Europe-Mideast-Africa Base Oil Price Report


Rumors abound that EMEA base oil price hikes may have come to an end, on the basis that demand is slowing and availability is improving for all types of base oil.

This is one view point, but in reality the market may not have suddenly realigned. There are still problems assembling API Group I composite cargoes with mainstream specifications at prices which will attract receivers in deep sea locations such as West Africa, India and Middle East Gulf.

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Laying hands on an extra truckload of Group I is not a problem in Europe, but purchasing large cargo lots for shipment to other locations is still very difficult unless the cargoes were pre-booked on a long-term basis.

Mainline producers who regularly supply areas such as Central and South America, Syria, Turkey and Egypt all appear to be sold out for June and most of July. The spot market is still extremely tight, but suggestions are being made that product might become available over the next few weeks. However no producers or suppliers are giving firm assurances that the supply situation is easing.

Prices have not moved since last week, but then neither has any oil. Group I solvent neutrals are still $1425 to $1445 per metric ton for the light grades, moving upwards to $1450 to $1485/t for the heavier grades such as SN 500/600, with bright stock still maintaining high values at $1590 to $1650/t. These prices are all based on FOB offers, supplied ex mainland European and North African ports from major producers.

Smaller lots sold by truck or barge will attract premiums of $40 to $60/t depending on distances and destination.

Russian material is still available ex Baltic loading ports for June loading, although the heavy SN 900 and SN 1200 are not available in large quantities. SN 150 and SN 500 are being offered around $1465 to $1470/t, FOB. With a number of interested parties looking to buy these parcels, sellers are tempted to increase prices. SN 500 remains scarce throughout mainland Europe, so whilst SN 150 will sell for around $1465/t, SN 500 may carry a premium to that price of $15 to $20/t. With only around 500 tons of SN 900 available for June loading from one supplier, its price is now around $1575/t.

Black Sea enquiries are flying all over the market for 2,500 to 3,000 ton lots of light Group I neutrals, but many of these enquiries have been duplicated. So whilst this market would appear to be buoyant, there are only perhaps two or three supplies available for June delivery. Prices vary widely, depending on whether you talk to sellers or buyers. Realistically sellers are looking for FOB levels around $1455/t for supplies of SN 150.

In mainland Europe, Group II/II+ grades have coasted over the last week, although one week is not a sufficiently long period in which to gauge whether Group II prices have moved again. We believe levels are around the same as last week, without the June 1 hikes which were suggested. No price rises have been reported as yet. Numbers for Group II grades on an ex tank basis lie between $1430 and $1475/t for the lighter end of the spectrum, with the heavier vis, excellent noack material at higher levels, around $1545 to $1615/t.

Group III material is still scarce within Europe, and buyers are always on the look-out for extra material, but no increases were announced at the beginning of the month. One producer is scaling back for the next few months to revamp part of the production unit, so until material starts flowing from Middle East Gulf producers, the market remains extremely tight. Prices, however, remain in the ranges of last week, with 4 cSt grades sold at $1350 to $1365/t, ex tank Northwest Europe and Mediterranean storage. Six cSt material is slightly higher at $1380 to $1395/t. Those offering an 8 cSt grade are requesting $1420 to $1435/t, although this grade is very limited in availability due to some importers not producing this higher vis grade at this time.

Iranian material is currently being loaded, with destinations such as the west coast of India and Vietnam. UAE is still taking in much of Irans SN 500, but it is unclear how much gets re-exported and how much is utilised within the Emirates. Prices for exported SN 500 moved up around $1400/t, FOB southern Iranian ports, which brings this material into the league of European exports. This may open the doors for any Russian and mainstream European avails which may surface over the next few weeks for supply into India and UAE.

Saudi Arabian prices were reported stable at $1310 to $1345/t for SN 150, with SN 500 at $1315 to $1335/t. Bright stock is priced in line with European levels at $1585 to $1630/t. These prices refer to supplies on an FOB or FCA basis. Delivered prices are in line with levels offered from Iran and Mediterranean suppliers to Middle East destinations.

East and South Africa have been reserved this week. There are still a number of enquiries for Group III grades to be imported into this region, coupled with specialised supplies of Group I material in flexibag containers, possibly destined for inland blending in countries such as Zaire and Rwanda.

West Africa has issued a few sparse enquiries for Group I supplies into Ghana, Togo and Nigeria, with some importers insisting on having higher spec material including quantities of bright stock with SN 150 and SN 500. These receivers ruled out Baltic cargoes which appeared lower in price, but which now are comparable with mainstream supply. There are few if any supplies of composite grade cargoes available in the European or U.S. markets which are not already earmarked for regular buyers within West Africa.

Offers of Russian material have been declined, but reckoning is that sooner rather than later these options will be reopened, given the limited supply situation.

Prices are still high for this region, although many receivers hope that base oil numbers are going to fall soon. Levels are as published last week, with Group I neutrals between $1575 and $1600/t and bright stock landed CFR around $1765 to $1800/t.

With crude oil prices staying put around $114.80 per barrel for Dated Brent, and WTI showing around $98/bbl, buyers are perhaps entitled to shout for base oil prices to stabilise or come down. And with ICE gas oil at levels close to last weeks trading at $941/t, there are some echoes of stability. Vacuum gas oil shows a similar curve to ICE gas oil, and maintains a smaller crack this week against Dated Brent. With talks of OPEC opening up the tap for more supplies of crude oil and the immediate threats diminishing from Libya and other Middle East countries, there could be signs that oil prices have peaked and may retreat.

Base oils are entitled to join this club apart from one aspect of membership, that being the supply/demand ratio which ultimately decides the price of base stocks. With Group l production falling further in favour of Group II and Group III supplies, there is growing demand for a material which is becoming relatively less available. This alone could determine prices for Group l base oil in the future, and the market could see a transition where Group l prices remain high along with demand, whilst copiously available Groups II and III grades may see prices fall.

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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