Europe-MidEast-Africa Base Oil Price Report

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A quiet week for EMEA base oil producers, but less than quiet for buyers clamouring in vain to purchase stocks from producers, traders or resellers, who simply have nothing to offer beyond planned and contracted on-going business.

With Dated Brent crude oil breaking through $120 per barrel and reaching $122 for front month trading on Tuesday, pressure increases on all petroleum product prices throughout the EMEA region. ICE gas oil progressed upwards to around $1020 per metric ton for May, and low sulphur vacuum gas oil followed at around $865/t, maintaining the crack against Dated Brent at around $7, so the mood is somewhat tense. WTI remains detached from the European (and, some would say, U.S.) scenario, trading around $108/bbl.

Buyers maintain this is temporary, caused by the Libyan crisis. But no sooner does one situation involving a critical country end, than another one appears to open up. With Syria and Morocco now joining Bahrain, Egypt, Yemen and Tunisia in a fight for democracy, there may be other like-minded populations who will adopt a similar course of action in the near future.

This could have far reaching and longer term effects on the price of crude and products, and with feed stocks rising steeply, refiners could increase base oil prices to keep them in line with other refined goods.

Prices this week have changed slightly, adjusting lower levels upwards. Very little new business is being transacted, so reliance is made on future contracted supplies which have been announced this week to carry significant premiums over current prices, and indeed over prices published in the market which are used as markers for sales of future base oils.

More than one supplier has commented that base oil prices in Europe will have to rise over the next month or so by around $100 to $150/t, to maintain realisations and keep netbacks for base oils in a positive frame.

Prices are therefore noted as those currently seen in the market, and do not reflect offers for future supplies. Most forward sales have been limited by producers, stating that they will not offer or issue prices until closer to delivery or lifting dates. Some sellers increased prices effective April 1, but these are seen as historical adjustments which do not take into account the feed stock rises of the past two weeks.

Numbers for API Group I solvent neutrals are put in a range of $1190 to $1220/t for the light grades such as SN 100/150, and the heavier material is higher due to scarcity of SN 500 and SN 600 throughout the European and North African regions. These prices are now $1245 to $1270/t, with bright stock trading at large premiums over published numbers, between $1490 and $1555/t. These prices are based on current FOB sales of bulk cargoes, loading from mainstream locations in Europe.

Prices for Russian and other CIS material are closely linked to the numbers above, whilst being sold out of Baltic loading ports and the Black Sea. Prices here have visibly risen this week, and suppliers have been hanging back on selling, trying to gain benefit from escalating price levels. The new tariffs are established at $1160 to $1175/t for SN 150, and $1160 to $1210/t for SN 500, basis FOB Baltic Sea loading.

The really heavy grades from Uzbekistan such as SN 900 and SN 1200 have been hiked to higher levels, and whilst only one of these grades is available at any one time, the prices for short term forward supplies are at $1255/t and $1285/t for these grades. Black Sea supplies of light neutrals loading from Russian or Ukrainian ports are being offered to Turkish buyers at $1260 to $1275/t basis delivered CFR/CIF. Once again these receivers are baulking, commenting that prices should be some $100/t less.

In the Middle East Gulf region, very little base oil is witnessed coming out of Iran, whilst stockists in U.A.E. are still offering small cargo lots of SN 500 ex tank or FOB, at new high levels. Prices are now around $1320/t FOB for these supplies, but with few takers for local or west coast India destinations.

Many enquiries are generated from this region for supplies of European Group l, but with few opportunities to supply these requirements, traders are turning down many of these requests. Saudi Arabian barrels have been in demand throughout the Red Sea and Gulf Cooperation Council areas, but again with limited availability beyond normal supplies, enquiries are not fulfilled. Saudi prices have been adjusted in line with mainstream European levels, and are now estimated to be slightly above those applying within the European arena. SN 150 is now at $1200 to $1220/t, but with SN 500 at $1235 to $1260/t, slightly lower than Europe. Bright stock is estimated around $1530/t. All prices are derived on the basis of FOB Yanbu.

West Africa has seen many enquiries turned away, with traders and producers alike stating that they cannot provide enough material to cover the total demand from this region. The possibility of civil war in Cote dIvoire adds to the overall problems and shortage of supplies of base oil reaching this region. Nigerian receivers are hitting the market almost everyday, looking for alternatives to their normal supplies, but finding few.

Those fortunate enough to be receiving cargoes from Europe and the Baltic are paying new high prices for delivered mainstream Group l base oils, now estimated to be $1325 to $1350/t for SN 150. SN 500 will now be $1380 to $1425/t, and bright stock approaches $1650/t, all basis CFR delivered West African ports.

Group ll/ll+ price levels have increased this week, with some resellers applying price increases from April 1 and others applying increments in line with source production price hikes in the Far East and U.S. The full extent of these increases has not been determined yet, since it will take a few deliveries for reports from receivers to filter through. One importer has commented that a price rise of some $55/t would be applied to the light grades, with the heavier vis oils going up by some $80/t. Whether these rises will be sufficient to fully cover all cost increases remains unconfirmed, since there were rumours of another increase for these prices to apply from mid April.

Prices for Group ll grades are now between $1230/t at the light end of the vis scale, up to $1355/t for the heaviest grades.

The best description of Group III prices is that they are moving. Some importers have declared increments this week, and others, notably some Far Eastern producers, stated that prices are under review and any revisions will be advised over the next few days or weeks. The last numbers reported were for 4 cSt material at 1220/t and 6 cSt grades at 1240/t, but any new sales may be at substantially higher levels.

Middle East Gulf supplies of Group III grades are being sold at markedly higher prices than mainland European ex tank numbers. Prices in U.A.E. are $60/t higher than the euro-equivalent rate in Europe. It is difficult to see prices in Europe maintained at current levels much longer.

The EMEA base oil market is exceptionally tight, yet there are occasional pockets of supply from some Mediterranean producers which are quickly taken up by traders and other major receivers who buy and transport their own supplies independently. However there does not appear to be any respite to this short market in the near future. Demand is growing faster than production is increasing.

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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