Europe-MidEast-Africa Base Oil Price Report

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Its a steady yet firm week for the EMEA base oil market with a large number of enquiries from regular receivers and blenders in Europe.

There is a great deal of anticipation in the market that numbers are going up, accompanied by some knee-jerk enquiries which may be trying to beat any increases. Levels have not moved much from last weeks numbers, aside from some marginal adjustments to the lower numbers.

Some sellers offering material to deep-sea locations are running into problems attracting suitable vessels to complete export transactions. This is causing delays, frustration and occasionally further negotiations on prices.

Buyers cannot make deals work with the freight costs being offered, and sellers are unwilling to discount to take account of this factor. Some sellers are moving to increase prices, stating that as raw material costs increase, so the prices for base oils must also rise.

This attitude is buoyed by strong underlying fundamentals, with WTI crude oil prices breaching $91 per barrel and Dated Brent traded above $97. Consequently, ICE gas oil has moved above $810 per metric ton in trading this week, with associated material such as vacuum gas oil following. Fuel oil, in tandem with the distillate grades, has also moved upwards, not just as a direct effect from rising speculative crude levels, but also from strong demand in the cold northern hemisphere.

As noted, base oil numbers for mainland Europe are in approximately the same ranges as last week, with buyers stating that increases applied over the last month have already covered the new highs in raw material costs. According to buyers, base oil prices should remain as is. Suppliers are not of this opinion, citing new highs for crude and product prices which have still to be applied to the base oil slate.

One point raised by a couple of European buyers is that at no time during the last year, when crude and product prices have been going down as well as up, have base oil prices ever been in reverse. As a response, producers said this merely reflects the traditional base oil delay to other price movements, establishing a flatter price curve rather than spiking daily or weekly like other products in the market.

Prices for API Group I grades are $1,085 to $1,120/t for light solvent neutral grades, with heavier neutrals such as SN 500/600/650 between $1,110 and $1,150/t. Bright stock has started to rise to new highs and is now $1,385 to $1,460/t. All prices above are based on FOB main European and North African ports. (Clarity is still being sought on the results of the Egyptian General Petroleum Corp. buy tender, and also on the large 8,000 ton sell tender from Naftec in Algeria.)

Russian and Belarus prices are under review, but with difficulties such as ice breakers possibly required to lift prompt cargoes from these supply points, freight economics are against prices moving as high as traders in the Baltic would like. SN 150, SN 500 and SN 900 are available from suppliers in the region, priced around $990, $1,030, and $1,060/t respectively. There are many enquiries for these supplies from traders and some traditional receivers looking to move them to West Africa, the Middle East Gulf or India.

With the arbitrage from Russia to China once again opening up for rail-fed supplies of base oils, due to Far East prices rising by some $20 to $50/t, some sellers have been diverting availabilities away from Black Sea and Baltic supply routes in favour of delivered-at-the-frontier sales into China, through Mongolia. Prices are assessed at $940 to $970 for solvent neutral grades equivalent to SN 150 and SN 500, basis DAF, although there are reports of Russian refineries looking for higher prices.

Black Sea avails remain tight with Turkish buyers looking for any additional material at last months prices. Levels are now edging up to $1,060/t, basis CFR, for SN 150 delivered into Gebze or Istanbul, but few buyers are queuing to buy at these levels, at least at the moment.

Saudi Arabian producers have increased prices of Group I base oils to levels commensurate with mainland European supplies, with SN 150 selling at $1,055 to $1,080/t, SN 500/600 at $1,095 to $1,125/t and bright stock reportedly at $1,265 to $1,320/t, all basis FOB Red Sea and Middle East Gulf ports.

In the Middle East Gulf, there have been no reports of further Iranian export cargoes loading out of the southern ports. Supplies of Iranian material are still flowing into U.A.E., but this local traffic is being transacted in smaller cargo lots with local methods of payment. Prices ex tank, or FOB U.A.E., are in the range of $1,070 to $1,090/t for supplies of SN 500, with no reported SN 150 available for export. There have been a number of enquiries from this area to purchase SN 150 from Europe and Far East, but to date no cargo completion has been reported.

Eastern and South African buyers have come to the market with a few enquiries for supply of small bulk cargoes for discharge into Mombasa, Beira and Durban. These are reckoned to be price checkers, since supply of quantities of less than 1,500 tons total for three grades per cargo are difficult to organise unless suppliers are willing to perform a milk run, discharging various quantities at multiple ports en route. Prices for these supplies are relatively high, given associated costs of delivery, at $1,180 to $1,195/t for SN 150, $1,225 to $1,245/t for SN 500 and around $1,500/t for bright stock.

Similar levels are expected in West Africa for new cargoes although some parties are looking to move lower priced Russian and Belarus material into these areas, with very heavy solvent neutral grades being substituted for bright stock where possible. While this would not be acceptable for certain marine lubes, many lube blends in these regions are industrial or automotive, hence this practice can be readily adopted.

Prices into West Africa are now at levels of $1,155 to $1,210/t CFR for the range of light and medium solvent neutral grades, with SN 900 priced around $1,265/t. Bright stock pricing is moving upwards to around $1,480 to $1,520/t CFR West Africa. Competition for European bright stock cargoes will be fierce in light of the large quantity required to service the Egyptian General Petroleum Corp. tender.

Group II/II+ base oils have been moving steadily ahead on prices without causing any sensations. Levels are somewhat intertwined with Group I numbers; at the lower end of the viscosity scale, prices are $1,120 to $1,165/t. N500 material is priced between $1,140 and $1,210/t depending on viscosity index and Noack volatility.

Some Group III prices have moved upwards this week, with new deliveries of 4 cSt base oils recorded at 1,380 to 1,400/t. Strangely, 6 cSt material appears to be maintained at 1,425 to 1,450/t. It was clarified that future quantities of 6 cSt base oil would almost certainly be priced higher. These numbers refer to varying quantities of imported and locally produced Group lll base oils delivered to blenders within the European mainland.

Turnaround dates are currently being announced by some of the principal producers in Europe and the Middle East Gulf, with others electing to wait until after the summer before embarking on routine maintenance. No major upgrades or changes to production have been announced at this stage.

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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