EMEA Base Oil Price Report


The EMEA base oil scene is reportedly flat this week due to holidays and almost no demand. The outlook looks dreary with few enquiries, and many players say they dont expect revived activity until at least September.

Dated Brent has stabilized between $108 and $109 per barrel. Market expectations are that U.S producers will review base oil numbers with higher crude and product prices soon, and with West Texas Intermediate moving up to within $2 of Dated Brent, pressure to hike base oil prices may be building from across the Atlantic. Within Europe, Middle East and Africa regions, API Group II prices may come under pressure in Europe to move higher, endangering the grades steady progress in Europe.

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Feedstock levels, however, remain buoyant with ICE gas oil up in the new highs around $920 per metric ton for front month settlement. The VGO crack remains positive with levels for LSVGO and HSVGO showing strength at $822/t and $815/t respectively. Base oil production is currently taking a hammering after refinery, storage and handling costs are added. Many producers are reviewing realizations for the product group, and if negativity persists, Group I may simply disappear from the slate of some refiners.

Some rumors suggest that a major Group I supplier with refineries in U.K and Italy is considering converting some production into a Group II facility. This would be the first indigenous outlet for Group II within the Europe, and may show which way the market is heading. The reports validity has not been confirmed.

European Group I prices remain weak with the few reported offers and deals showing further erosion. Light solvent neutral grades are assessed slightly lower at $950-$970/t, with two offers for mainstream SN 500 heard between $970-$985/t. Bright stock offers remain thin with only a couple of calls for material to go to Nigeria, co-loading with Baltic supplied neutrals, and one parcel identified loading from Livorno going to Alexandria for Egyptian General Petroleum Corporation supply. Prices remain under pressure due to these limited cargo movements at $1060-$1075/t.

The largest identified parcel – some 9,600 tons – has been heard loading out of Agio Theodoroi, Greece, bound for a Libyan port. Another 3,000 ton cargo is loading out of Portugal for Mohammedia, Morocco.

The above prices refer to FOB offers or sales ex mainstream suppliers located within the European mainland and North Africa where availability permits.

Local European inland sales dipped in response to buyers pulling back from the market during holiday season. Only emergency and contracted sales of Group I are taking place. Some buyers said they are considering looking at forward purchases of material on a fixed price basis, using the auspices of a trading exchange which would effectively buy the material now and hold in stock for buyers to draw down some time in the future. In some cases the buyer would use their own storage for this exercise but with payment only being affected on draw-down. This has been applied to other speciality products, but is a new concept for base oil purchasing.

Prices for domestic Group I sales remain at a premium to export offers and sales, between 60 and 80/t.

Baltic & Black Seas
Baltic sales have been slow with a couple of enquiries for large parcels to go to western Africa. Russian sales tax for petroleum products is increasing in August by some 2.9 percent, which will affect FCA prices for base oils leaving refineries. This increase will be passed on to FOB sales of Russian base oils adding around $25/t to selling levels. Prices in the Baltic ports are under the same pressure as Group I coming out of mainland Europe with FOB numbers for SN 150 and SN 500 now around $940/t and $950/t respectively. SN 900 prices vary widely with large parcels as low as $930/t, but more typically this grade is being offered and selling in smaller parcels at $975-$990/t.

Black Sea business has been dire with few routine cargo sales of SN 150 and SN 500 from traders in this area. Reports are that two 3,000 ton parcels – one from Russia and one Uzbek – were sold into Turkey at $965/t and $925/t CIF. Turkish buyers denied accepting these parcels, particularly at these levels, stating that they would expect to pay at least $30/t lower, especially for the Russian material.

Turkish buyers, however, are just not in the market to purchase these cross-Black Sea base oil cargoes, citing high inventories and exchange rate problems in addition to high inflation and a poor economic situation which has only worsened after the civil problems.

