Europe-MidEast-Africa Base Oil Price Report

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The EMEA base oil market was treading water this week in the face of news from the Far East and other regions of increases of $30 to $60 per ton, mainly the result of rising raw material costs.

EMEA producers were poised to follow suit and have surely been trying to move prices higher, but the buying fraternity appears to have stood its ground. Sellers are asking for numbers some $20 to $30/t higher than last week, and buyers maintain they are not willing to pay these increased prices, at least not yet.

The result is that so far prices have not moved within the European mainland. Peripheral markets such as some parts of the Middle East Gulf and East and South Africa are certainly facing higher import prices from Far Eastern sources, but overall European base oil prices have remained static, perhaps awaiting the inevitable, but certainly not experiencing the knee-jerk reaction which could rightly have been expected.

A few producers ventured that the European base oil market takes more time to adjust to external drivers, such as rising feedstock values and the price of crude oil. U.S. producers have the benefit (or otherwise) of posted prices which can change levels almost immediately. The Far East refiners do not employ a posted price system, but they do announce price increases to the market as required, and those changes are normally applicable almost immediately.

With prices remaining static throughout the EMEA base oil market, the strangest aspect is perhaps that this is the region which is experiencing the largest increases to crude oil and feedstock values. Dated Brent is trading at $102.85 per barrel in response to Middle East unrest, with WTI continuing to increase the differential by trading at $85.70, almost the largest delta ever recorded between the two marker crudes. (The largest was $18/bbl last week.)

ICE gas oil futures had traded around $850/t for a number of days, but early this week levels dramatically increased by some $20/t, and front month gas oil now trades around $872/t. Vacuum gas oil is very short in the market. Levels were $735/t for low sulphur VGO and $718/t for high sulphur VGO.

With sellers wanting more, and buyers refusing to pay, prices for API Group l base oils in mainland Europe remain the same as last week. Light solvent neutrals are selling in the range of $1,085 to $1,130/t, slightly narrower than last week, with SN 500/600 at $1,120 to $1,165/t. Bright stock prices have held firm between $1,345 and $1,410/t. All these prices refer to bulk parcels sold FOB basis, ex mainland European and North African ports.

Baltic FOB prices for Russian, Belarus and Uzbek base oils have moved slightly from last week, but again sellers are having difficulty achieving desired levels, with rising freight costs adding to the dilemma of supply economics. SN 150 is offered at $1,035 to $1,040/t, and SN 500 is sold at a premium of some $25 to $30/t, at $1,065 to $1,075/t. Still available are the very heavy neutrals SN 900 and SN 1200, and interest is generated for these barrels, along with the other neutrals, from buyers in West Africa.

Turkish importers seek Black Sea availability of SN 100 and SN 150 from Russian traders, and enquiries for 2,000 and 3,000 ton cargoes of SN 150 are circulating around the market, Buyers are looking for prices in the region of $1,045 to $1,050/t, whilst sellers are confirming that these would be the FOB numbers to which freight of around $25 to $40/t would be added. Some buyers say they purchased material below these levels this week, but shipping information cannot confirm these purchases.

The Middle East Gulf is experiencing complexities which are difficult to understand. Sellers from Europe and other regions have offered rafts of material to receivers in U.A.E. and India where there appear to be shortages of SN 150 and SN 500 grades. The understanding is that very little material is flowing from Iran, and whatever is available is either lower spec or very highly priced.

Exports from Iran would now be around $1,125/t for SN 150 and some poorer quality SN 650, with no reports of any SN 500 available this week. Last quoted figures for SN 500 were in the region of $1,090/t basis FOB Iranian ports, although buyers acknowledged that these levels are not possible in todays market, since this level was posted at the beginning of January.

Buying expectations are not reflecting these levels as yet, and are in the region of $1,120/t and $1,150/t for SN 150 and SN 500 respectively, basis CFR U.A.E. ports.

Buyers seem reticent to take up these offers, either preferring to buy locally in the case of India, or perhaps waiting to see what happens on political fronts before committing to large inventories. With the civil unrest moving through Egypt, Yemen, Bahrain and Iran, there are a number of potentially damaging uncertainties facing this region once again.

Saudi Arabian producers appear largely unaffected at the moment by the activity in the region, and there are large private enquiries for delivery to Jordan, which could be transported to Iraqi receivers. These should be met by supplies from Yanbu refinery.

North Africa has seen two sell tenders. The first is from Algeria for some 8,000 tons of three grades of Group l material and is believed to be destined for the Far East. The second is the SAMIR tender from Morocco which was not awarded due to reserve prices not being met. Prices for this tender from one potential buyer, which were not confirmed, were bid around $1,065/t, $1,090/t and $1,295/t for SN 150, SN 500 and bright stock, basis FOB Mohammedia.

West Africa has been busy with a number of enquiries from the usual importers. There are those looking towards the U.S. to fill requirements, but it is believed that current prices in that area do not favour exports to West Africa. Buyers are looking at supplies from points such as the Baltic and Mediterranean, but the ideal combinations of grades are not readily achievable for the freight element to assist. Two-port loading is not economic, although two-port discharge with a larger vessel could be contemplated.

Prices for Group l material arriving in Ghana and Nigeria are $1,180 to $1,260/t, depending on quality and origin, with bright stock priced between $1,530 and $1,565/t, the same levels as last week.

South Africa has had a number of enquiries for Group lll material, and there appears to be a growing trend in that region to adopt Group lll grades as an adjunct to the locally produced Group l material.

Group lll prices remain firm throughout the region as a whole, with EMEA numbers seeing small increases from some sources, but others have not changed for some weeks, if not months. Prices are much as reported last week, with delivered levels between 1,375 and 1425/t for 4 cSt material, and 6 cSt oils between 1,425 and 1,455/t. These are based on truck and barge deliveries to all parts of the European mainland.

Group ll prices remain as per last report, at $1,140 to $1,225/t for light viscosity material, and heavy Group ll grades at $1,225 to $1,260/t.

With I.P. Week and a gathering for base oils programmed for London next week, there will be many discussions on where the future lies for the various aspects of the base oil market. It will be interesting to note the differences in attitudes among producers, sellers and buyers, and to assimilate the range of views of players within the EMEA 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.

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