Europe-Mideast-Africa Base Oil Price Report

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Are chinks in the armour starting to appear? One or two mainstream European producers may be entertaining bids from buyers at levels which are below most offers in the European mainland.

EMEA FOB prices overall are higher for all types of base oil than in other parts of the globe, and European producers are resisting pressures to bring prices into line with what buyers consider to be acceptable levels.

Some players are saying that demand is not picking up as predicted for September, and stock levels remain higher than some producers would have imagined for the end of August.

Dated Brent crude has traded in a relatively narrow range during August, between $108 and $115 per barrel, but it may be on the rise again. WTI confuses as a marker, the delta between these two crudes now being extended to some $25 to $30/bbl. WTI was quoted around $87/bbl in early week trading. ICE gas oil front month closed Monday at $963 per metric ton, showing small gains against last week and reflecting the upward movement to crude levels. Feed stocks such as vacuum gas oil have risen in price over the last seven days.

Price ranges for API Group l base oils in Europe are widening to take account of the small degree of discounting which is starting to occur at the lower ends of the pricing bands. At the same time certain prices are being maintained at the higher ends, creating a wider spread. There was no talk this week of any sellers looking at increasing prices for Group l base oils, perhaps a real sign of impending weakness creeping into the market.

Prices are now between $1380 and $1420/t for light solvent neutrals such as SN 70 through to SN 150. Higher vis grades of Group l material are $1400 to $1455/t for SN 500/600, with bright stock holding firm at $1565 to $1650/t. These prices refer to FOB offers for mainstream production grades ex Europe and North Africa.

Russian barrels are foremost in the traders market at this time, with widespread availability. Prices moved off the top but have not continued the downward slide as some players imagined might happen. Levels are much the same as last week: SN 150 and SN 500 between $1255 and $1300/t, and heavy neutrals such as SN 900 around $1365/t.

Although one large producer is about to undertake maintenance at two refineries which will affect base oil production for up to six weeks, these events are not likely to affect the overall availability of base oils flowing from Russia and Belarus to ports in the Baltic and Black Sea areas. Lukoil uses a substantial part of its production for its own finished lubricants both within and outside Russia, and will have prepared to cover this part of its business, as well as regular and contracted customers.

Black Sea trade is flourishing with several Turkish buyers taking large quantities of SN 150 and SN 500, loading from both Russian and Ukrainian ports. Prices between $1225 and $1255/t CIF attracted buyers in droves, and now most Russian suppliers say they are sold out for September in this region, although some still have SN 150 in quantities of 2,000 tons to offer for the second half of the month. Prices for these smaller parcels are a little higher, around $1260 to $1275/t basis CIF north Turkish ports such as Gebze.

The Middle East Gulf remained quiet with some conflicting reports of Iranian SN 500 (or possibly SN 650) offered out of BIK port at very low levels around $1205/t. With Ramadan coming to an end, players expect this region to come to life in the next couple of weeks. Some suggest that Iranian trading is becoming even more precarious with added difficulties and disputes as to quantity and payments.

East and South African blenders have been making enquiries regarding supplies of Group l material from Red Sea and UAE sources. East Coast African receivers in Dar es Salaam and Kenya are looking at Group II base oils, possibly opening new markets for Far East Group II producers.

From Cote dIvoire to Angola, West Africa continues its quest for imported base oils. Many discount the smaller markets in this area and concentrate only on Nigeria.

Nigeria awaits the arrival of a number of Baltic cargoes with prices anticipated at new lower levels, due to the fall in the FOB numbers. Prices are expected around $1455 to $1495/t for the range of solvent neutral grades. with high vis SN 900 landed into Apapa port around $1565/t.

Further cargoes being loaded from mainstream producers are expected to arrive in Nigeria within the next ten days. These cargoes may all contain bright stock sourced from the U.S. One importer said prices for U.S. bright stock are much lower than the material loaded ex Europe. Numbers are reported around $1645/t basis CFR Lagos. The quality of this material has not been revealed, but its price tag is some $130-$150/t below premium European products.

Group II/II+ base oil prices have been hiked to match ex-refinery levels from sources. These grades are priced between $1485 and $1555/t for light vis products, and higher vis material coming into Europe is priced at ex tank levels of $1535 to $1730/t, depending on Noack and vis.

Group III receivers were braced for a round of increases to be announced from September 1, but to date only one Group III supplier has confirmed that prices will escalate by some 10 to 15/t. This seller claims demand is still outstripping availability, it has sold all production allocated for the European market through the end of the year.

This is surprising with avails promised from Qatar and ultimately Bahrain, but with a confident air, suppliers of 4 cSt, 6 cSt and now 8 cSt grades of Group III say demand for this group of products will continue to grow at levels which will soak up any material coming to the market.

The ranges for Group III extend even further than previously and are now 1380 to 1450/t for the lighter 4 cSt grades and 1390 to 1475/t for 6 cSt. 8 cSt is more available and will be priced at a euro equivalent over $2100/t. All prices refer to ex tank sales, with delivered prices reflecting transport charges by road to end users.

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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