis FOB, in bulk, and in some cases, in containers.

These levels show few signs of either increasing, or indeed, decreasing, although outside influences are always at hand. Crude oil has again fallen in a weakening market due to large stocks now being held within the U.S. pool. Dated Brent is now trading at around $72 per barrel, and WTI has fallen back to an even lower level at $71.50. With healthy stock positions, demand faltering and economic doubts on both sides of the Atlantic, the scene is set to remain negative.

Petroleum product prices have reflected the fall in crude, and ICE gas oil has shown signs of retrenchment in front month trading and through the following four months. Vacuum gas oil has come off the high numbers seen some weeks ago, the crack reducing to around $4.70, perhaps adding a touch of pressure to base oil producers to once again examine their selling numbers. The repost from sellers to these comments is that the market is fully committed, and if anything shows signs of shortage, thus justifying the current price levels, which buyers appear to be accepting without recourse.

Perhaps one word of caution affecting Group I base oils: there are rumblings from the Far East markets suggesting that base oil prices have peaked and there is now enough material to cover the local market, and more. With this comes a growing attitude that prices will have to come into line with other parts of the barrel. This could overspill into other regions, and could spread quickly throughout the base oil scene, where material could be imported from alternative sources where a possible price transition may occur.

Group II/II+ grades appear to have shrugged off any signs of the market falling away, and are showing strong signs of advancing in the European market. However, echoing the activity for Group I base oils, these grades have shown no appreciable change in pricing over the last few days. This is perhaps due to many deliveries being delayed until after the end of August, and the summer vacation break. Prices remain as last week, at $1,000 to $1,060/t for the light vis grades, and the heavier ends at $1,045 to $1,100/t, basis delivered mainland European locations.

Similarly Group III base stocks have not moved in price over the last week. Such a short window of time does not mean that these grades do not have further prices rises to come, since the demand for this material is steadily outweighing availability. Prices are in the ranges of 1,000 to 1,025/t for 4 cSt material, and 1,020 to 1,065/t for deliveries of 6 cSt oils. Availability of 8 cSt grades is increasing slowly, and prices for this viscosity are put in the band of 1,070 to 1,100/t, basis delivered mainland Europe.

The remainder of the region has been extremely quiet, perhaps with the exception of East and South Africa, where a number of enquiries for Groups I and II grades have been extended to suppliers in Europe, the United States and the Far East. Arbitrage from Far East to these parts of the African continent may be a growing possibility, with the suggested increasing weakness within the local source markets. Prices for local base oil sales in South Africa are still somewhat confused, but reported levels this week show SN150 at $1,120 to $1,145/t, SN 500, $1,130 to $1,170/t, and bright stock is posted around $1,280 to $1,325/t. These are delivered prices to blenders within the region.

West Africa has been slow with few new enquiries hitting the market. There are traditional cargoes being worked for regular receivers, but there is a growing hesitation in the area, perhaps sensing that prices have peaked and lower levels are around the corner. At the moment receivers are in the unenviable position of take-it-or-leave-it, due to constraints on availability for mixed cargoes with the right product split. This may change, but not in the short term, and prices for September arrival will be around $1,080 to $1,150/t for the spectrum of Group I neutrals, with bright stock around $1,250 to $1,275/t.

No Iranian base oil movements have been reported over the last week. With seasonally high temperatures in this area and other Middle East Gulf regions, and of course with political pressure growing by the day, this market may take some time to recover.

Russian exports have been muted this week with no reported new availabilities coming out of the Baltic or Black Sea loading ports. There are a number of problems reported from Transneft regarding transportation of cargoes of all petroleum products following the large fires which have ravaged many parts of the country. The fires and smoke have caused damage to the rail network which is responsible for transportation of dirty petroleum products. This has a knock-on effect for base oil destined for export. Prices therefore remain unchanged as per last weeks report.

EMEA producers have enjoyed an unprecedented run of high realisations and excellent netbacks on all sales of base oils over the past 12 months or so. This has been due to avoiding overproduction, and a steady demand which has grown out of the decline following the economic downturn of 2008. This program has ensured that most availabilities for Group I base oils were contested on price, driving numbers to the levels where they stand today. Along with this, the market has experienced a certain insularity, which may be broken in the near future by a surplus of base oil coming from alternative markets outside the normal European arena, which may push EMEA producers to relent on the high numbers in the market today.

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

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other