Europe-MidEast-Africa Base Oil Price Report

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It was another week of intense pressure on prices throughout the EMEA, with buyers turning down almost all first offers in the belief that lower numbers are inevitably feasible. Sellers, however, are countering by requesting bids before deciding if they will sell at those levels.

More than once this week bids have been so far below break-even, that sellers have dismissed the bids and not even disclosed what price they would be willing to consider.

With crude oil showing further weakness, Dated Brent traded at $96 per barrel, down another couple of dollars from last week, and ICE gas oil was at its lowest point in almost two years at $841 per metric ton earlier this week. Vacuum gas oil has kept pace with gas oil. With the underlying weakness of petroleum product prices, base oil prices are being committed to at lower levels, due to lower costs of raw material, and the less than ideal demand in the region.

Lower prices are being offered in mainland Europe, but obviously are not low enough and do not meet buyers satisfaction. API Group l solvent neutrals have dipped by $20 to $30/t from last week, and are now $1195 to $1225/t for light neutrals, with heavier grades such as SN 500 coming in at $1225 to $1240/t. Bright stock is starting to realign itself at $1235 to $1270/t.

The prices above relate to bulk offers for base oil to be lifted ex mainstream production in North West Europe, the Mediterranean and North Africa where applicable.

These prices are a combination of offers, bids and business which has been completed during the last seven days. There have been few export cargoes agreed to during this time, but local European blending operations have been accepting deliveries the last few days, perhaps reflecting that buyers had staved off the day when they had to buy until present, in the hope that prices would come off the top. That has happened to a degree, with local Group I deliveries being made at $45 to $60/t over the prices mentioned above.

Baltic and Black Seas
Baltic prices for Russian and Belarus have been under the cosh the last few weeks, and nothing has changed. Buying pressure is mounting on distributors for perhaps the wrong reasons. These points of sale in the Baltic (and the Black Sea) are being regarded as the first to capitulate when prices start to fall, and also to be more vulnerable to moving stocks more regularly to free up ullage for material coming down the supply lines.

Bids for SN 150 and SN 500 have been received at $1050 to $1110/t, whilst sellers want closer to last weeks $1145 to $1155/t for these grades. Deals will be done somewhere in the middle. Sellers have said that they cannot afford to sell at the lowest levels, since this would incur negative margins with large business losses.

The Black Sea market for Russian base oils is in a slightly different position. There is some small interest from Turkish buyers this week, albeit reserved, but there is some glimpse of cargoes moving again from Azov and Ukraine on a trans Black Sea basis. Prices have fallen to allow this interest to develop. Delivered levels for SN 150 are $1085/t, with SN 500 being delivered at $1100/t, both grades basis CIF Turkish main ports.

One offer for Russian Black Sea material has been reported from Indian and Middle East Gulf receivers, perhaps from traders trying to repeat the large 7,000 to 9,000 ton cargoes which emanated from the Black Sea six months ago. The levels were unrelated to current Black Sea pricing, which would certainly be attractive to Indian and Middle East Gulf buyers versus local avails, but this offer has not been corroborated. Prices were pitched at $1120/t and $1125/t CFR for SN 150 and SN 500. These were the only grades concerned.

Middle East
The Middle East Gulf has not reported any significant changes in base oil prices over the week. But with a weak sentiment in the market, not many players are rushing to buy large quantities of material from outside supply points such as Europe and United States, where offers for Group l cargoes with high bright stock content were floated over the last couple of weeks. Interest is slow to move on such avails, and with a small amount of Iranian exports coming through the UAE, the market appears to be sated.

News that the major Iranian producer which was in turnaround is coming back up this week will only fuel questions as to where, when and how exports from this plant can be anticipated. The sanctions affecting all Iranian exports are certainly limiting base oil business. Small cargo lots are being handled within UAE by blenders and traders who re-export quantities although mainly in flexies to India and East Africa.

Africa
East and South Africa have been exceptionally quiet, with few talks of product movements into these regions. There are rumours of South Africa refiners adjusting prices downwards by $50 to $75/t for base oil sales to local blenders. This would mean prices are still some $100/t higher than mainland European levels, which might be enough to open arbitrage for bulk cargoes to move in that direction.

In West Africa, there have been calls in Ghana to renegotiate base oil prices which have been deemed too high by govermnment and third party receivers in Tema. Apparently no changes have been made to contracted sales into this market over the last three months, and now with the markets around the world moving downwards action is being demanded.

In Nigeria receivers are reqesting lower and lower prices for base oils being negotiated. Buyers want to enjoy prices that will be available the market bottoms out, but want those prices applied now.

As mentioned above, Baltic suppliers have borne the brunt of unfounded bids for imports into Nigeria. Landed prices into Nigeria are being targeted at $1150/t CFR for Group l solvent neutrals, with SN 900 on the same basis at $1185/t. These levels will require exceptionally low FOB prices yielding even lower netbacks to Russian refinery FCA sales. At this time these will be impossible to arrange, but it is difficult to anticipate when buyers will be satisfied and begin to firm up negotiated bids within a reasonable timescale.

Group II/Group III
Group ll imports are being pushed downwards with gathering momentum being applied to Group l prices that have eroded little from last weeks levels. Prices are now $1260 to $1285/t for light vis products, with heavier vis material being sold ex tank at levels around $1325 to $1355/t. These grades are being dragged down by the falls in Group l pricing, along with discounting at source by producers in the Far East and the United States.

In the Middle East Gulf, prices remain the same as last week, since most of the pricing in these regions is formulated on a monthly basis. Suppliers have said that they are looking to revise levels come July 1, but until then contracted sales will continue at the same delivered levels.

Buyers are not taking full contracted quantities, rather accepting minimum deliveries, with the assumption that prices will be lower for July deliveries. Prices are still at $1220 to $1230/t for the light 150N, with 500N at $1300 to $1320/t, basis CIF at Middle East Gulf ports.

Group lll sales show little change, although there have been discussions between larger buyers and suppliers to re-evaluate current prices. There have been a number of instances of retrospective rebates or discounts being applied to material already delivered or collected, whereby clients have been assured that prices will always be competitive or at least can be brought into line, even after the event.

Levels are slightly off last weeks numbers at 1310 to 1355/t for the 4 cSt grades, with 6 cSt viscosity material being sold ex tank at 13800 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.comy

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