Its a quiet week, with many large industrial concerns closing their doors for prolonged seasonal shutdowns. Current API Group l prices have been firmly established over the last few weeks, but the market is seeing upward price movements for Group ll and Group lll.
Some sellers of Group ll grades reported that they would have to sell at new higher levels since there were a growing number of alternative outlets for these oils in other regions around the globe, and they could not be seen subsidising the European market by selling at prices which were almost in line with Group l numbers.
Prices for Group l grades are being quoted around levels reported last week by most producers, with a small number of exceptions. Those exceptions this week came from Iran and Russian exports which appeared to be nudging upwards, possibly into their correct relative price position versus the rest of the EMEA market.
Mainland European light solvent neutrals are in the range of $1,040 to $1,070 per metric ton, with the heavier end of the viscosity range lying in a band between $1,075 and $1,125/t. Bright stock, where available, was being sold at $1,295 to $1,355/t in the main, but one supplier in the Mediterranean set a new recent high for this material at $1,410/t. This was declared to be for a relatively small quantity of some 600 tons, due to one export buyer facing an extremely urgent requirement for this product.
In the Middle East Gulf, Iranian exports of SN 150 moved swiftly to a new high pricing platform, in the main due to the lack of availability of this particular grade in that market. 2,500 tons of SN 150 and SN 500 were reportedly priced at $1,040/t and $940/t respectively. The large differential in values underlines the shortage of SN 150 in the area. These numbers refer to FOB sales, BIK port, for loading second half January.
Other prices in the Middle East Gulf, for example Saudi Arabian supplies, are around the same levels as mainland Europe, since much of this production from the east coast of the Kingdom competes with European exports to African and near Middle East buyers. One tender has been issued to sell a typical grade slate of Group l base oils to Sudanese and East African buyers. This is probably only a price checking exercise, since logistics and the resultant freight costs almost prohibit sales from Europe or other eastern suppliers competing with current supplies from Yanbu and Jeddah.
Under the same banner another tender has been opened to supply North African receivers in Tunisia, but again it is difficult to envisage a French major giving up on this valuable supply of Group l base oils, given that there are probably few large producers who can meet the strict specifications and also furnish the additional volumes from current production.
Russian exports from the Baltic have reached new highs for SN 150 and SN 500, around $1,010 and $1,025/t for these two grades. Material continues to be offered from the main players in the Baltic, with new sales being announced for January loading.
Russian and Uzbek production also continues to be sold ex Black Sea supply points, where base oil storage is available. Prices in the Black Sea aimed at Turkish and near Middle East buyers are around $990/t FOB for SN 100/150, and around $1,010/t for SN 500. Depending on parcel sizes, freight between $35 and $60/t, when added to FOB levels, suggest CFR/CIF price levels into the main receivers.
Group ll/ll+ prices for European imports are now between $1,095 and $1,145/t for the light vis grades, with heavier material showing at $1,175 to $1,265/t. The two Group lll base oils, 4 cSt and 6 cSt, have moved in line with source production increases, and these grades are now 1,310 to 1,340/t for the 4 cSt material, and 1,360 to 1,385/t for the heavier 6 cSt oils.
West Africa has remained quiet this week, with many players from the buying side spending time in Europe at this time of year. Some of these buyers have been attending meetings in mainland Europe with producers and traders to establish semi-contractual supplies for next year. These talks will form the basis of negotiations on quantities, quality, and prices for cargoes entering areas such as Ghana, Nigeria, Cameroon and Angola. Further pricing information will be available after this current round of negotiations takes place
With fundamentals remaining bullish, crude oil moving upwards to $92.75 for Dated Brent, and WTI following this trend at $89.20 per barrel, the future is possibly upwards for raw material costs. ICE gas oil front month is showing consistent levels to last week at around $765 in late trading, and vacuum gas oil prices are reportedly moving above last weeks highs, with the crack in Europe against Dated Brent now showing at over $8/t.
If the momentum for upward price revisions for base oils is gaining strength, will European and Middle East Gulf producers move swiftly and decisively to jack up numbers? Or will they slowly move price levels over a period of time, whilst protecting important market share?
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.