Europe-MidEast-Africa Base Oil Price Report

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A rich tapestry of items for base oils was painted during I.P. Week in London with the ICIS conference and Argus forum examining the future of the market.

Many global players were at the meetings, and although no official pricing data could be expressed during organized sessions, networking opportunities proved invaluable for sellers and buyers alike. Some sellers actively pushed for higher numbers across the board for all types of base oils, while many purchasers expressed reservations to prices rising given the levels of stocks being held by many producers.

Crude oil continues to increase with Dated Brent moving ahead to around $123.50 per barrel in the face of rising tensions in the Middle East Gulf region. International Commodity Exchange gas oil has reached new highs at $1025.40, due to rising crude levels along with a sustained period of severe cold weather throughout Europe and Central Asia.

Many rumours of deals with a wide range of prices were heard throughout the week, with some buyers claiming that they had successfully negotiated discounts for cargoes and forward contracted volumes for European domestic deliveries, while at the same time others commented that sellers were being stubborn and that they could be facing capitulation on prices due to high inventories and the lack of buying interest.
The arbitrage for European supply to the Middle East, India and the Far East appeared to remain firmly closed with weak numbers continuing to rule those markets, however opportunities appeared to be opening up into Central and South America predominantly for API Group l material coming from mainland Europe. These destinations may hold some of the answers for European refiners being able to move material into these locations.

Prices for API Group l grades remained in ranges as previously reported, however, at the lower end of the spectra there have been offers at higher and at lower prices which only serve to extend these pricing bands. Numbers for light neutrals are now between $1025 to $1065 per metric ton, with heavier neutrals being offered and sold between $1045 to $1080/t. Bright stock remains weak with ample supplies from almost every producer outlet. Prices reflect this position and are in a range of $1145 to $1220/t.

All the above prices refer to FOB levels, for bulk cargoes from European and North African mainstream producers.

Baltic/Black Sea
Russian base oils have stalled after making some progress back from the exceptionally low levels at the turn of the year, but even with the absence of one main producer there appears to be sufficient export material around to satisfy most of the enquiries.

Prices offered were between $1010 to $1060/t from Baltic ports for SN 150 and SN 500, but trader comments suggested that discounting could be applied and sellers were prepared to offer below $1000/t for prompt sales.

Weather was still playing its part in the Baltic with business getting back to normal after severe ice disruption over the past few weeks. Black Sea levels appeared to have moved higher due a large number of enquiries from Turkish buyers, but avails are thin with many resellers not in a position to offer material for delivery until the second half of March. Prices for forward sales have been either higher than currently quoted, or are being index linked with expectations that prices may move upwards.

Offers heard for SN 150 and SN 500 were around $1080 to $1100/t basis CIF Gebze port. Netting back to FOB levels at around $1035 to $1060/t. Again these offers were considered to be too high, with Iranian material being quoted as available and providing lower prices. Discussions provided evidence that this material may not be supplied from Middle East Gulf, but could be offered on a delivered at the frontier Turkish border basis.

Iranian avails appeared to have diminished further with a lack of Indian buyers, with some Iranian sellers willing to look at alternative supply locations such as East Africa. Although difficulties remain with active direct trades between Iranian suppliers and outside buyers, trade possible by the use of United Arab Emirates handling and also a suggestion of a barter system whereby commodities other than oil are being offered as a payment vehicle. Commodities such as cement, fertilizers and grain are all being offset against oil product supplies.

Prices still being listed basis FOB Iranian ports are as follows. SN 150 can be seen at $1045/t, SN 500 at $1060/t and SN 650 at around $1025/t.

Saudi Arabian prices were tamed back suggesting that this supplier did not want a large inventory. Although a major part of this suppliers output of base oils is sold on a contracted basis, spot sales are part of the portfolio so must be addressed. Levels were marginally lower than European equivalent grades at $1020 to $1045/t in respect of SN 150, SN 500 being offered between $1030 to $1055/t, and bright stock at $1125 to $1175/t.

Africa
East African and South African markets were quiet with few players from these regions apparently travelling to London for I.P. Week. There have still been a number of smaller enquiries for Group l grades being delivered in flexies which have met with considerable interest from traders using Russian and also mainstream supplies.

Prices are such that margins can be realistic since container freight to South Africa can compete with bulk shipments. Levels of $1245 to $1280/t have been recorded for supplies of SN 150 and SN 500. Bright stock flexies have been delivered and with European numbers relatively low, opportunities for this grade are being actively sought. South African bright stock levels are at $1350 to $1375/t, showing potential margins to be shipped in arbitrage.

West Africa participants in the base oil industry were visible en masse in London last week. Many looked to expand their seller portfolio. Since many of the original receivers from Nigeria have ventured into chartering their own vessels and either purchasing on an FOB basis, or by encouraging FOB suppliers to move into the shipping market and start delivering on a CFR basis.

Prices for cargoes being landed are still soft due lack of buying initiative since January when some 75 kt of mixed grades arrived into West Africa. Numbers are now $1075 to $1045/t for the raft of solvent neutrals being offered now with SN 900 from the Baltic coming in at around $1135/t, Bright stock is being favoured due to the length of the European and U.S. supply scene, with prices between $1120 to $1235/t depending on source and quality.

There have been comments as to the accuracy of prices arriving into West Africa, but on investigating the spreads confirmed or offered over the last few days, the levels above can be corroborated by a number of receivers.

Group II/III
Group ll prices in Europe and maintaining their differentials against Group l grades, but with the announcement that a major U.S. exporter of Group ll will have a great deal more material targeted at the European markets. This and other similar actions by other producers may alter the slate of base oil types in Europe or all time. Prices are competing with Group l to the extent that higher prices are only just keeping pace with the higher quality of Group ll grades. Levels are between $1125 to $1185/t for the lighter vis grades, with the heavier base oils some with excellent oxygen stability priced between $1250 to$1275/t all basis out of tank supplies from either Northwest Europe or Mediterranean storage.

Group lll prices in Europe continue to keep a high profile in that they are growing in availability, but still appear to be short throughout the region. Discussions during I.P. Week provided some news that some local suppliers are keen to review prices and may elect to realign numbers with Group ll and Group levels. This was not to say that they would be offering discounted price levels, but in the case where Group l and Group ll maintain their perceived lowly status, Group lll prices may be allocated on a fixed margin against other types. These discussions were not a stated intent, merely the thoughts of more than one Group lll supplier.

Prices are maintained at current levels until hard evidence of offers at lower levels is corroborated. Levels are 1355 to 1380/t in respect of the 4cSt material, and 1380 to 1420/t for supplies of the 6cSt grades

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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