EMEA Base Oil Price Report


Theres been little action throughout EMEA, other than the continuing trend of bullish prices due to crude and feedstock increases over the past few weeks.

Within Europe, the Middle East, and Africa, some buyers are commenting that prices have risen enough, and that if there werent a tight supply scene throughout Europe, prices might be lower. This may be premature, since levels have only just reached sellers acceptance with Dated Brent around $105 per barrel.

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Crude slipped in early week trading, with Dated Brent front month futures below $111 per barrel, down some $6 from last weeks high. This is due in no small part to the possibility of peaceful settlement to the Syrian chemical attacks, which could ease pressure on crude supplies. West Texas Intermediate responded similarly, maintaining a crack against Dated Brent at $107 per barrel.

Feedstock levels have slumped, with ICE gas oil front month at $938 per metric ton in late Tuesday trading, coming off some $30 from last weeks peak.

API Group I prices within Europe and northern Africa have steadied. Prices may have marginally increased at the lower ends of the spreads, but have not moved at the higher points. Light solvent neutrals can be bought around $995-$1030/t, with some offers on the table for SN 500 higher by some $20-$25, between $1030-$1065/t.

Larger parcels of bright stock are around $1110-$1140/t, and smaller slugs are pitched at $1160-$1175/t, which is around the same as last week. What quantity constitutes large or small is sometimes subjective between buyers and sellers, but cargoes of 2,000 – 4,000 tons will benefit from the lower prices whilst 300-700 metric ton cargoes will be priced accordingly higher.

These prices refer to FOB offers and sales conducted from mainstream production within Europe, the Mediterranean (including northern Africa) where availabilities and stocks allow.

Local European mainland sales of base oils have seen increases from many suppliers applied September 1, preceded by the low buying activity of the holiday season. Most players anticipated these increases since even buyers comments were that prices for local deliveries were falling behind the export levels. The beginning of this month appears to have rectified this matter, with increases ranging from $35/t to $110/t or Euro equivalent, depending on grade specification and supply source.

The increases brought domestic and local markets back into step with export sales, with the differential between the two now at a more normal spread of 65-90/t for like-for-like grades of base oil.

Baltic & Black Seas
Baltic activity appears to be subdued with only a handful of enquiries for destinations such as western Africa. There are two reported large cargoes for September loading, and another three large cargo enquiries for October. In addition there are some smaller parcels being worked for Antwerp-Rotterdam-Amsterdam and the United Kingdom, along with prices appearing to be unaffected by the large export duty increases which were mooted for all Russian petroleum products.

Levels for SN 150 and SN 500 appear to be in line with northwestern Europe offers from mainstream sources adopting the usual differentials to take account of location and product specification. Assessed prices are $985-$1035/t for these grades-not as high as predicted last week when the market was being formed after the movements in mainland Europe and the threat of export duties increasing. SN 900 is offered at $1065/t for large quantities.

Black Sea reports are vague with apparently some Turkish buyers keen to re-stock for the coming months, but these purchasers are reticent to buy at this time, fearing that the market is once again facing a downturn. The logic behind this appears at first to be baffling, but with sales of light neutrals being offered for export out of storage within Turkey, there may be some rationale behind these thoughts.

Offers of Russian material are being countenanced by some buyers at levels around $975-$985/t basis FOB for SN 150 and SN 500 with Uzbek material offered on a CIF Gebze basis at around $985/t. Buyers are not rushing to accept these levels, and comments are that private deals can be much lower than those in first pass offers. Some reports are that prices as low as $940/t have been considered for CIF delivered parcels of various qualities of base oils from Fergana.

Middle East
Near Middle East endures the problems of civil war and international interference, both of which may only exacerbate the difficulties in receiving, storing, and blending lubricants. From reports in Lebanon and Jordan, most of the national lube producers have closed down, with raw materials being impossible to source. Finished lubricants in large quantities are being supplied into Syria from many of the surrounding countries such as Turkey and Jordan, whilst there are rumors of Iranian and Russian shipments crossing these borders to supply various factions within Syria. However, these reports are at least third hand and cannot be substantiated at this time.

