Europe-MidEast-Africa Base Oil Price Report


As December begins there are no apparent sea changes to the EMEA base oil market, with a number of stand-offs where sellers are unable to entertain low bids from notional buyers because if they accepted, they would be selling material at a loss.

Many API Group l refiners and distributors are investigating whether their offers can be accepted because they have large base oil stocks with few outlets to alleviate containment problems, which are growing daily.

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In almost all cases, offers are being rejected by buyers who are either not in a position to purchase at this time due to their own high inventories, or by others who are playing a waiting game to see how much further the market can fall.

Comments and reports from all sides and throughout various regions within the EMEA, have suggested that prices have bottomed out, and the market will not fall further than the asking prices suppliers are now offering. The signs are that this point may have been reached, with sellers refusing to give way, whilst time buyers are stating that they are possibly willing to entertain selling levels above rock bottom, but not until January 2013.

This time lag will give the market any last chances to wring out whatever substance may be left to bring prices down further, whilst keeping blenders and finished lube producers inventories at low levels for year end reporting.

Given that background fundamentals have not moved over the last few days, Dated Brent crude oil traded at $109.50 per barrel, almost at parity with last week. Front month ICE gas oil closed Tuesday at $934 per metric ton, only a $5 drop from seven days ago. The pressure to maximise production of gas oil and ultra-low sulfur diesel at the expense of base oils continues, since using vacuum gas oil feed stocks to produce these alterative petroleum products makes much more economic sense than beating up the system over low realisation or loss making base oil numbers.

Group l prices are eroding from last weeks levels, but are now possibly as low as they will go without substantial downward revision to raw material costs. There are fundamental reasons behind prices not going lower. Most suppliers are refusing to entertain offers below current numbers, commenting that any further erosion would mean selling at a loss. Light solvent neutrals are maintained at $890 to $925/t, with heavier grades such as SN 500/600 being offered FOB between $920 and $940/t. Bright stock has been offered but not accepted at $995/t, with a spread now ranging from $995 to $1025/t.

The prices above refer to bulk cargo sized parcels of Group l grades available on an FOB basis ex refineries and storage in North West Europe, Mediterranean and North Africa, where availability of each grade pertains.

Local mainland prices have all but collapsed, with poor demand and increased competition from Baltic and Black Sea offers bringing downward pressure on inland prices. Truck and barge deliveries have dipped to a 30 to 40/t difference over the bulk cargo prices detailed above. The options currently open to blenders have never been so numerous, with product available from Eastern Europe and Russia in addition to the normal suppliers within Western Europe.

Baltic and Black Seas
Russian and Belarus business in the Baltic is very slow, with many sellers and distributors claiming high inventory and containment worries for the duration of December. These players worry that bids and offers coming from limited sources such as West Africa are extremely low and unacceptable to sellers. Some parties contacted this week have advised that bids for FOB sales of SN 150 and SN 500 at $825 to $850/t have crossed the table only to be thrown out as risible. Sellers claim they cannot sell and replenish stocks at these levels, and they have no option but to wait for the market to improve with prices starting to climb. Acceptable FOB Baltic levels are deemed to be $865 to $890/t for the two main grades, with SN 900 being bid and offered at around $1000/t.

Black Sea trade remains dire, with no cargoes reported sold this week. There are many Turkish bids ranging from $820 to $855/t being sought for CIF delivered SN 150 and SN 500. Some sellers have openly stated that this market has lost touch with reality and that these prices are impossible to countenance. Respectable selling levels would have to be $890 to $920/t CIF Gebze, but even if sellers were to offer lower numbers it is doubtful whether there are any real buyers out there.

Middle East
Turkish imports have featured parcels being re-exported from UAE, with remarkably low prices. Iranian FOB offers have come out this week at $835/t for three 3,000 ton cargoes of SN 150 and SN 500 on basis of sales ex BIK, but with Western sanctions tightening further, these parcels can only be sold on a local basis for UAE. Some sources say there are plans afoot to halt importing Iranian material into Middle East Gulf states and then re-exporting with new documents. Western banks have declared that they cannot and will not handle any cargo which is even remotely considered to be Iranian, which will further hinder the movement of material from the Middle East Gulf.

