Europe-MidEast-Africa Base Oil Price Report

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Further downward pressure continues to be exerted on EMEA base oil prices, particularly for material from within the European mainland.

Dated Brent prices have fallen back to around $108 per barrel, which has possibly contributed to ICE gas oil front month numbers being around $50 per metric ton lower than one week ago, at $949.50/t in early week trading.

Many producers are concerned about market share, since many boundaries have been broken within the last few weeks. For example, product from Eastern Europe is finding its way into western regional markets due to low demand at home. This ingress of nondomestic material has opened up the region as never before, with cross trading now the norm.

Prices within mainland Europe have ducked again, but not by much. API Group I light solvent neutrals remain at $1025 to $1055/t, with heavier neutrals coming in at $1045 to $1075/t. Bright stock has dipped ever so slightly this week and is now $1265 to $1299/t – certainly below $1300, as one buyer said. These offered levels apply to FOB prices ex mainland Europe and North Africa.

The price for what is sometimes termed domestic business, which is the smaller end of the market where blenders receive delivery of base oils by truck, barge or rail, has become confused with prices offered for export markets. Overlapping has occurred due to some producers offering local prices at export levels just to move material out of tank. The averages of these prices are only marginally above cargo FOB levels, and quite possibly do not cover the extra handling, transport and storage costs of $25 to $60/t which this business necessarily incurs.

Russian and Belarus prices in the Baltic remain static. Traders state there is nowhere for the prices to go, since they are at rock bottom compared to ex-refinery prices within Russia, with little chance of a rebound upwards.

Levels for SN 150 and SN 500 ex Baltic loading ports remain at $1015 to $1045/t, depending on quantity and quality being shipped. SN 900 is offered around $30/t above the high for the lighter neutrals. There have been rumours of prices below $1000/t for both SN 150 and SN 500, but these have been vigorously denied by resellers, claiming that at those levels, sellers would be losing some $20 to $50/t.

Availability remains reasonably tight. One Russian producer who sells directly into the market said there would only be three cargoes of some 3,000 tons each of SN 500 available between now and end January. Other sources have said they will only source and provide avails if the prices are high enough to allow resale at a margin. They will not procure and store in tank as normal without having commitment from buyers. This could slow down the market in this region with cargo quantities taking up to eight weeks to arrive into shore tank from FCA supply points within Russia.

In the Black Sea there appears to have been a mini revolution by one or more suppliers who dug their heels in and set prices much higher than previously reported. One parcel of SN 150 is confirmed to have sold at $1160/t basis CIF northern or eastern Turkish ports, with a second early December parcel on offer on a non-negotiable basis at a similar price. There are rumours of avails being tight in this area, particularly for SN 150, with few new cargoes available until February. These instances may spur other suppliers to maintain offers at higher levels, but at the moment the spread for SN 150 and SN 500 cargoes of some 3,000 tons is $1045 to $1160/t basis CIF Black Sea destination ports in Turkey, Romania and Greece.

The Middle East is badly affected by the civil and political problems in Syria and now Egypt, with a total ban on all petroleum products going into Syria. There are rumours are that some supplies of base oil and other petroleum products from Iran have found their way into Syria. How this was accomplished has not come to light, but large cargoes of base oil loaded out of the Middle East Gulf which were destined for Turkish ports may have been part of the act.

Iranian base oil exports remain thin in light of threats of all-out sanctions because of concern over nuclear weapons capability. Blenders are wary of using Iranian base stocks, and users of these oils may divert procurement away from these sources and look at alternatives from Europe or Far East.

Prices are becoming more difficult to define but the latest movements into the west coast of India suggest that FOB levels ex southern Iranian ports for 4,000 to 5,000 ton cargoes are around $1080 to $1095/t for SN 500, with SN 150 around $15 to $20/t lower.

There have been no new reports regarding price movements from Saudi Arabian producers, but with December 1 looming, there may be revisions in the pipeline.

East African receivers have taken in a number of mixed cargoes, both in bulk and in flexibags, but generally they are buying smaller quantities than the norm, perhaps in anticipation of lower prices or to avoid high year-end inventories. Demand is stated to be reasonable, but not at the highs of some five years ago.

West Africa buyers remain on the lookout for any year end bargains. Some have reported taking interests in Group I cargoes being offered from the U.S. No confirmation has been received of any completed deals, but one large cargo has been assembled from the Baltic with additional quantities from a secondary loadport in Northwest Europe.

Prices for material arriving into Nigeria, whether from Russian or mainstream suppliers, are $1135 to $1175/t for the range of solvent neutrals, with bright stock where available around $1380 to $1385/t.

Group II imports maintain relative strength in the EMEA markets, with more material imported into the Middle East from Far East suppliers. European Group II usage is still marginally growing. New formulations are calling for high viscosity index base oils, and Group II oils are there to take up the slack.

Light grades are being sold ex tank at $1195 to $1255/t, which one distributor called acceptable given the state of the European base oil market. The heavier vis grades can be found at $1320 to $1350/t.

Group III prices remain firm, demand is high, and availability still relatively tight. It continues to be sold at 1375 to 1390/t for the lighter 4 cSt grades, and 1380 to 1415/t for the 6 cSt material, in the European mainland market. This market is so attractive that some suppliers fear more material is on the way, making these prices unsustainable.

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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