Some EMEA base oil producers are adamant they will not sell below raw material cost realisations. Others are prepared to discount heavily to clear inventory prior to year end.
Overall, demand is still slow, but this is camouflaged by year-end sales activity. The whole region is down compared to twelve months ago, with some estimating a downturn in base oil demand of 8 to 10 percent for all base oil grades. Most offers for material to be cleared and loaded before Dec. 31 are being sold at close to break even.
Dated Brent crude oil is showing around $108 per barrel, slightly down from last weeks level. ICE gas oil is down by some $25 per metric ton, trading at $923/t for front month business. Vacuum gas oil has similarly traded down this week, with the crack against DB diminishing by $2.75.
The spread for API Group I prices within the European mainland is enlarged due to rebates, discounting and plain lower prices. Lower viscosity grades such as SN 150 are now $1000 to $1070/t, with heavier SN 500/600 between $1015 and $1080/t. Bright stock, perhaps due to going exceptionally long, is $1195 to $1235/t.
Bright stock has reversed its long-time position in short supply that resulted from demand both locally and in the export markets of West Africa, South America and the Middle East Gulf and India. All these areas have found either alternative supplies of bright stock or other options for increasing blend viscosity, in some cases by using high vis SN 900 and SN 1200 material.
The bright stock situation may be ameliorated by Egyptian General Petroleum Corp.s large bright stock requirement, but the tender has been awarded to two major European suppliers, who may or may not use their own material. The additional grades of SN 600 and SN 400 are understood to be awarded to a Greek producer.
Russian prices have once again come under pressure. Levels for the two main grades of SN 150 and SN 500 have been eroded by some $20 to $25/t, to around $960 to $1010/t and $975 to $1020/t respectively.
There have been cries of no more from the sources, and it is firmly believed that these levels can not plummet further due to the FCA prices paid in rubles and euros to the refineries in Russia, Belarus and Uzbekistan.
Even the higher vis SN 900, sold at a premium of $60/t over SN 500 a few months ago, is now priced only $10 to $15/t higher.
Black Sea trade has been very quiet with Turkish demand near zero. A few enquiries are circulating for spurious destinations; its possible some third parties are trying to break the sanctions imposed on Syria, but these would be risky transactions to say the least, with impounding of cargoes and arrest of vessels a possibility if these trades were attempted.
Prices are being discussed for supplies in early January from Russian sources, these being slightly higher than the latest offers heard at between $1020-$1045/t for quantities of SN 150 and SN 500, basis CIF Turkish ports. Of the reported high priced cargoes offered at around $1150/t for SN 150, only one confirmed loading has taken place, with another cargo of 3,000 tons offered for loading around December 8, being declined by buyers.
Middle East Gulf business has been quiet with a notable lack of Iranian SN 500 coming out for export. The price for one lot of SN 500 basis FOB BIK was heard around $1045/t, for a 3,000 ton cargo. A similar quantity of SN 650 was also offered for export to the west coast of India at an FOB equivalent of $1065/t. These prices and quantities were declined by Indian buyers, who are able to choose between these offers and indigenous supplies in local currency, and also highly discounted Far Eastern Group II.
Indian refinery exports have found their way into UAE, with two mixed cargoes of Group l SN 500 and Group II 500 N discharging in December. These movements show how fickle trade patterns can be; until recently, material generally moved out of UAE.
East Africa and South Africa are busy with a number of enquiries for imported material. Most are for quantities of European material in flexibags. Remarkably the delivered prices are not substantially higher than true bulk deliveries due to container freight rates being relatively low for these destinations.
Prices based on flexibags in containers from mainland Europe delivered into east coast of Africa are around $1215 to $1240/t for Group l solvent neutrals. Due to heating and handling costs, bright stock is a little higher, around $1390 to $1440/t basis CIF.
Receivers in West Africa are busy discharging large quantities of base oils into Nigeria and Ghana. Other locations such as Cote dIvoire and Senegal have also received parcels of Group l material from traditional suppliers, often in combination with Group l neutrals being shipped to South America.
Nigeria issued a number of enquiries this week for cargoes to arrive in February, and with the eagle-eyed buyers identifying the length of the bright stock market in Europe, many have included large slugs of this grade in their requirements. These enquiries are also being circulated through a network of traders to suppliers in the U.S. and South America.
Mainland European Group l grades are arriving into Nigeria around $1145/t for the solvent neutral grades, with bright stock still high at around $1445/t. This reflects the time lag between commercial and financial agreement, shipping and the arrival of the cargo Apapa, which in total can be as much as six weeks.
Russian Baltic prices into Nigeria are much lower, with light and heavy neutrals $1080 to $1125/t. Lower specification bright stock from the U.S. is as low as $1185/t.
Group II prices within Europe and the Middle East Gulf have succumbed to lower pricing pressure. In the Middle East Gulf, Far Eastern suppliers are keen to compete with Group l grades. Offers have been seen at $1135 to $1145/t for quantities of 150N, in conjunction with 500N at $1255 to $1270/t, all basis CFR/CIF UAE ports.
In Europe a similar scene is evolving with many Far Eastern Group II importers trying to maximise the quantities of material being offered through their distributors and agents. Prices have fallen for ex tank supplies and are now between $1165 and $1240/t for the light grades such as 150N, with heavier vis material between $1290 and $1330/t. These grades are sold in dollar equivalent prices in euros in the European markets.
Imported Group II grades from the U.S. tend to carry a small premium over other supplies, around $15 to $25/t in some but certainly not all cases.
Group III continues on the resplendent path of full utilisation of all availabilities from all sources. The European market cannot get enough of this base oil, and all stocks currently in tank have been allocated to receivers. Elsewhere the scenario is the same, with Middle East Gulf and Indian receivers all clamouring to share the new output from Bahrain and Qatar.
In Europe Group III prices are unchanged from last week, with the lighter 4 cSt grade at 1360 to 1385/t, and the heavier 6 cSt available ex tank at 1380 to 1420/t.
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.