Europe-MidEast-Africa Base Oil Price Report

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Another indifferent week has gone by in the EMEA base oil market, with few reported deals being struck. Buyers and sellers are maintaining reservations about the current market. An underlying sentiment remains that prices should be rising given the background of other petroleum products, but with a lack of demand, the stalemate may last a bit longer.

Crude prices moved dramatically over the last few days, with Dated Brent breaching $118 per barrel before falling by $3 within one hour late Monday. ICE gas oil futures peaked at $1020 per metric ton last week before falling $25/t in exceptionally volatile trading on Monday, then returning close to where it began. Dated Brent finished at $113.60 per bbl, whilst ICE gas oil front month closed at $988.50/t

This uncertainty has raised fears that prices may be unsustainable given current production levels and stockpiles. Some commentators believe crude markets are in line to drop spectacularly, and that the whole underlying scene will crumble to bring petroleum prices back to more economically manageable levels.

Base oil producers are biding time, with no real pressure to lift prices immediately. One refiner is offering base oil in response to enquiries, but is not actively pushing sales. Also they will not offer discounts, since they believe prices are in line with other petroleum product values and providing acceptable netbacks.

Whether formalised or not, this appears to be the prevailing attitude of many suppliers throughout the region.

Buyers, meanwhile, have pre-formed ideas on base oil values and what they are willing to pay for available supplies. Needless to say, these levels do not exactly match offers emanating from the buying fraternity, hence the present stand-off.

API Group I prices are not rising quickly as many would anticipate, but offers are carrying premia, which were not in place previously. Offer prices are higher than last week, therefore price bands are adjusted upwards.

Light solvent neutrals are priced at $1040 to $1085/t, with heavier material between $1060 and $1095/t. Bright stock is showing at $1095 to $1135/t where availability allows. Avails of heavy neutrals and bright stock are not abundant, with some producers altering production schedules to limit availability. This is being done because a long market would make it impossible for prices to rise.

Buyers are holding local prices at bay, saying that with access to alternative supplies they will not pay more than required, and that they will hold suppliers prices at levels which can provide profitable sales of finished lubricants. Inland prices are still around 70/t higher than export cargo offers, taking account of the extra costs involved in this type of supply.

Baltic and Black Seas
Russian and Belarus supplies from Baltic ports have been muted, perhaps because of limited avails of base oil in the region. Stocks in shore tanks do not appear to be as high as previous times, with a number of players declaring limited avails through the rest of September and even through the first half of October.

Prices have remained around the same as last week, but with increases forthcoming from Russian refiners they will increase by $40 to $50/t. FOB levels for SN 150 and SN 500 are $1040 to $1065/t. With the varying quality of some of the material, some discounting is evident, but only for lower spec material. SN 900 is still in relatively short supply, with several large enquiries being floated from West Africa, where this grade is being utilised as a substitute for bright stock in some applications. Small avails of 250 to 500 metric tons of this grade are available ex tank at $1100 to $1130, primarily for loading into flexibags.

Black Sea trade remains sporadic. Some days, Turkish buyers are all over the market, on other days no buying interest can be generated. Russian availability is thin, with prices moving slightly forward with repeated offers for SN 150 and SN 500 at $1090/t CIF, but few buyers showing interest. Buyers want around $1040/t, while sellers want at least $1065/t CIF.

Offers of bright stock for 1000 to 2000 ton cargoes have been circulated at $1155 to $1170 CIF Gebze, but suppliers are stating that FOB levels are rising and will not remain valid after the end of this week. Buyers have been insisting that bright stock prices should be lower than SN 500, but those days are past, and with bright stock avails limited, prices for this grade could climb to new recent highs.

Middle East Gulf
Business has returned to active duty after the long religious holiday and summer break. There have been enquiries for Group l and Group ll grades from regions such as UAE, Oman and Qatar. Several supply points are being targeted such as Europe, the Far East and even the United States for some light Group l grades.

Iranian exports remain elusive, and many are not identified as cargo lots leaving BIK, but are being loaded in smaller parcels from all southern Iranian ports and discharged into storage in UAE. Few if any direct sailings are going from Iran to India, due to problems in finding vessels. Prices are stable at the moment. SN 500 is selling ex UAE at $1020 to $1035/t in bulk, with many export sales being made in flexies which are being loaded FOB out of UAE container ports at $1140 to $1165/t. The increased prices reflect the cost of the flexibag and the transportation of the containers to and from the port.

With Group l prices in Far East weakening again, sellers have renewed to export these grades into the Middle East Gulf. The levels are still high when compared to recent Russian and European cargoes to this area, but with a little more downward pressure this arbitrage could certainly open.

Africa
East and South Africa markets remain stable in thin trade. Buyers reports of low priced UAE material arriving into South Africa at $1100/t CIF in flexies were proved inaccurate, with prices closer to $1245/t being more likely. The original offer was for low quality Iranian material which could not be used by South African blenders.

General prices within South Africa remain buoyant against the prospect of one major refinery going into turnaround next month. Receivers reported prices at $1245 to $1270/t for delivered volumes by truck, with bright stock selling at $1440 to $1485/t.

West African prices have risen in line with European mainland FOB rates, and will continue to strengthen should these levels remain firm. As predicted last week, with Baltic prices rising to close the delta between that supply and mainland Europe, prices for products from both sources are landing in Nigeria and Ghana at very similar levels.

Nigerian buyers and receivers are looking for further lower costs from the Baltic. But with one supplier only having avails during mid October, deals have already been put into place for October and November on an index-linked basis against prices published in a weekly report. Levels are proposed at the mid point of quotations plus $5 on an FOB basis. Other cargoes comprising, SN 150, SN 500/600 and bright stock have been confirmed out of North West Europe and the Mediterranean for arrival during October and November.

Current landed prices into Nigeria for Group l grades are reported at $1120 to $1165/t CFR for neutrals, with bright stock delivered at $1215 to $1245/t CFR. SN 900 from Baltic supply points is being sold at $1155 to $1170/t CFR.

Group II/III
Group ll imports into Europe are stable, with some prices for the heavier grades starting to move slowly upwards. Prices have revised in line with recent Group l movements and are now between $1110 and $1130/t for the light vis grades, whilst the heavier ends are based at $1155 to $1195/t, all basis ex tank supplies, North West Europe or Mediterranean storage.

Middle East Group II supplies particularly into the Middle East Gulf are still lacklustre, with a soft market which has lasted over the past two or three months. Suppliers are trying to entice receivers to take cargoes of all mixed grades with an emphasis on the higher vis material. Low vis grades such as 60N/70N have suddenly leapt in demand in the Far East, and a shortage of these grades is now possible for receivers in UAE who manufacture transformer and other electrical oils from these base stocks. Prices are now assessed at $1045 to $1090/t for light vis grades, with 500N at $1125 to $1155/t.

European Group lll markets have been very quiet, with very little new activity from sellers or buyers alike. With price levels remaining in line with expectations, the market is declared stable with levels between 1150 and 1165/t for the 4cSt grades and with 6cSt material loading ex tank at 1195 to 1210/t. This market is different in that it reflects gentle waves in the pricing graph rather than the more severe spikes and troughs of the Group l and Group ll markets


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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