There may be positive pricing signs within the EMEA base oil market, which in the past had played a major role in reducing prices. Sellers in the Baltics appear to have declared base oil prices to be too low, and are taking steps to stabilise them at acceptable levels.
With Dated Brent at $106 per barrel, the markets could be witnessing stability with crude moving only $2 to $3 per bbl. Other petroleum products are following, with ICE gas oil front month closing at $913 per metric ton in early week trading, falling because of lower crude levels.
Although the market appears to be bottoming out, API Group l prices from Europe continue to fall, reflecting the difference with previously offered prices in areas such as the Baltic and Black Sea. FOB ranges have moved considerably, with light solvent neutrals such as SN 100 and SN 150 selling at $870 to $975/t. Heavier grades such as SN 500 and SN 600 are being offered at $870 to $985/t.
Bright stock is trading at $980 to $1000/t, maintaining its position over solvent neutrals. One producer suggested that bright stock prices might be the first to rally, since the requested prices fell far below breakeven, and were only being entertained to move other inventory as part of the same cargo.
Baltic suppliers lowest prices were on counters for SN 150 and SN 500 at $835/t, whereas sellers are now looking at $900/t for both grades, and appear to be moving these offers upwards at every opportunity.
Distributors are seeking SN 150 and SN 500 at $925 to $940/t, and should mainstream European prices rally on the back of these numbers, these prices could be attainable. SN 900 is being offered now at $970/t, up some $30/t from one week ago.
The low prices previously from Europe have attracted buyers, who are keen to cement deals now, which would afford sellers the option to sell in a market with limited availability. This in itself may help to lift prices off the bottom.
Black Sea
Similarly, the Black Sea area has adopted the very same principles, with many Turkish buyers looking to firm up valid offers without delay. Levels close to $900/t CIF Turkish ports have been confirmed. However, new offers from sellers at some $50/t higher are now being issued for future business.
Black Sea sellers confirmed they are unwilling to sell large quantities of SN 150 and SN 500 at very low levels for large cargoes to the Middle East Gulf or India, and now would seek higher levels for all deep sea export business. Bids were received at $800/t FOB Theodosia, which suppliers considered to be too low.
There are instances of large parcels of Far East Group ll offers to Turkish receivers for 150N, 200N and 600N, with prices competitive to Group l European and Black Sea levels. These imports may reflect the availability created in Far East due to overproduction and lack of demand there.
Similar offers are being considered in UAE. With more Middle East blenders able to switch from Group l to Group ll, and with a shortage of Group l material from Iran, prices for lower-quality Group ll are $1050 to $1065/t for light grades, with heavier grades at $1095 to $1125/t.
Iranian output from BIK has all but stopped, with a limited amount of SN 500 available for local sales this week. Prices are still higher than arbitrage numbers from Europe or the Far East, but the supplies can be used locally for smaller flexibag deliveries to India and East Africa. Prices for latest Iranian avails are at $1060 to $1075/t, equivalent in local currencies.
Saudi Arabian prices are stable with less downward pressure from both buyers and inventory. Levels have followed mainstream Europe prices, but are still yielding acceptable netbacks. With a Sudanese need for a regular supply of up to 10,000 tons of mixed Group l grades, prices are expected at $1030 to $1055/t FOB for solvent neutrals, with bright stock at $1125/t.
Africa
East African receivers are seeking a full range of material to replenish stocks from UAE suppliers that normally use Iranian base oils. With this option diminishing or being overpriced, East Africa importers are looking at Russian supplies, which could be beneficial in terms of spec and quality issues. Prices are being offered at $80/t less than current levels of $1210 to $1250/t CIF East African ports, with most material being delivered in flexies due to port storage constraints.
South Africa buyers are also looking for top-up quantities from sources other than the two domestic base oil sources. Prices remain competitive, but are higher than other regional pricing such as in Europe or the United States, which affords the importing of Group l and Group ll grades. Levels are between $1230 and $1275/t for solvent neutrals, and around $1345/t for bright stock FCA or ex tank.
Many Nigerian receivers are trying to firm up cargoes from Northwest Europe, the Baltic and Mediterranean. Seeing what might be the last of the lowest prices, many are pushing to close deals without delay. Traders sensing the market could be turning are offering delivered prices in West Africa which are higher than last week.
Prices for arrivals into Nigeria will be $1010 to $1040/t for Baltic supplies of SN 150 and SN 500, with mainstream European cargoes at $1045 to $1060/t for neutrals. Bright stock will be landed at $1135/t.
Forward prices and current offers now being negotiated are $30 to $50/t higher than above.
Ghana receivers have issued a tender for Group l material to Tema. This private business may be designated for neighbouring states such as Togo or Benin, but specs are high, and only mainstream supply points will be utilised. Local comments were that this supply could coincide with a sell tender from SAMIR in Morocco, but this information could not be verified.
Group II/III
Group ll prices in Europe are marginally higher than Group l. While prices are unchanged as of the end of July, comments from blenders indicate they have been under review and may be reduced from Aug 1. These downward adjustments may be short-lived, however. Light vis grades is fetching $995 to $1030/t, while heavier material is being sold ex tank at $1055 to $1110/t.
August prices for Group ll base oils being contracted into the Middle East Gulf have fallen $20/t from last weeks assessments. Far East producers are looking to increase production and a few refinery turnarounds are planned. Slackening demand from China and the other major consumers in the region is leading to surplus which has to be moved. Unlike Europe, there does not appear to be any light at the end of this tunnel, with prices falling to $1010 to $1050/t for 150N grades, and $1065 to $1100/t for 500N material. All on basis of CIF delivered to Middle East Gulf ports.
Group lll is losing its firm grip on the European mainland. Almost all producers and suppliers have discounted prices from Aug. 1; some have offered back-dated rebates. A number of receivers have approached alternative suppliers, and have found discounts of 50 to 80/t being offered on existing prices. This is new practice, because it was not advisable when material was short. With a changing situation and Group lll products freely available, buyers are able to take advantage of this new market.
Prices forward of this date are now established between 1165 to 1175/t for sales of 4 cSt grades, with the 6 cSt material selling at 1210 to 1220/t, all ex tank.
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.