Europe-MidEast-Africa Base Oil Price Report


Just when the base oil market appeared to be in balance and relatively stable on prices throughout the EMEA region, things changed.

It would have appeared last week that both producers and sellers alike were content to see the year out on a flat market basis, with all parties concentrating on first quarter dealing for next year. This scenario has not been borne out due to a number of factors, not least of which has been the dramatic and rapid rises in crude and petroleum product prices over the past few days.

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Whether down to cold weather playing the demand card here in Europe, or whether crude stocks in the United States are perceived as being too low, the results have seen the hardening of prices across the board. With product prices reflecting directly on to feedstock values, many producers have decided to move base oil prices upwards with immediate effect.

Crudes have risen to new highs, with Dated Brent and WTI breaking through the $90 per barrel hurdle. The levels are now settling, with Dated Brent bullish at $91.10/bbl, and WTI losing a little of the impetus seen over the past few days, falling back to $88.75/bbl.

Feedstock values have risen in tandem, and International Commodity Exchange gas oil front month is strengthening to highs at $775 per metric ton in trading earlier this week. Vacuum gas oil has also moved upwards by considerable leaps and bounds, to levels above $650/t in the Mediterranean and northwest Europe. As a principal feedstock for base oils, trading levels for low sulfur vacuum gas oil will mount pressure on refiners to increase realizations for all base oils.

Whilst this is indeed the market sentiment, it has been difficult to establish which producers prices have risen, and even more difficult to gauge the increments which are to be applied, which theoretically will now cover most base oils being purchased in the short term.

The problem in the EMEA, unlike the U.S. base oil market, is that there are no posted prices announced and circulated by sellers. Market prices are only established after deals and transactions have taken place, which in turn can be shared knowledge within the market.

Most producers, however, have ideas as to where prices should be, and many commented that they were looking to increase numbers with immediate effect. Equally, some were also stating that they were sold out until mid January, and these increases would only apply to new business being negotiated now, but for delivery or loading during the second half of January and beyond.

However, suffice it to say that the increases being sought by most commentators this week, are significant and deemed to be in the order of between $50 and $80 per metric ton for API Group I grades, similar rises applying to Group II/II+ base stocks, but as yet, no fundamental information as to what would happen to Group III oils.

The perception is that increases along the same relative values would apply to Group III grades, since producers of these base oils have in the past seized upon every opportunity to increase price levels whenever possible. These increases are defined as possible rises, but could be eroded somewhat in negotiations to take place.

Therefore, it is has been difficult to pinpoint new levels of pricing. But using producers selling ideas and buyers expectations, it has been possible to assess where prices will now become established.

Group I solvent neutral grades appear to be between $1,070 and $1,110/t for the light vis grades, and the heavier neutrals such as SN 500/600 are between $1,120 and $1,165/t. Bright stock appears to be at levels of between $1,340 and $1,425/t. All these prices are based on FOB sales out of mainland European and North African ports.

There is a shortage of availabilities of Group I base oils coming from Europe, with new destinations such as South America soaking up large parcels of this material. Cargoes destined for West Africa and Argentina using one vessel to deliver to two locations have been booked by French suppliers, whilst another major has moved European barrels from Mediterranean sources to La Plata.

In the Middle East Gulf region, prices from the United Arab Emirates continue to rise to levels around $960 to $975/t from tank supplies, with FOB levels adding a further $10 to $25/t, depending on method of transhipment. There have been no reported Iranian exports of Group I base oils this week, which suggests that second half January loadings will not be followed up by any other parcels at this time.

Saudi Arabian producers have moved to increase prices almost in line with mainland European levels and are now looking for FOB and delivered numbers to be moved upwards by some $40 to $60/t, depending on grade and delivery location.

Group II imports in the Middle East Gulf continue to demand higher prices than previously seen, but with the bulk of this material coming into the region from Far Eastern sources where prices have been stifled to a large extent by lack of local demand, the increased values for these grades have been lower than comparative base oils in Europe.

Prices now for Group II material delivered CIF/CFR into the Middle East Gulf area are in the range of $1,085 to $1,130/t for the lighter grades and heavier material in a band of $1,125 to $1,155/t. Korean N60/70 material is arriving into the UAE at around $1,115 to $1,145/t.

Group II prices in Europe are described as maintaining the delta between Group I and Group III, so they are being leveled at $1,090 to $1,135/t for the light oils with the heavier vis grades falling into a price range of $1,165 to $1,225/t. All prices are basis imported material being sold on delivered basis.

Group III prices are reported as keeping to the same levels as last week, but with an inevitable increase in those levels about to be announced any time in the next few days or weeks. Prices are now in the following bands: 1,280 to 1,315/t for 4 cSt material, and at 1,325 to 1,355/t for the 6 cSt grades, basis delivered within mainland Europe.

Russian and Belorus exports continue under the pressure of the winter weather affecting many rail movements over the last few weeks. There are a number of enquiries from Chinese buyers looking to purchase Group I base oils such as SN 150, SN 350 and SN 500/650 on basis DAF Chinese and Russian /Kazak borders.

These are for large quantities of material which are being utilized in locations within mainland China, which are more easily reached by rail from Russia and Kazakstan, than from the eastern seaboard of China. Economics rule that these sales of various grades will continue, with demand in the Chinese hinterland gaining ground on a progressive basis.

Prices for these grades are established in the order of $980 to $1,000/t for the light grades, continuing upwards to around $1,025/t for the heavier solvent neutral base oils, basis delivered at the frontier border crossings such as Urumchi or Naushki.

Other Baltic availabilities have been soaked up for the remainder of December, being sold at prices between $985 and $1,010/t for SN 150, and $1,015 to $1,030/t for SN 500 basis FOB Liepaja or Riga ports. These levels will quickly adjust to any new mainstream European levels, and any new sales of Russian and Belorus base oils will surely carry a higher premium than the prices above.

Turkish buyers looking for Russian and Uzbek light grades appear to have gone quiet, with few enquiries hitting the market this week. Although with the normal timing for these transactions, delivery for parcels negotiated now would coincide with holiday date deliveries, hence there may be a natural slowdown in the region during the next few weeks.

African buyers have been active in the buying arena with more enquiries from East and South African receivers for material coming from Far East sources.

West Africa has seen the resumption of almost normal trading from French suppliers, with the arrival of two cargoes of Group I grades. Nigeria is slowing down, possibly looking ahead to the holiday period when there will be blending plant closures over the Christmas and New Year period.

Some of the larger blenders in Nigeria are taking advantage of this time to perform regular maintenance and repair on their plants, anticipating that demand for base oils and finished lubes will slow during the next few weeks.

One aspect of any anticipated higher European price levels will be that these will impinge on any new cargoes for West Africa, bringing more financial constraints to some of the private importers.

It appears that the EMEA base oil market is about to enter yet another phase of prices hikes, based on rising raw material costs and also a continuing healthy demand for all types of base oil. With prices for all base stocks moving upwards in the U.S. and now Europe falling into line, it only remains for the Far East producers to announce their price intentions over the next few days.

However, if the Far East demand cycle is not imitating that of the U.S. and Europe, and supply continues to outstrip regional requirements, the base oil scene may see a stronger than ever arbitrage. That could result in Group I and Group II base oils being exported from Far East producers to the Middle East Gulf, Africa, and even to South America, where demand for these grades is high.

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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