Quantities of SN 500 have been quoted as sold ex UAE at $1030/t in flexies, all bound for East Africa or South Africa.

Warring factions in Israel and Gaza have all but stopped possible activity from Israeli ports. With nearby Syria and Lebanon still engaged in civil strife, and with Egypt being drawn into another round of political and economic conflict, the base oil market is not a primary concern in Near Middle East. These areas however still require finished lubricants, which are being supplied from host nations such as Turkey, Iraq, and Jordan. Base oil imports for local blending within this region have tailed off to less than 20 percent of normal requirements.

Saudi Arabian prices have reacted to falling levels within Europe, and whilst local and indigenous markets have absorbed much of the flak from the drift in European prices, the effects are at last filtering through to ex gate prices at Yanbu, Jeddah and Jubail. Levels are not as low as European numbers, and Group l solvent neutrals are available at $1020 to $1055/t, with bright stock at $1085 to $1100/t.

East African and South African prices are maintaining their relative strength, with imports from UAE in flexies being imported into Mombasa and Durban at CIF levels close to $1150/t for SN 150 and SN 500. Local prices are comparatively high, with solvent neutrals being sold ex Cape and Durban refineries at $1155 to $1185/t, with local bright stock available at $1225/t.

West African buyers have been roaming the European, Baltic and Black Sea markets looking for year end, bottom of the market base oil suppies. Many in Ghana, Nigeria, Cameroon and Togo have recognised that this might be a good time to purchase material for replenishment inventory, which will take around six weeks to arrive into West African ports, thus avoiding high year end inventory costs, whilst purchasing at the bottom of the market.

The only problems are West African inherent, in that some buyers are looking for plainly unobtainable prices, with sellers limiting discounting to FOB and CIF levels, which allow them to at least breakeven or even add positive contribution to base oil sales. Negotiations are taking longer than normal due to the gap between sellers firm offers, and buyers expectations of ever decreasing base oil values.

Baltic prices landed into Nigeria on a CFR basis will now be $940 to $985/t, with SN 900 $25/t higher. Bright stock parcels, where co-loaded from mainstream European refineries along with Baltic material, will be landing at $1075 to $1100/t.

Group II/III
European mainstream grades, depending on source, will be $15 to $25/t higher than Baltic supplies, even taking account lower freight rates from the Mediterranean and mainland European supply points.

Group ll prices have not fallen, since they are considered to be in line with Group l levels and there is no apparent requirement to discount the grades further. These are the comments received from more than one importer of Group ll grades, which would suggest these grades have not come under the same pressure as Group l products. Levels within EU countries are maintained as previously announced at $1065 to $1100/t for light material, with heavier grades selling at $1115 to $1175/t on the basis of ex tank sales.

Middle East Group ll numbers have not altered from November to December, and are approximately in line with last weeks prices at $1010 to $1040/t for the lighter grades, with material such as 500N and 600N between $1090 and $1130/t. The one factor that might rock the pricing boat is a report that a 12,000 ton cargo of U.S. major produced Group ll products has landed into West Coast India at $950/t, which could have a knock prices in the Middle East. Monitoring of this situation will take a few weeks to conclude.

Group lll prices in mainland Europe appear to have stemmed their fall, and are apparently marking time at previously advised levels. With 4 cSt and 6 cSt sharing the same pricing platform, prices range from 965 to 1025/t, all on the basis of ex tank sales. Where this material is delivered some distance by road from source, prices can vary by up to 50/t.

There is still an oversupply situation for these grades but suppliers have stated this week that with careful handling of the integration of new supplies of Group ll grades, the market can adjust to the benefit of both suppliers and buyers. You heard it here first!!!!!

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at

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