Europe-MidEast-Africa Base Oil Price Report

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Price increases in the EMEA base oil markets may be running out of steam, due to poor demand from all parts of the market.

Within the European arena, including North Africa and Turkey, forecast finished lube sales are reported down at the end of the first quarter by up to 7 percent against 2012 sales.

Dated Brent crude moved ahead by some $2 per barrel over last weeks quotation, to over $110.50/bbl. ICE gas oil front month numbers are posting some $25 per metric ton higher than one week ago, closing at $931/t on Tuesday trading. This is due to rising demand amidst cold, unseasonal weather affecting most of the European mainland. These slight pressures would normally push base oil producers to try to move numbers higher, but without demand, and in spite of production cutbacks, there are unsold barrels of base stocks.

The situation varies from one supplier to the next, and FOB price ranges have widened to take account of this disparity. API Group l solvent neutral light grades are $1040-$1085/t, and the medium to heavy grades between $1060-$1115/t. Bright stock prices reflect the growing demand and low availability for this grade, at $1175-$1225/t.

The prices above refer to cargo sized parcels offered ex mainstream supply points in Europe or North Africa.

In the local European market, most suppliers are settling for current selling levels for all Group l grades. The premium for domestic sales has fallen back a little this week with low demand for almost all products. Some players anticipate an April turnaround in demand to replenish low inventories. There is little evidence of this so far, but business might just start to pick up over the next few weeks.

The premium for locally delivered Group l base oils in road tank wagons or barges is around 80-100/t over export FOB prices as above.

Baltic & Black Seas
Baltic distributors confirmed prices similar to last week with one major addition. This pertains to supplies of SN 900, available in quantities around 3,000 tons at $1065/t basis FOB Riga port. SN 150 grades with slightly lower quality than the norm have been offered around $970/t, basis FOB Baltic ports, and SN 500, in demand for most West African cargoes, is up around $1000/t.

Black Sea trade has remained relatively quiet as the market eagerly awaits the return of Turkish buyers, after the introduction of the new legislation on importing base oils. Some trades did take place last week, with quantities of Russian SN 150 and SN 500 and Uzbek I-20 A (SN 150) offered for April loading. Prices remained conservatively pitched around $975-$980/t for lighter grades, with SN 500 offered at $985-$995/t.

Some heavier SN 700 and SN 850, in combination with a parcel of bright stock, all with exceptionally high specs, have been offered into the Turkish market. CIF prices are under discussion.

Middle East
Near Middle East business remains slow due to civil and economic problems, but Egyptian imports are strong, with bright stock cargoes arriving into Alexandria port. One offer for future cargoes of bright stock was heard last week around $100/t over the high of a published price used widely for index-linked deals. Either the supplier was bullish regarding future pricing, or the published prices were rather inaccurate.

The Middle East Gulf continues to see Iranian Group I base oils imported into UAE and then re-exported using local origin documents. Many traders working this business say their export material may not be purely Iranian, but can be blended with Indian, Pakistani and local Group l base oils. Prices have move upwards in this region over the past few weeks, although no new prices were heard in the last few days. Levels are maintained around $1055/t for SN 500, with SN 150 marginally higher at $1060-$1065/t. All are basis FOB sales, ex UAE ports.

News of a new lubes blending plant in Ras al Khaimah in U.A.E. reported in last weeks Lube Report (see story), emphasizes the need for Group l base oils in this region, and may rekindle plans for new Group l production. There are rumours afoot that a combined Group l and Group II plant could be considered.

Africa
East African and South African receivers complain that new offers on imported material in flexies from U.A.E. and Saudi Arabia are higher than for locally produced base oils, resulting in a shift away from importing packaged base oils. An attempt to ship a bulk cargo of some 2,000 tons of SN 500 from U.A.E. failed due to the small size of the cargo and the relatively high freight costs. Importers were limited on financial grounds and also on storage from importing a larger cargo.

Prices within South Africa are akin to European domestic levels, with SN 150 and SN 500 sold by truck at $1165-$1185/t, and bright stock around $1300/t.

West African buyers show no sense of urgency to buy large cargo lots of base oils. Routine supplies are moving from the traders normally involved in this market, but some of receivers, particularly in Nigeria, have expressed doubts about not being able to pass on price increases to their finished lubricant buyers.

Local sources talk of finished lubricant contracts running for one year at fixed prices. The local method of dealing with raw material increases is to cease deliveries of finished lubes to buyers until such time as they agree new prices, presumably fixed for another year at a higher rate.

Offered prices in West Africa remain stable. The flattening of FOB levels in Europe and the Baltic is yielding landed numbers around $1175-$1200/t for Group l solvent neutrals CFR. Bright stock is coming into Nigerian discharge ports at $1290-$1310/t. Some cheaper oddball grades are flowing into West Africa from U.S. suppliers.

The driving force as always in the West African market is price, and should some base oils not come up to scratch on quality, as long as the price is right, these grades will be purchased and used within the system.

Group II/III
European Group II sales are feeling the effects of the decline in finished lube sales. Price, however, remains positive, possibly on account of source increases in Far East and U.S. Levels are around last weeks numbers, $1135-$1190/t for the lighter vis range, whilst the heavier ends are sold ex tank at $1265-$1290/t.

Group II offers for April in the Middle East Gulf have risen substantially since last month, and with two of the main Korean producers going into turnaround next month, supplies of Group II grades may be lower than normal. Prices are $1090-$1110/t for light grades from 60N through 220N, with heavier 500N/600N around $1170/t, basis CIF southern Gulf ports.

Throughout mainland Europe Group III sales appear to be gaining ground. Prices remain under pressure from oversupply, although one producer and another importer have declared that they will not sell these grades at a loss. Some prices have moved upwards by 5-15/t.

Average prices throughout Europe are 1010-1070/t for the two main grades, 4 cSt and 6 cSt, on an ex tank basis.

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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