Red Sea loadings continue from Yanbu and Jeddah with Saudi Arabian producers exporting large quantities of Group l base oils during the last month. Prices are estimated to be on a par with European Mediterranean levels and without the expense of a Suez transit opens the arbitrage to take these high spec products into areas such as United Arab Emirats and Oman. FOB levels are expected to be $1025-$1055/t for solvent neutrals. Higher vis grades make higher end prices, with bright stock at $1120-$1140/t.

Middle East Gulf trade has picked up with many traders and blenders in the market to both purchase and sell base oil from the U.A.E., Qatar and Bahrain. Iranian base stocks do not appear to have lifted from abysmally low prices, but with falling inventories for sale out of BIK, only a few stalwart trades are being conducted. Prices again have been heard as low as $790/t basis FOB, but converting these trades into U.S. dollar terms is not always a practical or simple option, with barters and local currency dealing being employed to effect these deals.

Suppliers in the U.A.E. continue the trade into eastern Africa with exports of SN 500, which can be of Iranian origin or blended material from sources such as Pakistan. This trade continues to expand with a number or receivers looking to import large quantities of blend stocks for land-locked satellite locations within the heart of the Africa. Countries such as Zambia, Uganda and Rwanda are now turning to base oils rather than relying solely on imported finished lubricants.

Selling prices for virgin SN 500 base oil into Uganda, for example, are reported between $1450-$1500/t, with other recycled grades being utilized to great effect.

Southern African markets also import SN 500 into Durban in flexies, although most of the local third party blenders continue to buy from the national producers. Delivered prices for Group I within South Africa and neighboring countries have wide ranges due to varying delivery costs with solvent neutrals between $1145-$1200/t, and bright stock delivered between $1350-$1400/t.

Western African receivers are looking for further cargoes of heavy vis Group I, or alternatively bright stock which may be sourced from U.S. suppliers or from the usual European refineries. Prices for base oils into Nigeria have risen, and receivers are having the usual difficulties in passing these increases on further down the line.

There is resistance to accepting the new raft of prices offered into this market, with a number of buyers looking for alternative sources to offset increases from the Baltic and European suppliers. Target prices reflect numbers which were last delivered into this area some two months ago and do not take account of the FOB increases which have necessarily taken place since then.

Offers are around $1065-$1125/t for solvent neutral grades, with European bright stock around $1185-$1200/t. Traders are looking both to the Far East and the to the U.S. for alternative supplies of bright stock, where prices may be more attractive. SN 900 ex Baltic is being offered into Nigeria in substantial quantities at around $1100/t, but with some traders taking a buy position on this grade, no guarantees are in place for the avails or the prices to be workable if pricing agreements are concluded. Prices are CFR numbers basis Nigerian main ports.

Group II/III
The remainder of the source increases for Group II imports into Europe are now filtering through with September 1 being used as the date for price hikes across the board. Far Eastern suppliers have pushed prices upwards by some $25-$50/t where some U.S producers through their distributors have engaged price rises of more than $65/t. But the bottom line is that all Group II grades are now closely grouped in terms of prices across the European mainland.

Importers are keen to keep these grades as close to Group I levels as possible to encourage transition to these products. Levels are as reported last week with one or two small adjustments for the heavier vis grades. The light vis range is now between $1130-$1165/t and the heavier vis 500N and 600N are $1230-$1285/t.

Middle East Gulf buyers are being asked to bid for supplies of Group II, since offers had shown little interest to receivers in U.A.E. and Qatar. Bids so far have been around $1065/t for the light vis 150N and 220N, and around $1155/t for the heavier 600N. These levels would be considered very keen and would not incur lengthy validity and pertain to delivered prices CIF UAE ports. Buyers looking for fixed prices appear to have had their wish granted.

Group III prices within mainland Europe show no changes over the last few days. Levels of around 950-975/t are established for 4 cSt and 6 cSt. Many buyers refuse to accept any increase to bottom line prices which were in place previously, whilst others are requesting discounts in exchange for brand loyalty and quantity commitment. Given the readily available supply situation, buyers appear to be in the drivers seat.

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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