Europe-MidEast-Africa Base Oil Price Report


EMEA base oil markets may have accidently slipped into a period of relative stability, with background fundamentals firming in light of crude demand against a denial of oversupply and economic downturn in major consumer markets such as China.

European prices are complex, since demand is still slow, but at the same time availabilities are limited due to turnarounds, production cutbacks and some refineries looking after their own in-house arrangements. Mainstream prices are stable to weak, with some pockets of activity such as the Black Sea generating enough interest to flag up some small price increases, even in the face of low demand.

Dated Brent crude has been on a roller coaster since last week, breaching again the psychological resistance level of $100 per barrel, then bouncing back to attain levels of $105 in late trading on Tuesday. Meanwhile ICE gas oil has kicked back with a vengeance to rise to $872/t for front month trades, an increase of some $25/t against last weeks showing.

Whilst overall movements in crude are important, these vacillations with short lived peaks and troughs should not have any significant effects on base oil prices. With gas oil prices climbing unseasonably, as an alternative product to base oil, this should push refiners to at least maintain price levels for base oils.

API Group l levels reflect a slight weakening in prices throughout the European mainland this week. Numbers are $965-$1010/t for light solvent neutrals, with heavier grades such as SN 500 moving to $1000-$1025/t. Bright stock demand has eased, and a number of suppliers are able to supply relatively large parcels of 3,000 to 5,000 tons. Levels for parcels of bright stock are $1085-$1135/t.

The above FOB prices refer to bulk cargo lots, offered or sold ex mainstream supply points in mainland Europe and/or North Africa.

Mainland European local pricing has lowered, with a number of supply outlets altering numbers from May 2. The concessions have been made in the face of mounting price pressure from the Baltic and Eastern European suppliers in areas such as Czech Republic, Poland and Hungary. 2,000 tons of Baltic material ex Northwest Europe was reportedly sold around $935/t FOB, having been transhipped from the north. With freight around $35/t, netback value to FOB is relatively simple. This level may be the exception rather than the rule, but euro sales of mainstream material have taken the brunt of buyers dissatisfaction, resulting in a raft of quantity discounts, TVAs and other incentives by sellers.

Differentials of between 120-150/t are maintained against export levels, but with the dip in cargo prices, this differential is in danger of being negated.

Baltic & Black Seas
Baltic sales are dull with a few traders looking for large cargoes to sail to West Africa, but with little interest from receivers in those regions. Prices for the two grades SN 150 and SN 500 remain under pressure, but sellers are trying to keep prices as high as possible without losing sales. Two distributors have announced that they will not sell below breakeven to empty tanks, but will sit on inventory until the market turns.

FOB levels this week are between $915-$930/t, with SN 900 offered at $980-$1000/t. Higher levels are reported from one or two sellers, but with rising inventories and falling sales, levels heard at $940-$955/t FOB will not fly. SN 900 is being offered at $985-$1000/t FOB

Black Sea fortunes paint a rather different picture, with sellers moving prices to levels which are more in line with higher quality Baltic supplies, perhaps in response to FCA levels being pushed higher. Offers for CIF supplies of various grades are around $965/t at Gebze port, and with counters around $920/t being turned down by suppliers, the middle ground would appear to be $945-$950/t basis CIF delivered.

One enquiry from a Turkish buyer for a total of some 15,000 tons of various grades has attracted the use of the INSCX trading exchange, which can facilitate fixed-price contracts being delivered over a period of time, using bills of exchange rather than letters of credit as a payment instrument. This instrument has apparently been shown to Turkish receivers looking for stability in the market without heavy pricing penalties such as can emerge using index-linked forward pricing contracts.

Middle East
Near Middle East is subdued after the flaring of problems within Syria and the intervention of Israeli forces. Regular supplies of sea-borne cargoes of base oils have all but ceased into Syria and Lebanon, and the mainstay of supply comes from Turkey in the north and Jordan in the south. These supplies are all made by road, making the manufacture of finished lubricants a nightmare scenario in these areas.

Iraq may have revamped supplies of base oils through one of the existing plants at Daura. The other plants at Baiji and Basra do not appear to be functioning, but further clarification is being sought on this once important source for Group l base oils.

Middle East Gulf markets appear to be buoyant, and this region is the most positive of all the EMEA areas. Group l material from Saudi Arabia and the Med has been arriving into UAE and other GCC areas, with Iranian prices taking a dip after the large increases which were imposed on these base stocks. Seemingly UAE traders were unable to lift Iranian material at the higher prices, hence the retraction. Levels for FOB sales of SN 500 are reported around $1040-$1055/t, a decrease of some $40/t from the highs imposed some two weeks ago.

Group l SN 150 again appears to be in short supply in UAE with some traders enquiring to Europe for supplies of this grade, along with the possibility of quantities of bright stock for blenders in this region. The same grade is forming enquires from Black Sea sources for supply into both western India and UAE. Prices CIF/CFR for this grade landed into UAE could be around $985/t, making this an attractive alternative to Iranian or mainland European supplies.

South Africa remains stable with the turnaround of the South Africa Oil Refinery starting. There have been some enquiries for further supplies of flexies of SN 500, and with offers being received out of the Black Sea regions, prices for both SN 150 and SN 500 are estimated to arrive CIF at Durban port at $1065-$1085/t.

West Africa awaits the issue of the next Ghana tender for Tema, which should be advised within the next few weeks. Nigeria remains unexciting, and no confirmed trades have been reported, although two shipping enquiries are still alive in the market for one cargo of 4,000 tons out of Riga, with another parcel of 5,000 tons ex Med supply also bound for Nigeria.

West African prices may have reached a low point at $995-$1120/t for Group l solvent neutrals with bright stock around $1175-$1200/t. All prices are CFR sales landed in Nigerian ports. Prices levied for supply into Cameroon were last week classed together with Nigerian imports, but prices for this destination should carry a premium of around $50/t.

Group II/III
European Group II prices are under pressure in line with Group l grades. Weaker levels are expected to emerge this week after May 1 realignments took place. Levels of $1155-$1200/t are assessed for the light viscosity grades, with higher vis oils selling between $1280-$1290/t, all on the basis of ex tank sales.

Middle East Gulf Group II imports are currently being reviewed with some movements downwards as reported last week, but equally with higher vis grades taking the brunt of some hefty increases bringing these grades into line with Far East source hikes. May contracts for delivery are being heard between $1065-$1085/t for the light grades with the heavier range of products around $1175-$1200/t, all on a CIF delivered basis, southern Gulf ports.

Group III struggles onwards, with producers and importers gallantly trying to move prices upwards in spite of the oversupply situation for these grades. These efforts appear to be lost on the market, which believes that the situation should be taken advantage of, in the same way that sellers reacted when this group of base oils was in short supply, and prices were hiked high.

Levels now reflect the low demand for all base oils coupled with the oversupply for this particular material, 955-965/t for both 4 cSt and 6 cSt grades.

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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