Europe-MidEast-Africa Base Oil Price Report

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The EMEA base oil market may vary on a weekly basis, but the direction for pricing continues on a positive, upward course.

Although the situation in France is improving, it is not helping the European base oil market. A number of receivers, blenders and traders are desperate to lay hands on material which is awaiting loading in the export and mainland distribution terminals. It has been difficult to assess the latest news from the terminals in the north, but operations are being restarted within the refineries. Resumption of normal services will be some way off as yet, with some striking groups still affecting the daily running of the plants. With reforms announced for November 3, this week could finally see the end of the civil unrest.

The other main element looming this week is the prospect of much higher crude and product prices after U.S. stocks of distillates are declared low. The Fed looks like embarking on a program of quantitative easing. The French refineries are still not fully operational. And the Saudis have declared that through OPEC they want to see crude oil rise by some $2 per barrel and that $90 is not an unrealistic nor unattainable level for their exports.

With crude levels already firming to around $85/bbl for Dated Brent, and WTI not far behind at close to $83.70, producers say these sentiments are more than enough to push base oil prices further up the scale, given that short supply and relatively high demand for all types of base oils in Europe is still in evidence.

However, with distillate levels in Europe remaining lacklustre, and ICE gas oil futures showing weakness through November front month, at just above $700/t, there could be an argument that the feedstock pressures do not support increasing prices within Europe. Given that the Far East base oil market is still showing little signs of picking up, availabilities from that region go into the melting pot to compete with European supplies.

API Group I grades in Europe have moved upwards by another small rise this week, and the new range for light solvent neutrals is $1,010 to $1,060/t, with heavy neutrals such as SN 500/600 in the range of $1,050 to $1,115/t. Bright stock is reported this week between $1,285 and $1,345/t. These prices reflect mainland European and North African supplies, for FOB sales.

Group ll/ll+ material has moved on again, with some of the imported material being in relatively short supply over the last few weeks due to uncertainties regarding production from a number of the source producers. These problems appear to have been lifted now, and the flow of Group ll material will resume back to normal(if that is the correct term to use when looking at a product group which is expanding rapidly, with new users looking to move to these grades for new formulations). Prices for Group ll base oils have moved slightly with effect from the beginning of November and are now $1,045 to $1,085/t for the light vis grades, and for N500 equivalents and beyond, levels are $1,085 to $1,155/t.

Group lll prices have been increased by some of the suppliers who import into Europe, whilst others have reported that they are reviewing prices now and will be taking action as appropriate. It is felt that importers hold an ace card with Group lll grades in that they can weight the amount of material being imported into any one of two or three regions, and to a certain extent can cherry pick where the best realisations and margins can be made at any one time.

With prices moving up it is anticipated that the European market will become as attractive as other areas such as the U.S., and more material may flow into the European blending scene at all levels, rather than be sold only to major large blenders within the EU. Prices are 1,235 to 1,265/t for the lighter 4 cSt material, with 6 cSt grades priced at 1,280 to 1,320/t. These prices refer to truck-delivered material within the European mainland.

Russian Group l grades are still not widely available, with any material coming on the market being sold quickly to the usual traders. There have been reported sales of SAE 10 and SAE 30, along with other I-12, I-20 and I-40/50 parcels. The I grades are mainly lower specification material, but with higher viscosities for the I-40 and I-50, these are attracting buyers sometimes substituting heavier neutrals in the place of bright stock, where formulations allow.

Prices for SAE 10 and SAE 30 (equivalent to SN 150 and SN 500 respectively) are $990 to $1,025/t basis FOB Baltic ports. The lower vis I grades are sold below these numbers, whilst the high vis material, which can be equivalent to SN 800/900, is in demand and is selling at $1,085 to $1,120/t, on the same basis as above.

Small cargo lots of SAE 10/30 have been reported available ex-Sea of Azov and Ukraine, but with prices in excess of $1,000/t FOB and buyers in Turkey looking for delivered material at $940 to $950/t CFR, it would appear that these cargoes are going nowhere. Buyers from the Middle East Gulf and India who have lifted this material previously are shying away at this time, with availabilities coming from within Middle East Gulf and Far East which can undercut these prices on a delivered basis.

Saudi Arabian prices have been reported at $990 to $1,010/t for light solvent neutrals, heavy neutrals at $1,000 to $1,025/t, and bright stock at $1,240 to $1,265/t, basis FOB sales. Whilst these levels are reported, the actual selling prices are placed nearer to the European FOB levels. There may be lower priced material invading this market from the Far East; this aspect is being investigated.

A report from Iran has confirmed that selling levels have broken through the $900/t FOB barrier, with a cargo of 3,000 tons of SN 150 being loaded ex Bander Bushire, end November, at $917/t FOB. To confuse matters, another cargo of 3,000 tons of SN 500 is quoted at $885 loading early December, but quality can make this difference in price, along with the general shortage and higher demand for SN 150 material in the area.

There have been a number of enquiries for Group ll and Group lll grades for delivery into Iran, for small quantities delivered by flexibags, but the trading limitations with Iran make these enquiries extremely difficult to indulge by outside traders. Ultimately this demand may be met by using local merchants who can trade with Iran without bank guarantees and payments from the Iranian banking system.

In South Africa the local scene for base oils appears to be buoyant, with a new round of prices taking effect from November 1, bringing levels for delivered Group l grades $50 to $75/t higher than European FOB levels.

No news has been reported of further cargoes of Group l material being imported from Far East locations; volcanic activity in the source area is perhaps hindering movements. However, a number of enquiries have been circulated for requirements of Group ll and Group lll base oils into East and South African ports.

West Africa has been subdued this week with little activity on cargo arrivals, or for new enquiries. Prices remain around the levels as noted last week for new imports, except the new mainland European increases will have a small upwards effect on those numbers. There are reports of receivers in areas traditionally supplied by French producers having problems, but specific cases are difficult to determine. Many receivers probably have sufficient inventory to see them through the strike action.

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.

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