Middle East
Stifled by Syria and Egypt conflicts, there are reportedly very few base oil trades in the near Middle East. Some exports are leaving Israel, and material is being imported through Aqaba port in Jordan, but the ultimate destinations of these supplies is indistinct, with a great deal of base oils transported by road coming from Jordan, Turkey, and in some cases, Iraq.

An enquiry for 5,000 tons of mixed Group I grades has been issued for Sudanese receivers, but whether this is price-testing as usual or a real enquiry remains to be seen. Mediterranean sources are active in looking at this parcel with supply envisaged for first half August. FOB prices are deemed to be in line with Group I European levels.

Other Red Sea trade has reported 4,000 tons being offered out of Jeddah for supply to Oman and United Arab Emirates, with expected prices in last weeks range of $985-$1025/t for Group I solvent neutrals and bright stock around $1150/t basis CIF/CFR Oman and U.A.E. ports.

In contrast, Middle East Gulf traders are still looking to take material out of Iran. Prices for SN 500 ex BIK are falling again, making these parcels increasingly attractive to buyers. But simultaneously, Iranian producers are almost distraught at the levels at which they must sell to export these grades. FOB sales of Iranian SN 500 are now considered to be around $840-$855/t.

Theres scarce news regarding the availability and pricing for the other two Iranian export grades, SN 150 and SN 650.

Once again a shipping enquiry has been made for base oils to move from Hamriyah to Yanbu with the considered opinion that this cargo will not be made up of prime base stocks but may be either re-cycled material, or off-spec grades for re-processing.

The region remains quiet due to Ramadan, and with the high temperatures of August approaching, many players are preparing to put business on ice for the next few weeks.

Eastern Africa and Southern Africa imports of Group I base oils continue with a few receivers sending out enquiries to test prices or change suppliers. These enquiries rarely bring any change due to local restrictions on specifications which are not included in material produced in alternative markets. Thus U.A.E. imports into Durban and Mombasa continue around $1145-$1165/t for virgin SN 500. Recycled oil is becoming more acceptable in these regions, with prices some $50-$100/t lower than virgin base oils. Local blenders and distributors are considering recycling units, which on a small budget can provide a useful source of quality base oils for finished lubricants.

Western Africa has seen the issuance of the annual Ghana tender for supply of Group I into Tema, and this will be evaluated in the next few months. Nigerian receivers are looking for a number of cargoes for early September arrival, subsequently a few traders are in negotiation for Baltic material with options to load bright stock ex mainland European sources. Cargoes for up to 10,000 tons are being considered for import into Lagos, with one 5,000 ton parcel from Augusta being noted for prompt loading, comprising mainly of bright stock.

With larger parcel sizes and hence lower freight rates, landed mainstream supply prices will probably be comparable to Baltic loaded material. Levels are expected around $1025-$1075/t for light and medium neutrals, with bright stock coming in around $1140-$1160/t, all basis delivered CFR Nigerian ports. SN 900 is expected to form a high proportion of the quantities loading out of the Baltic, with prices not expected as low as the $1008/t seen recently, but around $1020-$1035/t.

Group II/III
Prices for European imported Group II are coming under pressure from the Group I camp, but with crude and feedstock levels rising in Europe, U.S., and the Far East, this pattern may change. Currently, light vis material is at $1055-$1100/t, and higher vis grades such as 500N and 600N are between $1130-$1215/t. All basis ex tank sales north-western Europe or Mediterranean.

Middle East Gulf Group II business is slow alongside all other base oil activity in that region, with the Holy Month currently underway. Assessed prices of $1045-$1095/t for light vis 150N and 220N have not altered since last week, along with heavier vis 500N material between $1135-$1185/t.

Group III remains outside the box within Europe with oversupply continuing. However, one European producer has commented that demand has increased slightly over the last quarter, with hopes that this trend will continue for the foreseeable future. Levels for the two main grades, 4 cSt and 6 cSt remain unaltered, between 905-920/t ex tank. Mention should be made of the continuing flow of Group III material from Bahrain going into Mumbai. Cargoes of 4,000 tons appear to be moving every month with comments from producers that these should begin increasing.

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

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