Europe-MidEast-Africa Base Oil Price Report


A confusing picture is emerging in the EMEA base oil market. With strikes and industrial problems in mainland Europe, the picture is complex.

There appears to be a glut of API Group I material in the Far East, creating downward pressure on prices within that region. Future prices may reach levels where the arbitrage could be established to export from Far East, if not to European locations then to destinations traditionally served by European producers and traders.

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Should this scenario evolve, it could limit the ability of European producers to hike prices to preferred levels and could push prices for export into a downward swing. This in turn could affect local European prices.

Group II and Group III grades are not affected and remain buoyant in pricing and relatively short in supply, in both the Far East and the EMEA regions. Two large production units are down at this time. One is in Richmond, Calif., where Chevron produces Group II/II+ for European import; the other is the Formosa plant in Taiwan, which has not restarted production after turnaround. These significant holes in the supply chain have allowed Group II prices to edge upwards by some $20 to $30 per metric ton this week in EMEA and in the Far East.

Group III prices continue to be driven hard by suppliers within Europe, with reports this week that further increases are planned for November. This could take delivered prices for the two main grades, 4 cSt and 6 cSt, to new highs of 1,250 and 1,300/t. For now, delivered numbers lie between 1,215 and 1,230/t for the 4 cSt material, and between 1,240 and 1,270/t for the 6 cSt grade.

Group I prices within the European mainland are steady, but with hints that producer-driven increments will be applied. With very little Group I base oil available for prompt sales, the picture is a little muddy. But prices are now in the range of $990 to $1,040/t for light neutrals, with heavy grades such as SN 500 and SN 600 between $1,035 and $1,080/t. Bright stock realistically is now ranging from $1,285 to $1,325/t. All these prices are based on FOB sales, ex mainland European production.

We hear reports of supply problems caused by the industrial upheaval in France, resulting in shortages of material normally flowing from the refineries in the north to receivers in Europe and also for export. Many blenders relying on these supplies are concerned and are scouring the market for any unallocated barrels of suitable base oil. This in turn has applied a price impetus to the already short market, and with no satisfactory end in sight to the problems, more shortages can be expected throughout the area.

Some slightly inferior quality material is available from Russia, as well as some comparatively high quality base stocks coming out of the Naftan refinery in Belarus. These grades are mainly flowing through Latvia for export ex Baltic, whilst other Russian material is available from the Sea of Azov, for export through Black Sea routes.

Russian and Belarus prices have firmed in line with other European levels and are now anywhere between $970 to $1,050/t, depending on export location and quality, for SN 150 and SN 500 or regional equivalents. Some reports have filtered through of heavy neutrals SN 850 and 900 taken out of the Baltic region into secondary storage in Northwest Europe. These grades may be combined with other availabilities to send to West Africa, and in some case these oils can be used as substitutes for bright stock, being highly priced and similarly sought-after in any large quantity.

In the Middle East Gulf more Iranian cargoes have been earmarked for export, with quantities of 2,500 tons of SN 150 and SN 500, and 5,000 tons of SN 650 ready to load during November. Prices for these cargoes are $885/t, $878/t and $870/t respectively. Later cargo movements, reported to be destined for Asian receivers, loading around 18 November, have prices slightly higher at $898/t for 3,000 tons of the SN 150 grade, and $875/t for 3,000 tons of SN 650. All these cargoes are to be loaded ex BIK.

A further cargo of 3,000 tons of SN 150 is available to load ex Bander Bushire around the same dates, with similar pricing at $885/t. All basis FOB ports mentioned above, possibly being purchased in euros or local currency by traders working in the immediate area.

A great deal of these exports are being utilised in United Arab Emirates or Indian markets, but rumours were reported this week that traders were looking to take quantities of Iranian base oils into East Africa and South Africa. These reports are unconfirmed.

Three cargoes of base oils from Far East locations have arrived into eastern and southern African countries. These cargoes have been handled in a break-bulk manner, being purchased by multiple receivers in the various discharge ports. Prices are estimated around $1,085 to $1,145/t basis CFR/CIF for the Group I solvent neutral grades, and $1,350 to $1,400/t for bright stock. Some players suggested that some quantities of Group II and III were included, but this is not confirmed.

In West Africa there has been very little buying, but there are many enquiries for a range of products to be imported into countries such as Ghana, Nigeria, and the former French colonies, which are all fearful of shortages due to the strike problems in France. Many of these third party blending operations are dependent on formulations using approved base oils from French refineries. Without these supplies, the market could come to a standstill.

In Nigeria, one cargo of mixed base oils has arrived this week, and prices are now expected in the range of $1,090 to $1,170/t for solvent neutral grades up to SN 600, with some supplies of SN 900 being sold at close to $1,200/t. Bright stock is around $1,400/t. All basis CFR main West African ports.

Operators are looking to Far East and Middle East Gulf for alternative supplies on a serious basis right now, and one cargo has been booked, but in flexibags in containers, from a Southeast Asian supply source for West African receivers. One importer has commented that this could be the first of many supply movements from that region, and this initial sale was a trial prior to bulk cargoes being sought.

Underlying trends for crude and feed stocks have shown weakness this week. With crude retracting to $80.90 per barrel for WTI, and with Dated Brent only showing marginal strength at $81.55/bbl, both markers have lost some $3/bbl since last weeks peaks. Feedstock values are similarly weaker this week with vacuum gas oil some $30 lower than two weeks ago. ICE futures have also come off peaks seen a couple of weeks back, and are now showing at just over $700/t for front month trading, with graduated weakness showing forwards from that point. Uncertainty is rife in all sectors of the market right now, with very few positive signs identifiable in the short term.

With industrial unrest in France and other austerity measures still to be announced throughout other western European countries, there is a degree of uneasiness creeping back into the industrial markets, with double-dip recession still a real threat not just in Europe, but also in many of the other areas which depend on the flow of raw materials from mainstream producers in western economies.

Base oils, particularly Group I grades, are in a state of flux right now, and it is anybodys guess as to which way the market will turn in the immediate future and in the months to follow.

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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