Europe-MidEast-Africa Base Oil Price Report

Share

Its been a tepid week for API Group I base oil sales in the EMEA regions, with Europe showing little interest to sell or buy outside of contracted quantities.

The elation, followed by deflation, over the EU economic situation has tainted mainland Europe, with ripple effects starting to be felt in Middle East, East African and South African markets.

Buyers have been coming to the market with enquiries, but when prices are offered these window shoppers either decline or disappear altogether. One or two traders were offered export cargoes at special discounts, some $50 to $100/t below last weeks market levels. These offers are not confirmed, and these levels are not included in this weeks spreads.

Prices for Group I material have been pushed lower, and sellers are now actively trying to move material out of stock. The problem is exacerbated by lack of any real arbitrage opportunities for European material.

Levels now are between $1085 and $1135/t for all grades from SN 70 through to SN 600. The narrowing of the range is possibly the effect of producers not being able to move any one particular grade from the slate. Only bright stock is maintaining a relatively high profile at $1340 to $1375/t, but it is still down from last weeks levels by some $30 to $40/t. These prices apply to FOB offers for bulk cargoes which have been made ex mainland Europe or North Africa by mainstream producers.

Demand is certainly there for bright stock, with Egypt and Nigeria looking to buy available material, but producers are very aware that by selling this grade alone or with small quantities of solvent neutrals, they are creating a stock problem for other grades which may be difficult to solve.

European local prices for smaller deliveries made by truck and rail have come under intense pressure. Some buyers are buying in flexibags from export sellers, a practice that is becoming more acceptable, since savings against local prices can be as much as $100/t for solvent neutral grades. Prices for local Group I neutrals have thus fallen by some $150/t over the last few weeks, and may eventually fall into line with export numbers.

Two main producers are talking again about cutting back production, but with levels as they are at the moment, there is very little scope to reduce output further without bringing refinery trains to a complete stop.

Russian Baltic prices have again come under the hammer with buyers insisting on lower FOB levels. The problem is that Russian refinery prices, plus freight to the terminals in the Baltic, are now too high to compete with selling levels demanded by buyers. Some Baltic traders have stopped purchasing for the moment, and will wait to see how things pan out. In the only deal which appears to have been put into place, a Baltic re-seller has adopted the role of trader, and has completed a direct sale into Nigeria. Offers are heard between $1035 and $1070/t for SN 150 and SN 500, and around $1085/t for the SN 900 heavy grade.

Black Sea prices are in the same boat with a number of enquiries for supply of both SN 150 and SN 500 into northern Turkish ports, but nothing much is taking place. Turkish buyers think the market has further to fall. Prices being offered are slightly lower than Baltic rates, due in the main to lower transportation costs to Black Sea ports.

Russian material ex Baltic has been offered into UAE and west coast of India, but prices for the lower quality material have not found favour with buyers as yet. Numbers were heard in the region of $1135 to $1160/t for a combined cargo of SN 150 and SN 500. The 7,000 to 8,000 ton cargo was comprised of the two grades. These offers were possibly made by traders seeking opportunities with Iranian material.

Iranian exports have declined to almost zero, due to a major turnaround at the Sepahan facility in the north. UAE still hosts some remains of export cargoes from Iran, but this material is being offered locally rather than for bulk export, due to the small quantities involved. Replenishment export quantities are expected to restart during the second half of December after local commitments are fulfilled within Iran.

Saudi Arabian prices have fallen back almost in line with European mainland values, but are showing some resilience within the region. Perhaps due to the lower availability coming from Iran, and the alternative Russian offers carrying lower specifications, there is an opportunity for the Saudi producer to capitalise on supplies of Group I material. Prices are around $1120/t for SN 150, $1135/t for SN 500, and bright stock at around $1385/t, all basis FOB or FCA.

West Africa, and Nigeria in particular, is still playing the waiting game, but some buyers have realised that the market may not have much further to go down and will purchase Russian exports from suppliers in the Baltic on a direct basis.

Many receivers in West Africa think the market has reached its nadir, and this is the time to replenish inventories prior to year end. They anticipate that producers and sellers will be willing to show keen prices, to achieve lower refinery stocks prior to year end.

Offers made early this week for mainstream production are $1260 to $1285/t for the range of solvent neutrals, with bright stock around $1415 to $1425/t. Prices may end up slightly lower, or even slightly higher, depending on cargo size and freight.

Group II products have fallen back to levels around $1205 to $1255/t for the light vis grades, with the heavier grades coming in between $1265 and $1340/t, all basis ex tank sales Med and NW Europe.

Group III continues its stable pricing journey, with little movement in numbers reported this week. After a little trimming of prices at the end of October, prices are set to remain firm through November with some talk of small increases for the higher vis grades from one or two importers. Current levels are 1365 to 1385/t for the 4 cSt grades available in Europe, and 1375 to 1410/t for 6 cSt.

Perhaps a little comfort filtered through in early week trading with Dated Brent crude oil falling back to around $108.60 per bbl, and to bolster this fall, WTI crude did its best to maintain the delta between the two crudes by dropping to just above $90 per bbl. Other indicators such as ICE gas oil have not reacted to the crude dip, perhaps due to demand for this type of product growing due to the advent of colder weather in Europe and the U.S. Levels in early week trading were the same as posted last week, around $950/t in front month trading.

These levels are not lowering raw material costs for base oils, such as VGO, which is being maintained at relatively high levels. Producers state they are coming close to break even on realisations for base oils and will not have much more room in which to manoeuvre given the current climate in the market.

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.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other