Equilibrium in the EMEA base oil market would be a welcome scene for both producers and buyers, as long as sellers see acceptable margins and buyers can access sufficient quantities and receive a decent contribution from sale of finished lubricants.
Other parts of the crude slate are relatively stable. ICE gas oil front month numbers are trading marginally higher than last week, around $1007 per metric ton. Brent crude continues to hover around $118 to $119 per barrel, with the heat from the Iranian stand-off turned down a little. The vacuum gas oil crack is still high, and with firm demand for this feedstock, producers could try to push base oil prices higher.
On the other hand, base oil prices may already be high enough to cover this raw material cost blip, as API Group l is being sold at acceptable netbacks to refiners and distributors alike. More product appears to be available in all parts of the Europe and also from Mediterranean supply points.
Price ranges have narrowed since last week. Group l light solvent neutrals are $1310 to $1345/t, with higher vis neutrals such as SN 500/600/700 offered at $1325 to $1365/t for FOB sales. Bright stock continues to weave an unusual pricing course, with some smaller parcels, often shipped with other grades, offered below heavy neutral prices. The price range for bright stock therefore bridges the band for SN 500, and is now $1355 to $1435/t.
These Group l prices refer to bulk FOB sales offered or loaded from mainstream European supply points either in the North, Mediterranean or North African areas.
Baltic & Black Sea
Baltic supplies of Russian and Belarus base oils are rising. Distributors in the Baltic are still paying high prices for FCA sales of material, but domestic demand is being sated, and more material may be marked for export.
Prices are still relatively high compared to mainstream European numbers, but sellers are entertaining bids from traders who may move material to locations such as West Africa, Central and South America, the Middle East Gulf and India.
Offers are tempered by availability of the two main grades, SN 150 and SN 500, at $1275 to $1310/t FOB. Higher offers are heard, such as $1340/t quoted this week for 5,000 tons of SN 500 and SN 150, accompanied by 1,000 tons of SN 900 priced around $1365/t. Buyers are declining, saying that Russian Baltic supplies must come back into line with other European base oils before they will consider taking lower quality products with additional costs of freight and additives for blending.
Prices are gravitating to the $1300/t mark or just below for the two main grades. One cargo has been successfully negotiated for West Africa, but prices were not available for confirmation. However levels are reputed to be $1270 to $1285/t FOB basis.
Black Sea Russian business is not as sure, and the main buyers in Turkey are staying away. With high domestic inventories, and cargoes from Far East and Middle East Gulf arriving into this market, it could be some time before normal trade is resumed. Recent government action appears to have stymied the use of light vis base oils as a diluent for diesel fuel, hence demand has been drastically reduced throughout Turkey, even with the main domestic producer, Tupras, in turnaround.
Two small cargoes have been confirmed for cross Black Sea trade, from Azov to Gebze, at $1305 and $1315/t for SN 150 and SN 500 delivered, CFR basis.
Sellers in the Black Sea have been looking further afield at buyers in Northeast Africa and Red Sea locations, but local supplies from Saudi Arabia and Egypt are competing fiercely for this business.
Middle East
Middle East Gulf trade has been thin this week, now that Iranian prices have been lifted by some $80/t, taking account of raw material costs. In addition, one of the main export producers in Iran is now in turnaround and will not have export barrels available for some five to six weeks.
This has killed off much buying interest from India and China. UAE buyers have taken two lots of SN 500 and a smaller quantity of SN 150 from BIK at FOB levels of $1235/t and $1225/t, respectively.
Middle East blenders want to utilise Group II from Far East sources as alternatives to Group l oils from Iran and Saudi Arabia. The delivered prices for Groups I and II are becoming competitive, and given the quality of Group II, considerable savings are possible. Fighting these moves are Group III producers in Bahrain and Qatar who see their back yard as a strategic part of their market, where the continued use of Group l is necessary for optimum Group III offtake.
Africa
East African buyers are investigating supplies from Russian and Uzbek Black Sea sources, both in bulk and in flexies. With Turkish demand diminished, East Africa buyers are testing to see if this supply source could be a viable alternative to Iranian barrels from UAE, or Red Sea supplies. With many of these receivers looking for small cargo lots, this alternative may or may not work, but with landed prices in this region at $1410 to $1465/t for Group I solvent neutrals, there could be incentives to make this business work with the arbitrage open.
Receivers looking for bright stock in East Africa may have to check the Far East. At delivered prices around $1550/t CIF, there is scope to move this grade in containers to cover this market.
South Africa remains stable with base oil trade quiet. There have been no reported enquiries for large quantities of Group I or Group II. With local production meeting local demand, only speciality grades of base oils, such as white oils, are presently being imported into this region.
There have been noted requirements for Angola, which would normally be covered by GALP supply from Portugal.
West African business appears to be expanding beyond Nigeria, Togo and Ghana, with a number of enquiries emanating from Cameroon and Gabon. Lack of storage facilities limits the import of bulk material into these regions, but use of containers and flexibags allows base oil to reach small blenders and wholesalers.
Group I delivered to Douala, Cameroon, is around $1600/t, and bright stock delivered on a CFR basis is around $1750/t.
Meanwhile the bread-and-butter bulk business into Nigeria is moving fast. With availabilities increasing from European sources, and with Russian Baltic pricing coming into line, many receivers in Nigeria are looking to replenish inventory as soon as possible.
Prices are $1375 to $1445/t for SN 150 and SN 500 from Baltic or mainstream producers, and bright stock added to the cargo is arriving into Apapa around $1425 to $1465/t, all basis CFR.
Group II/III
Group II prices reflect source increases from the United States and Far East, with European levels now between $1360 and $1400/t for the light vis grades. Higher viscosity material is sold ex tank between $1430 and $1495/t.
Middle East Gulf prices for Group II grades, lower than in Europe, are $1275 to $1315/t for the light ends, with heavier vis grades such as 500N sold ex tank at $1360 to $1385/t.
Some importers of Group III grades have announced increases from May 1, but others are satisfied with ex tank prices at the moment. The range of prices is now slightly wider: 4 cSt grades lie between 1435 and 1495/t, with 6 cSt material between 1480 and 1510/t, all ex tank basis either from Northwest Europe or Mediterranean storage.
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.