Europe-MidEast-Africa Base Oil Price Report

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With holidays bridging the few working days left this year, not many players are around to push base oil business in the whole of the EMEA region.

Unsubstantiated reports of sales of API Group I grades at prices far below confirmed offers or completed deals are circulating in the market. Some say unscrupulous buyers may be the sources of the rumours.

The few sellers around this week say they will not consider lowering the bar further to accommodate opportunistic buying at unacceptably low levels. Sellers are dismissive of the rumours and are calling for substantiated evidence of such offers. One producer said he would wait more than a month with stocks in tank rather than sell at a loss. Others are equally adamant that they will not sell at levels below raw material costs.

European Group I prices are unchanged from last week, as few if any mainstream deals have been pushed through this week. Cargoes now being loaded were negotiated some time back, and there are no reports of prompt selling this week for lifting before year end.

Group I solvent neutrals remain at $1005 to $1055 per metric ton, with heavier grades such as SN 500/600 at $1015 to $1075/t. The spreads for these grades indicate the willingness of a few producers to bring prices right to the lower limits, whilst the majority are maintaining higher levels. Bright stock is in a tighter range, between $1210 and $1245/t.

The flexibility of some producers versus others depends greatly on the basis for cost allocation and how margins for base oil are calculated. Some refiners push fixed and variable costs together, and allocate these against different petroleum product sales, whilst others levy higher costs to markets carrying the largest margins, and vice versa. There are almost infinite variations for cost allocation, which allows some players to offer lower prices for the same material.

The Baltic and Black Sea areas have been rife with rumour and aggressive selling. Russian SN 150 and SN 500 have been reported selling around $880/t ex Baltic for large cargo-sized lots. These sales were made directly to traders who can quickly move substantial quantities of base oils to deep-sea locations.

This apparent inventory clearout has divided the Baltic market, with some distributors refusing or indeed unable to compete with these numbers. One commentator reckoned that these sales were aimed at selling large slugs of material quickly, protecting the local domestic European market from an erosion of prices were these quantities to be dumped into the regional markets.

The bottom line is that some sellers in the Baltic have plenty of availability for all grades, but can only offer at higher levels around $930 to $955/t basis FOB. Others are short on one grade and long on another, but with replenishment arriving in January, prices are unlikely below $900/t.

In the Black Sea the same major seller offloaded some 6,000 tons of mixed SN 150 and SN 500 for deep-sea export out of the region. Other quantities of similar material are on offer at $945 to $960/t basis FOB from other suppliers, but the local market has declined these offers in light of the lower prices known to be possible. Some buyers have requested offers from the major seller for the local Black Sea market around $900. These requests have been dismissed as too low for the local scene.

Receivers for the Black Sea cargoes could be based in either the west coast of India, or the Middle East Gulf, possibly U.A.E. These quantities could bolster the market in the Middle East Gulf for Group l base oils and could be competitively sold against supplies from Iran. The Iranian supply train has shown signs of collapse due to sanctions and associated issues, but recent FOB prices have been offered at new lows below $1000/t (equivalent).

East Africa and South Africa have been very quiet over the last ten days, with few reports of new base oil business, either imports or local distribution.

West Africa has been the hot spot for cargoes arriving over the past few weeks, with an estimated 85,000 tons arriving into Ghana, Nigeria, and Angola. More cargoes are presently on the water, with other quantities loaded from Rotterdam and the Baltic for January arrival.

As usual spot buyers, particularly in Nigeria, have been quick to spot year end bargain trading, along with the clearance selling out of the Baltic. Delivered prices are in a wide range, with the lowest numbers around $1010 to $1025/t CFR for Russian quality solvent neutrals. Offers are slightly higher when mainstream European sellers were prepared to move inventory, at $1045 to $1065/t, with bright stock around $1300 to $1320/t CFR. Cargoes of bright stock from Brazil and United States are being negotiated for January despatch, but with distinct variance on the quality of these sources. The Brazilian material is European-compatible whilst the U.S. material is lower quality. Price differential between the two grades could be as much as $80/t.

Group II prices in both Europe and Middle East Gulf have been stable this week, once again with few reports of any significant business. Prices have come under pressure following the Group l decreases and are soft heading into the New Year. Availabilities are good with Far Eastern production still long for the Middle East Gulf, with these grades now openly competing with Group l on price.

Group III levels remain as previously reported. Few deliveries by road truck are being made during this period with many blenders on short time operations, and with other regions slow due to holidays in Europe and Africa.

With few trading days this week, activity on the exchanges has been low and crude levels stable, around $108.60 per barrel for Dated Brent. ICE gas oil front month has shown signs of increasing demand with end of last week trading at $914.50/t, an increase of some $16 over last week.

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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