Europe-Mideast-Africa Base Oil Price Report


The EMEA market is awash with rumours of base oil prices collapsing. But while some prices have fallen from their peaks, the market is still short, and demand is keeping most prices unchanged.

Refining margins remain excellent for base oils, so most producers are content to see prices stabilise. Some refiners have tried to raise prices again, citing refinery charges which are said to be rising.

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Prices for mainstream API Group l light solvent neutrals continue in the range of $1440 to $1510 per metric ton, with SN 500/600 between $1450 and $1535/t. Bright stock is still $1570 to $1680/t.

These ranges are still exceptionally wide. Some producers maintain that combination cargoes of prime material require large premiums over published prices. Others are selling at the bottom of the range to regular and contracted customers.

Suppliers in the Mediterranean and Northwest Europe are commanding prices above the norm for combination cargoes of three or more grades, including bright stock, which is in constant demand in West Africa despite the high price.

Group II/II+ in mainland Europe is holding up, with prices reaching highs applied from sources in Far East and U.S. Levels are now firmly established at $1490 to $1545/t for light vis grades, with heavier material selling ex tank at $1580 to $1690/t, depending on vis and Noack.

Many players are awaiting new avails of Group III which will stream from Bahrain and Qatar. Blenders in a range of ports are reportedly being approached by exporters from Qatar to test the waters about potential volumes and quantities of grades which will be imported into Europe from the Shell-Qatar Petroleum gas-to-liquids base oil plant. It is rumoured that a number of satellite storage points will be established throughout mainland Europe to accommodate imported material.

Imported and locally produced Group III prices are rising again, with some suppliers advising receivers that further increases will take effect from July 1. These increases vary from supplier to supplier but are generally considered between 20 to 30/t for both 4 cSt and 6 cSt material. This will put prices between 1385 and 1410/t for the lighter grade, and 1420 to 1435/t for 6 cSt, all on the basis of ex tank supplies, from Northwest Europe and Mediterranean storage points.

Russian Group I supplies appear to have been boosted for July. A number of planned cargoes for next month have destinations such as the U.S. Gulf, West Africa, Mexico and China as possible delivery options.

Prices have dipped for these grades. It is likely that suppliers had to move material relatively quickly during June and July, to avoid material backing up along the supply chain. It should be emphasized that these were not fire sales, but suited the traders and exporters due to slightly lower prices paid to Russian and Belarus refiners.

The overall effect has been to pull prices down by some $40 to $75/t, depending on grade and size of shipment. Levels for Russian SN 150 and SN 500 are now around $1360 to $1375/t, with further pressure being exerted by traders who are moving the large quantities outside the European boundaries.

Black Sea prices remain higher than Baltic, with few takers in Turkey. These buyers state that they are waiting for prices to come down before making cargo purchases.

The Middle East Gulf has thrown up some strange prices this week, with one offer for SN 500 ex Dubai at a new low of $1345/t, whilst at the same time another seller was showing numbers above $1400/t for similar quality material from another Emirate source. This material is all Iranian re-exports, purchased in local currencies and brought to UAE for storage and either domestic use or export sales to locations such as India and Far East.

Iranian exports have not been included in any reports this week, and activity may be waning. But with expectations of new Group III avails about to hit the market in the third quarter, many are talking about how the requirements for Group l will be resolved on a long term basis. Whether the European arbitrage will reopen, or whether more modern Group l plants in China and elsewhere in the Far East will be utilised to bolster supplies remains a discussion point.

Red Sea and East African trades have been light this week, with continuing pirate activity in Somalia still going unresolved. Cargoes of base oil are moving through this region with heavily guarded vessels, which raises freight rates. Two cargoes from Yanbu and another from UAE have been reported going into East Africa ports on the usual milk-run, where one vessel delivers to multi port receivers.

Prices appear to be attractive to sellers, with Group l SN 150 and SN 500 sold to East African receivers on a CIF basis at FOB plus freight, equating to around $1500 to $1550/t, and quantities of bright stock are selling at delivered prices between $1750 and $1800/t.

West Africa continues to try to push prices down. Receivers are claiming that cargoes should come into the areas at discounted levels commensurate with Russian prices, some $60 to $130/t below offers from mainland European and U.S. sources. Levels are $1550 to $1680/t, reflecting the Russian SN 150 and SN 500 at the bottom end of the spread, and the higher quality, higher FOB priced material from mainland Europe and North Africa at the other extreme. Bright stock from Europe and U.S. is still $1840 to $1880/t, basis CFR Lagos.

Crude has fallen below $90/barrel for WTI, and Dated Brent is now around $108/bbl. Petroleum product levels have fallen dramatically as well, with ICE gas oil at $873/t in early week trading, and vacuum gas oil spread between $734/ton for high sulphur VGO and $758/t for low sulphur VGO. Most feedstock values have been discounted by some 15 percent from the highs of a few weeks ago, and base oil buyers consider that these cost savings should now be passed on to users.

There is stiff resistance from refiners and sellers, but with Russian prices leading, perhaps pressure may yet be exerted on mainstream producers to follow suit and reduce base oil price levels. There are reports of lower demand for July with receivers sitting on the fence waiting until they feel the market has adjusted. Some producers are showing a degree of length with regard to supplies, but lower prices are not yet generally in evidence throughout the EMEA base oil market.

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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