Europe-Mideast-Africa Base Oil Price Report

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With buyers and sellers generally maintaining their respective positions on where prices should be, little change has taken place in the space of a week within the EMEA base oil market. Europe has heard talk of producers looking at prices more closely, and in some cases appearing to be willing to discuss how to meet buyers expectations, at least regarding particular grades of API Group I stocks.

The Group II and Group III grades seem to be immune as yet from these talks, and holding firm at the price levels set by importers, and by local European producers in the case of Group III oils.

Prices for Group I base oils are slightly lower than last weeks spreads and are now range between $1,320 and $1,390 per metric ton for the light neutrals such as SN 100 and SN 150. This pricing is spreading from Northwest Europe, where it was centered last week, to other areas such as the Mediterranean and North Africa.

The contagion appears to be applicable only to these specific grades, with other low-vis products such as SN 70 remaining at the higher end of the price spectrum. Heavier oils such as Group l SN 500/600 are largely the same as last week, between $1,355 and $1,455/t, although one supplier has hinted at a small element of discounting if a package could be arranged for SN 500 bundled with bright stock and a relatively large quantity of SN 150.

Bright stock remains high in demand, and still tops the pricing mound. Prices are between $1,555 and $1,640/t, perhaps a shade lower over the whole band than previous weeks but still very acceptable to sellers, and obviously to purchasers, too.

Group IIs coming into mainland Europe remain at levels which have drawn away from any Group I overlap. Levels are now at $1,465 to $1,555/t for the light-vis material available, whilst the heavier 500N type products are priced at between $1,525 and $1,730, the higher end reflecting the desirable Noack properties of some of these imports.

Mainland European Group III prices this week apparently stood still, against expectations from a number of players that levels would start to move in one unknowable direction or another. The market remains tight and short enough of these grades to support demand, whilst at the same time a deluge of material is expected to arrive into Europe from new Middle East Gulf sources, which may spell out the reason for these prices staying put.

There is also the factor of exchange rate movement between the selling currency in Euros, and the production currency which is ultimately U.S. dollars. The value of the Euro has fallen almost 10 points against the dollar since last week, and if this drift continues, sources suggest the market could see some temporary price hikes to take account of this situation.

Prices however remain in the spreads of 1,380 to 1,450/t for the light 4 centiStoke grades, with the 6 cSt material being levied at 1,390 to 1,475/t. These prices are based on actual out-of-tank sales.

Russian material available in the Baltic is sticking at levels which, although lower than seen recently, are showing no further signs of erosion. These are in a band of around $1,240 to $1,285/t for the two main grades, SN 150 and SN 500. The buying groups who were claiming that they had received offers below $1,200/t for these grades have been unable to substantiate these claims, and sellers in the Baltic ports have intimated that, if anything, they have managed to sell at slightly higher levels than some buyers claimed.

There are fewer avails of Russian and Belorus material for the remainder of September, with prospects for October to be discussed. There has been one firm commitment for a mixed cargo of SN 150, SN 500 and SN 900 to go to West Africa, loading around end of September. This cargo sold at the lower end of the pricing band, mainly due to the volumes involved, the relative ease of the transaction, and the lack of overhead costs such as banking charges, which can account for a large chunk of a traders margin in these type of deals.

Black Sea regions have been vibrant this week with a number of large enquiries for Russian material. Various parties have issued more than one enquiry for some 5,000 tons each of SN 150 and SN 500, making it difficult to see where all this material is suddenly needed. Some say that inventories were exceptionally low due to the high prices and expectations of lower numbers to come, and importers cannot wait any longer and must act now to replenish stocks.

This keen demand may be sustaining prices at higher levels than last week. Russian traders are now adding another $10 to $15/t to the lower levels seen before, and are keen to maximize if demand is as high as it seems. Prices are at $1,240 to $1,290/t for CIF delivered into northern Turkish ports, for SN 150 and SN 500. There are some lighter grades being offered such as SN 100, and heavier ones such as SN 900, but the uptake for the heavies in this region has not been so buoyant as from the Baltic.

Middle East Gulf areas re-awoke this week after the long summer break and the extended set of religious holidays. Buyers are back in force, looking for bargains from either local supplies of Iranian Group I material, or imports of South Korean Group II base oils, the latter of which can be competitive with the former when the quality-versus-price argument is made.

Iranian SN 150, SN 500 and SN 650 are still available for local and re-export sales. SN500 levels are around $1,200/t basis FOB Bandar Imam Kohmeini port, with SN 150 showing at a slight premium to that price, and SN 650 some $20 to $25/t lower, due to quality aspects.

Group II prices in the Far East are said to have stagnated somewhat with lower local demand from that region, including China. Hence, Asian producers are keen to move material into areas such as Middle East Gulf to compete against against the low-quality local production, or the high-cost Russian imports (and perhaps eventually, European base oils flowing into this region once again). Levels for Group II are ranging from $1,400 to $1,550/t CIF, for the 150N and the 500N grades respectively.

West Africa is showing interest in any European, Russian and U.S. cargoes which can meet either quality specifications where parameters and approvals are all important, or where price is paramount, can meet Nigerian or Ghanaian expectations. One Russian cargo has been booked out of the Baltic for September loading, in addition to cargoes which are loading at present and will sail within the next few days for Nigeria.

The opportunities from the United States are few, but bright stock can be made available in quantities not found in Europe, so buyers are scrambling to secure supplies into this region. Demand appears to have returned in a big way, and the receivers in this region are keen to purchase – not for inventory, but for immediate use, right at this time.

The prices range widely due to the various sources and qualities being delivered. Levels are between $1,485 and $1,525/t basis CFR, for Baltic cargoes of SN 150 and SN 500, with SN 900 from the same sources at around $1,580/t.

European mainland-sourced material now lies within the pricing bands of $1,450 and $1,545/t, and bright stock at around $1,750/t basis CFR West Africa discharge ports.

With fundamentals relatively unchanged, International Commodity Exchange front month gas oil was even with last week, at $939/t, and Dated Brent was again slightly down at around $111.25 per barrel.

Producers generally seem resigned to the fact the prices are showing weaker stances throughout the EMEA regions markets, but are being somewhat resolute, and at least trying to keep those prices high in the face of mounting buyer pressures.

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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