EMEA Base Oil Price Report


API Group I in Europe is in short supply. With minimal stocks for spot sales, suppliers are turning away enquiries and saying its possible the tightening will persist through October.

With lower demand cycles, producers appear to have cut back on base oil runs to suit only their own requirements and that of contracted buyers. Realizations for base oils as a product group have fallen, and contributions from Group I base oils within the Europe, the Middle East and Africa market have been woeful.

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Many traders and end users are finding difficulty in purchasing requirements. Prices are therefore starting to firm with suppliers asking for the high ends of reference prices in offers for limited supplies.

Crude firmed in early trading on the back of unsettled events in the Middle East, supply problems with North Sea operators, and the closure of the main export installation in Libya. Dated Brent moved to just above $109 per barrel, with West Texas Intermediate close but with a widening crack at $105.60 per barrel. ICE gas oil in London trading is showing gains of around $7 per metric ton, with front month settlement at $928/t on Tuesday close.

Group I in Europe is notionally higher, but with few offers and few avails the scene is confusing for buyers looking for export opportunities on a spot basis. Offers have moved to the higher ends with more hikes anticipated. Light solvent neutrals are at $965-$980/t, with SN 500 in demand between $980-$1000/t. Bright stock in larger quantities is touted by suppliers particularly for sales into western Africa at $1075-$1090/t.

These prices apply to FOB sales and offers of Group I base oils ex mainstream European refineries in the north and the Mediterranean. No reports have been received this week of any offers or sales from northern Africa.

Local European supplies appear to be unaffected by the moves of the export markets, with many players on vacation. Differentials between export selling prices and those for the domestic or local markets are possibly lower this week, between 40-60/t, due to the increases to cargo-sized parcel prices. Normal differentials will return upon the month end. If export levels continue to rise, locally-delivered material prices will increase accordingly.

Baltic & Black Seas
It appears that some buyers are trying to beat impending increases announced by distributors and resellers in Baltic regions. One 12,000 ton cargo of mixed grades is contemplated for western Africa, loading between Aug. 25 and Sept. 5, whilst another 10,000 ton parcel is planned for delivery into Baniyas, Syria, the first large sea-borne cargo for some time into this war-torn region. Prices for SN 150 and SN 500 have remained relatively static until this week, during which the effects of the Russian export duty increase, and of course the positive mood reaction to mainstream European offers and avails.

Numbers are now $960-$980/t, in conjunction with offers of $990-$1025/t for SN 900. There are unconfirmed rumors that the large shipment(s) being arranged may have been sold well below these new offers.

Another unusual base oil movement has been reported loading out of the Baltic with a cargo of 5,000 tons for Nantong, China. Group I exports from both Baltic and Black Sea have an open arbitrage with Far East at this moment, although this may not be available much longer if Baltic and Black Sea prices rise.

Black Sea local trade is thin with few Turkish buyers showing interest in the market. Some Turkish players suggest that they are still looking for the market to come down, believing that availabilities are plentiful, and that sellers have nowhere to sell but to Turkish mainland.

Prices are currently quoted at previous highs, with almost all sellers saying they wont discount further. Numbers are between $945-$960/t for Russian sourced SN 150 and SN 500, with Uzbek supplies around $925/t all basis CIF main Turkish ports.

Near Middle East business will be cheered if the Baltic cargo of some 10,000 ton arrives into Baniyas. This will be one of the first bulk shipments delivered directly into Syria for some time, and may impinge on the overland supply scene from Turkey and Jordan. The end user is not identified, although to ensure funding, this cargo must be under governmental auspices.

The region is still mired in civil war, with the Egyptian campaign also showing no signs of abating.

Red Sea supplies are now flowing after Ramadan and Eid al-Fitr with one cargo from Yanbu destined for Jebel Ali carrying 13,000 tons of mixed Group I. Two smaller cargoes are to be loaded ex Jeddah, one for Sohar, Oman, and the other with around 3,300 tons for Singapore.

Prices for these cargoes are expected to have been settled some time ago, and will have followed European Mediterranean standards in the main. Therefore FOB levels are estimated around $965-$1000/t for solvent neutrals, with bright stock loaded at $1100-$1125/t.

Middle East
Middle East Gulf reports remain scant with holidays wrapping up. The cargoes from Saudi Arabia will certainly push the Group I stakes since around 20,000 tons of Group I will arrive into United Arab Emirates and Oman over the next few weeks along with another import of some 2,000 tons from Algeciras.

Locally Iranian export grades SN 500, SN 150 and SN 650 are once again under price pressure and it will be interesting to see if these grades respond to the European surge by reversing that trend. FOB levels are determined at $825-$840/t basis FOB Iranian ports for the SN 500 grade, with SN 150 sold at a small premium due to lower avails but with the poorer quality SN 650 at around $820/t.

These low levels ensure that receivers in eastern and southern Africa have maintained an interest in taking Iranian SN 500 in flexies from U.A.E. traders at a healthy margin for these resellers. Prices into Durban are around $1065/t and with container freight at about $120/t, its good business.

Western Africa imports include 5,500 tons of mixed Group I due for loading out of the Mediterranean for discharge in Apapa. The 12,000 ton parcel from the Baltic will also make a large contribution to imported base oils in Nigeria. Other shipping enquiries are showing interest for another central Mediterranean cargo being loaded during first half of August, but this may be a duplication with the other parcel loading from Augusta.

As usual, receivers will be reticent to accept that prices must rise, given the downward or at least stable market lows reported.

The already notified imports are as previously reported – $1025-$1050/t for solvent neutrals and $1125-$1140/t for bright stock landed. However, with prices gearing to move north, September cargoes are anticipated to be some $25/t higher.

Baltic-sourced SN 900, whether loaded directly from Baltic or from Antwerp-Rotterdam-Amsterdam, will carry price tags of around $1035/t, but will climb to new imported values of around $1060/t for future Nigerian imports.

Group II & III
It is reckoned that the increases of $20-$45/t from sources in the U.S. and Far East can possibly be recouped whist holding on to market share within the whole base oil supply scene.

Users of Group II within Europe have not indicated increases so far, but are prepared for it when business returns to normal soon. With the European market at its quietest of the year, low vis Group II is almost as competitive as Group I solvent neutrals, which may hasten the use and acceptance of Group II, at least at lower vis levels. Prices remain $1055-$1100/t for light vis and $1130-$1215/t for heavier.

Influx of Group II into Middle East Gulf regions has been at a low during the past month but will soon return to normal. Contracted volumes are being delivered but suppliers from Far East sources are determined to move prices up due to supply constraints and a tightening market in Korea, Japan and China. Levels $10-$30/t higher are being talked, extending prices to $1065-$1100/t for the range of light vis grades with the heavier material around $1155-$1210/t.

European Group III supplies have certainly gotten a lift from the absence of the usual influx of material from Middle East Gulf sources with prices moving upward again this week and surprisingly with receivers finding avails lower than demand for the first time for some two years. Levels for 4 cSt and 6 cSt have moved up again by some 5-10/t, up to 945-970/t basis FCA northwest European storage.

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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