Europe-Mideast-Africa Base Oil Price Report


The EMEA base oil market saw little trading activity this week, but there is negativity in the air. It may only be a matter of time before prices start to move downwards.

Many receivers are content with inventory levels, not looking to replenish stocks until after the summer. Many thought that European levels were bound for a fall, if only to bring mainland European API Group I prices into line with the Far East and U.S.

European prices exceeded other areas, particularly on the heavier grades such as SN 500 and bright stock, by as much as $100 per metric ton. High prices are now hampering the ingress of European base stocks into traditional areas of supply such as the west coast of India and U.A.E.

Buyers feel an adjustment is overdue, and the summer season in Europe will allow the market to realign to lower levels. How much lower prices should be is an ongoing discussion between sellers and buyers, with the latter calling for reductions of more than $200/t.

Lower fundamentals are being cited to support discounting from current levels. Dated Brent is trading in a relatively stable corridor between $108 and $114 per barrel. Feedstock levels are stabilising marginally above the lowest points, with low sulphur vacuum gas oil showing at $800/t and high sulphur VGO at $777/t. These numbers are certainly down from two months ago. Stability is suggested by ICE gas oil, which shows less than $15/t between front month and December, and is currently trading around $915/t for prompt dealing.

Base oil prices in mainland Europe remain in the same ballpark as last week, but with a distinct whiff of weakness surrounding numbers quoted today. Extreme highs, where premiums were added to published prices for forward and contracted sales, are disappearing. More product may be available in the coming months, with demand slacking off during the summer holiday period.

Prices for Group l light solvent neutral grades are now $1430 to $1470/t, heavier neutrals $1440 to $1485/t, and bright stock, still relatively scarce, $1570 to $1625/t. These numbers all pertain to offers and sales on an FOB basis ex mainland European and North African supply points.

Russian prices have stabilised or even bottomed at levels which reflect greater availability and the slightly lower quality for some Russian grades, close to levels last seen some three months ago. Baltic prices for SN 150 have stayed around $1360/t, but SN 500 levels have hardened slightly to around $1380 to $1395/t.

Black Sea trade has been slow again this week, with few sellers offering cargoes at attractive numbers to buyers who are showing little interest in purchasing light neutrals. There has been one large enquiry for some 14,000 tons of SN 150 or SN 100 per month, delivered into Gebze, but this enquiry has been treated somewhat disdainfully by most respondents.

Black Sea prices lie some $10 to $20/t above the same material being offered ex Baltic, but because most of the cargoes are offered on a CIF basis, it is difficult to determine the freight rates to establish factual FOB levels.

In the Middle East Gulf, Iranian selling levels have been cut by producers finding it difficult to find buyers for the quantities they want to export. Whether this is a function of lower demand, or whether it is an effect of the cumbersome purchasing arrangements which have to be borne when dealing with Iran, is not clear. Prices are $60 to $75/t less than their peak around $1360/t. All numbers for all grades, SN 150, SN 500 and SN 650, are sub $1300/t, basis FOB – even SN 150 has generated no buying interest at $1310/t.

Saudi Arabian prices are holding steady around $1340 to $1375/t for the FOB supply of SN 150, with SN 500 offered at $1360 to $1385/t, and bright stock at $1550 to $1600/t. Prices from Saudi refineries are generally more in line with European Mediterranean levels than Middle East Gulf numbers.

Iranian material has been offered in East Africa, both in bulk and in flexi-bags, but few takers are showing much interest, preferring prime material from Saudi suppliers or material produced in South Africa, which has become more available over the last few weeks.

West Africa has gone quiet with just a few enquiries for supplies into oddball locations such as Cameroon and Angola. The usual Nigerian business has a couple of enquiries circulating, but many buyers are happy to wait until after the wet season to see if prices will come off. Cargoes with Baltic supply are arriving, and one trader is attempting to arrange follow-up business using that same supply point. But with demand apparently sated in this area, there may not be much interest unless the prices are extremely attractive.

Prices delivered into West Africa remain as reported last week, but any new business, particularly if supplied ex Baltic, will certainly be some $50/t lower.

Group II/II+ base oils within Europe have not moved in price. Light grades from 100 to 230 vis are selling at $1490 to $1550/t, with the heavier products such as 600 vis and the light Group ll+ grades at $1585 to $1690/t. Some producers, for example Chevron and Motiva in the U.S., are experiencing plant limitations, and exports to Europe should meet satisfactory netback requirements. Oddly, Far East producers are looking at cutting prices in their home markets, but this may not be borne out with exports to Europe.

Group III becomes an enigma. Some importers are raising price levels from July1, while some others are offering discounts to regular buyerswhich is lowering ex tank prices. Some sellers might be at their limits for meeting requirements, while others could be facing competition from Qatar and Bahrain. These discounts may be precautionary tactics to keep buyers from straying from their regular supplier.

Prices therefore have opened up in ranges, with 4 cSt material sold ex tank at 1355 to 1410/t, and 6 cSt at 1385 to 1435/t. Some buyers confirmed that discounts are offered in the form of temporary allowances. These discounts vary from supplier to supplier, and are not offered to every buyer, but where applied appear to be 15 to 25/t.

Buyers are now in a position to hold back on purchasing replenishment inventory due to summer heat in the Middle East, summer rains in West Africa and the vacation season in Europe. Sellers have the choice to cut back production, as has been mooted by two refiners here in Europe, or to lower prices.

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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