Europe-MidEast-Africa Base Oil Price Report

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The hard facts of appreciating raw material costs throughout the EMEA base oil market have driven producers to state categorically that their prices have had to rise, and it appears that base oil numbers are set to climb back to acceptable realisation levels.

With Dated Brent crude showing strength at $126.50 per barrel in late Tuesday trading this week, and ICE gas oil climbing to $1034 per metric ton, these indicators are only adding fuel to the fire, when it comes to feedstock costs for the production of base oils. Further increases are imminent, even in the wake of defensive comments from buyers stating that demand is still low, and that base oils are mostly available throughout the European market. No matter how low the demand factor actually goes, no producer of base oils can continue to sell at levels which incur negative netbacks and eventual losses.

Prices have certainly firmed during the course of the last 10 days, and European levels for API Group l solvent neutrals have climbed by some $25 to $40/t over those noted last week. Levels for offers this week have been in the range of $1075 to $1120/t in respect of SN 100 and SN 150, and around $1095 to $1145/t for any available supplies of heavier neutrals such as SN 500 and SN 600.

Once again bright stock prices are not clearly cited by the usual suppliers, with some still trying to move quantities at what could be considered discounted levels between $1185 to $1220/t. Others have hiked their prices to around $1250/t, with short validities on these offers.

The lower prices for bright stock pertain to smaller quantities, which are either being sold FCA/FOB for flexi loading, or in trucks for local blending, whereas traders looking for larger quantities of this grade are having to face higher prices at the upper range.

Baltic/BlackSea
Apart for European mainland prices, Russian and CIS states material being exported through the Baltic has been finding a steady and plentiful array of buyers looking for supplies of SN 150 and particularly, SN 500, from distributors outlets in this region. Russian domestic off take is high due to the seasonal agricultural and end of winter demand, and with a number of major turnarounds still to take place within the refining sector, the availability of low cost export base oil is not in evidence.

Availability is tight with few sellers having to discount or even negotiate, to move sizeable quantities of this material. Two cargoes have been earmarked for supply to West Africa, with some 8 kilotons of mixed grades forming the core of one parcel. Additional material may be added to this shipment ex mainland Europe en route, although this has not been confirmed as yet.

Prices have ridden on the back of the increases applied elsewhere, and are now between $1040 to $1085/t for the grades SN 150 and SN 500, although there have been reports of a higher specification material being offered out at just above $1100/t.

The Black Sea regions have also followed in the same mode with product apparently becoming very short. Many Turkish buyers are spreading their purchasing catchment areas and are looking to North Africa and the Mediterranean for alternative supplies to the traditional Russian exports which are simply becoming unavailable. Freight rates are rising in this area with bunker prices climbing for short sea trade routes where smaller vessels are using gas oil as a main engine fuel.

With FOB levels adjusting rapidly upwards and shipping also on the rise, both offers and bids for scarce supplies are being touted at around $1120-$1145/t for SN 150 and SN 500 delivered on a CIF basis into main Turkish ports. These offers are few, and with Turkish buyers looking to Iran, Iraq, and Saudi Arabia for any available material, some commenting that the supply situation for base oils in this region has reached a critical point.

Middle East Gulf
In the Middle East Gulf regions a similar picture is evolving with Iranian prices starting to move upwards, possibly in response to European levels for SN 500 and SN 150 climbing over the last few days. SN 500 was heard offered for sale out of Bandar Imam Khomeini port, at $1093/t in respect of an FOB sale for a cargo of 3.6 kilotons, while SN 150 was again rumoured to be tight in the region and was being offered at around $1100/t FOB. Traders in United Arab Emirates have suggested that material has tightened within the Iranian market and that supplies of Turkmeni grades were not finding their way into the northern Iranian market as usual. Reasons for this possible breach of supply were not forthcoming.

Saudi Arabian prices would appear to have been pushed upwards over the last two weeks, since March 1, with delivered quantities within the Kingdom and other Gulf Cooperation Council countries showing increases of some $25 to $50/t depending upon grade and destination. Prices are in line with mainland European levels at between $1090 to $1150/t for the Group l neutrals, and bright stock in small quantities at $1270/t. All basis FOB or FCA.

Africa
East African and South African buyers have been busy trying to assess the current situation regarding supply of both Group l and Group ll base oil grades. A number of enquiries have been floated to suppliers in the Middle East Gulf areas, along with others to Far East supply hubs where the overall base oil market is still largely either in balance or long.

Prices in these regions still support imports, and both bulk and containerised parcels are being worked for April and May arrival into East African ports. Prices are reaching new levels, with Group l SN 150 and SN 500 being offered at between $1215 to $1265/t CIF main ports, with bright stock in containers reaching Dar-es-Salaam, Mombasa and Beira at around $1365/t.

On a slightly more serious note in West Africa, there are problems accessing suitable cargo quantities of material for import in this region, and a number of players are sending out enquiries to locations such as Venezuela, Brazil, and U.S. in the hope of tracking down material which can be used in the West Africa markets. Another option being investigated is the substitution of Group ll grades for Group l solvent neutrals, which although more costly on paper, could alleviate a tight supply scene for Group l material.

Prices for Group l material from either the Baltic or from other main European load ports will now fall into the following price bands for base oils arriving into West Africa. Levels will be ranged between $1155 to $1230/t CFR, with bright stock arriving at around $1325 to $1350/t. Other grades such as SN 900 from Baltic suppliers could be landed into Nigeria for example at around $1245/t basis CFR.

Group II/III
Group ll prices within mainland Europe, are neatly following the trend of the their Group l counterparts and have moved upwards by $20 to $50/t over the period, and are now deemed to be between $1165 to $1210/t in respect of the lighter vis grades with heavier material such as 500N or 600N selling at around $1275 to $1310/t. All basis out of tank sales from storage located either in Northwest Europe or the Mediterranean for Group ll grades have not firmed, due to lack of demand both in this region and in the Far East. However, sales are taking place at positive contributions according to sellers.

Group lll buyers expressed concerns that the market remains tight for supply even with additional production finding its way into the European arena. At the same time, these buyers are not so concerned since they also state that demand for finished products remains low, hence they do not require additional quantities of these grades.

In spite of contradictory comments, prices maintain at the same levels as previously stated with some importers suggesting that they would like to see increases coming perhaps April 1. In the meantime, they are content to accept current levels between 1345 to 1370/t for supplies of 4 centiStoke material, with the 6 cSt grades being supplied at 1370 to 1410/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.

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