Europe-MidEast-Africa Base Oil Price Report

Share

Without a great deal of activity on either end, sellers and buyers are wondering if the market is stable, or simply lacking direction.

Sellers appear to be content with the past three weeks levels, attempting to raise prices by only $5-$10 per metric ton over the mid-points of the ranges reported below. At the same time, buyers are countering offers, believing the market will fall.

Crude oil prices have flattened out between $102-$105 per barrel, and with Dated Brent currently trading around $104.25, little change is expected in the near term. ICE gas oil front month numbers have surprisingly risen to around $880/t, up some $20 over last week.

European Group I FOB prices have remained in last weeks range, with light viscosity solvent neutrals being offered and sold between $965 – $1010/t, and heavier grades of SN 500/600 ranging between $1000-$1025/t. Bright stock remains between $1085-$1125/t, with a few large cargo sales this week reportedly at the lower end of this spread.

The above FOB prices refer to sea-going bulk parcels, being offered and sold ex mainstream supply locations throughout mainland Europe and North Africa.

Local European prices have come under pressure again in the last few days. Many blenders are looking to narrow the gap between domestic and export sales, commenting that only extra operational and logistical costs should be applied to home-based sales where delivery is made by truck or barge in smaller quantities, and where double and sometimes triple handling through various storage tanks is involved.

Buyers are becoming savvier to the relative costs that apply to regional sales within mainland Europe and are fighting to have selling levels aligned with reported export sales, and to increase transparency of sellers applied costs and margins made. Nationals and majors may have to forsake their high margin sales of domestic supplies of base oils.

The differential tariff between export and local sales of base oil has fallen this week to around 80-100/t, which almost covers transportation, storage and handling costs. Importantly, differentials vary from one area to another depending on supply location and the idiosyncrasies of each market.

Baltic & Black Seas
Baltic prices for Russian and Belarus supplies have changed only slightly. SN 150 prices remain between $945-$955/t, but SN 500 has increased by some $5-$10/t, to between $965-$980/t.

Despite being slightly lower in VI and darker than SN 150, which is comparable to mainstream production in spec, SN 500 is in more demand within the European Group I market for export sales. Normally priced lower than or in line with SN 150, its currently higher due to relatively lower avails.

SN 900 is being offered at $1020-$1030/t, higher than last week due to demand from West Africa. With one reported 11,000-ton total cargo (8,000 tons of SN 900 + 3,000 tons of SN 500) loading during the second half of May, and a further enquiry for 4,000 tons ex Riga, both with destination Lagos, there are still potential sales for West Africa receivers, with a number of negotiations proceeding for parcels to be lifted during June.

Few of the many Black Sea enquiries have been confirmed or completed. One large enquiry for 15,000 – 20,000 tons of four grades has been tempered to purchasing only two light vis grades, equivalent to SN 80 and SN 100, for despatch to Gebze port. Prices offered were between $935-$940/t basis CIF. Russian SN 150 and SN 500 have been quiet, with sellers looking for higher prices for this higher spec material. Last offers heard for CIF Turkey sales were $965 and $970/t respectively, but these levels have not been accepted by receivers, who are looking for levels some $40-$50/t lower.

An enquiry for 9,000 tons of mixed grades including bright stock is being worked from Rotterdam to Gebze, but with freight against this movement, only higher spec mainstream material can carry the deal, and confirmation is pending.

There is demand from Turkish traders taking base oils into some of the few blend plants still active in Syria, where civil strife is intensifying. Prices are at a premium, with Black Sea SN 150 and SN 500 delivered into Homs by truck reported between $1250-$1300/t. Per reports, Saudi Arabian material is moving through Jordan by truck, and other attempts are being made to supply this region through Jordan and Lebanon, but little is known.

Middle East
One cargo of bright stock for the Egyptian General Petroleum Corporation has been organized out of Livorno for prompt supply. The pricing under the tender was index linked and based on the high quote plus $100/t. The high delivered price perhaps reflects the payment risks attached to this particular trade.

The Sudanese tender for around 5,000 tons of mixed Group I grades is still on the market, and traders using supplies from Algeciras have been actively bidding for this supply. It is still maintained that incumbent suppliers will hold on to this business due to the fragmented discharge procedures and port and storage limitations in Port Sudan. Levels offered are still at $1035-$1050/t for solvent neutrals and around $1145/t for bright stock basis CIF Port Sudan.

Middle East Gulf Group I imports continue with one parcel of 2,000 tons from Thailand into Sharjah. Domestic Iranian supplies are available ex BIK, with SN 500 offered on an FOB basis at $1035/t, an increase from offers heard ten days ago. Other grades such SN 150 and SN 650 are available in small quantities. Exports from UAE to East African receivers are increasing, along with supplies to South African traders and resellers who are able to use SN 500 to compete with local suppliers.

Africa
Receivers in Ghana are gearing up for the annual tender for Tema, which should be issued to registered suppliers in June. Nigerian imports have been few, but as noted above, one large cargo of some 11,000 tons will soon be en route. The CFR price for SN 900 grade being shipped from the Baltic is assessed at between $1090-$1120/t, depending on freight, with the SN 500 parcel being priced around $1065/t. These are seen as extremely competitive prices with alternative offers for SN 900 as high as $1155/t, and other neutrals at $1065-$1085/t.

The other tabled enquiries for Nigeria ex Baltic will not have the large parcel freight advantage, with a 4,000 ton enquiry loading out of Riga costing in excess of $120/t for shipping, unless topping off with bright stock somewhere en route.

Group II/III
European imported Group II prices are stable, with slight decreases to lower vis grades competing with Group I. Blenders expect prices to fall, but no one can say how much or when. The drivers for Group II pricing used to be Group I levels within Europe, but Group II supplies are now maintaining their own presence, steered only by source pricing decisions, which will ultimately affect wholesale prices at the point of sale.

Levels for light vis grades such as 150N and 220N are between $1120-$1160/t, and heavier vis 500N and 600N are between $1260-$1285/t. All prices on an ex tank basis.

Middle East Group II imports predominantly from Far East sources are stable to firm, with rumours of some suppliers trying to hike levels by $25-$40/t for June deliveries. Sellers are having problems gaining acceptance for these increases, with receivers opposing excessively higher prices in June. Prices offered are between $1075-$1100/t for light grades, and around $1185-$1225/t for heavier products, but these increases are tentative. Negotiations are continuing, and the true June picture may not be revealed until the end of May. Prices are based on landed levels into UAE and other southern Middle East Gulf ports.

Prices for Group III base stocks within Europe are continually under pressure, with sellers trying to keep levels afloat. Strangely there are reports this week of increasing demand for the two main European grades, but the extent of the increase and quantifying offtake is as uncertain as ever, with some suppliers insisting that they will not sell or resell straight GTL-manufactured Group III products, but only as a blend or cocktail containing Group III and other material.

One cargo Group III material of North African-origin has been doing the rounds with few takers. The parcel is being offered around $975/t FOB, equivalent to around 755/t, but with shipping and port restrictions, its unclear where this cargo could go, other than into the already sated European mainland market, where ex tank prices remain between 950-960/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 atpumacrown@email.com.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other