Europe-Mideast-Africa Base Oil Price Report

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EMEA reflects the global base oil scene, with less demand and greater availability of all types of base oils replacing the tight availability of the past few months.

Sellers are unwilling to discuss what direction the market might take, but buyers are seizing every opportunity to argue that numbers have to fall. In fact, some prices at the lower end of some ranges have actually firmed this week, but the higher ends are eroding.

Crude oil has again been trading in a relatively narrow corridor, with Dated Brent showing around $114 per barrel, and WTI about $95/bbl. Product prices have stabilised; ICE gas oil is trading at $958 per metric ton, slightly higher than last week but merely keeping pace with crude. Vacuum gas oil is slightly higher, around $790/t for high sulphur VGO, up to $825/t for low sulfur, with the crack remaining healthy around $14/bbl against Dated Brent.

Feedstock prices are showing stability within a given range, and the same pattern is applicable to base oils at this time.

European levels for API Group I base stocks are in approximately the same ranges as last week, with perhaps a little trimming at the top and bottom of the price bands. Light solvent neutrals are largely available, offered at $1425 to $1475/t. A few mainstream suppliers are willing to adjust prices downwards by some $10 to $15/t on combination lots of light and heavy neutrals. Heavier neutrals such as SN 500/600 are not being discounted, since these grades are tight and are priced between $1445 and $1485/t. Bright stock supply, scarce due to keen offtake levels with receivers such as Egyptian General Petroleum Corp. and Nigeria, remains between $1585 and $1650/t.

Russian Baltic supplies paint a more complex picture. Some suppliers are sold out for July, but others are offering material for prompt supply at slightly lower levels than seen previously. Further supplies of base oils may be coming down the line, and with ullage at a premium in the Baltic, some sellers may de-bottleneck at shore tank level. Prices in the Baltic have fallen from their highs to $1345 to $1365/t for SN 150 and SN 500.

Black Sea prices have mellowed, but not enough to excite the raft of Turkish buyers who claim to be controlling the market. Sellers have made some concessions to CIF prices and are offering SN 150 for around $1390 to $1400/t, basis delivered northern Turkish ports, in lots of about 2,000 to 3,000 tons per cargo.

In the Middle East Gulf, Iranian prices for Group l have dropped considerably from recent highs to facilitate export sales of SN 500, 150 and 650. Levels in U.S. dollar terms are now $1265 to $1290/t basis FOB BIK. Iranian producers have tried to maintain higher prices, but there few takers are willing to pay any premium over $1300/t for any of the grades. Traders in U.A.E. report that few transactions are carried out using dollars. Most export cargoes are bought in local currency on a basis of cash on receipt of goods, or in some cases a very short credit period after agreement to terms, i.e. before lifting the cargo.

This area experiences a considerable downturn during the summer months, and with the monsoon affecting the west coast of India, demand is lacklustre for all grades.

A few European cargoes have arrived in the Middle East Gulf, with one supplier eventually landing a mixed-grade cargo into a blender in U.A.E. The cargo was postponed a number of times, due perhaps to more attractive prices elsewhere, such as South America. But with the demand scene changing in Brazil, Argentina and Venezuela, European material may return to more traditional receivers.

East African buyers have received a number of cargoes of U.A.E. re-exports, both in bulk and flexi-bags. Prices are competitive, around $1430/t for SN 500 and SN 650, with SN 150 selling around $1455/t, basis CFR East African ports. Material is also being sold from South Africa into these areas at similar price levels, providing alternatives to Saudi Arabian, Mediterranean and Far East suppliers.

West Africa is quiet due to the rainy season, although one or two cargoes have reached Senegal and Cote dIvoire, where civil strife has curtailed supply operations over the last few months. Ghana tender supplies are continuing under contract, and Nigerian receivers have Baltic and Mediterranean cargoes arriving during the next few days.

In Nigeria a number of buyers are refusing to pay the numbers being asked. Due to the lengthy time between loading and delivery, buyers are asking that prices be renegotiated nearer to delivery date, causing a headache for traders who are buying firm on FOB and reselling on an agreed CFR basis.

A couple of buyers may hold suppliers to ransom, finding any small discrepancies within letters of credit to cancel payment unless prices are altered downward by as much as $75/t. New offers are $1570 to $1600/t for Group l solvent neutral grades, and $1710 to $1745/t for bright stock. These levels are much lower than previously offered, and it is difficult to fathom, particularly for bright stock, how they will be achieved, unless FOB levels in Europe or the U.S. drop dramatically.

Group II/II+ prices in Europe are under the same pressure as Group I, except that these grades remain tight from a supply viewpoint. Prices are $1490 to $1565/t for the lighter vis Group II grades, and $1575 to $1690/t for higher vis products such as 500/600N and Group II+ grades. All prices are basis ex tank supplies.

As the Group III market eagerly awaits the arrival of new production from Qatar and Bahrain, both domestic and imported availabilities continue to be sold out. Rumours continue of some local producers attempting to offer loyalty discounts in order to preserve their business in the face of imports from new sources. Importers in the main have not adopted these discounts, and some appear content to supply at 1355 to 1410/t for 4 cSt material, and 1385 to 1435/t for 6 cSt. All prices refer to ex tank sales located in NW Europe and Mediterranean satellite storage points.

These prices are at the high end as some Far East importers in Europe are selling some 20 to 30/t lower. It will be interesting to see where the newcomers pitch their prices in relation to those already on the ground, and also to judge the extent of brand loyalty. Entry strategy will be of utmost importance for the new Middle East Gulf supplies, which according to supply plans should commence during Q4 of this year.

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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