EMEA Base Oil Price Report


The EMEA base oil markets appear to be continuing through a period of relative stability with prices plateauing.

API Group I numbers are almost static within well-defined ranges which have now become accepted by both sellers and buyers, and with the absence of outlandish bids and offers, the current pricing model seems to be working for both sides throughout Europe, the Middle East and Africa.

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External pressures such as petroleum product price variations and volatile crude oil movements seem to have abated, and coupled with a phoenix-like demand for finished lubes starting to emerge from the ashes of contemporary economic disasters, the EMEA base oil markets may be starting to turn the corner.

Dated Brent has moved less than $1 to $107 per barrel. Price pressure points have abated, with Syrian politics entering discussion and the fear of confrontation from Iran rescinding. West Texas Intermediate has fallen back due to U.S. government shutdown, which may also affect other crude supplies around the globe. Some radical forecasts are that DB may fall to as low as $90/b before year-end, whilst the Organization of the Petroleum Exporting Countries has called for light crude to stabilize at an average of around $107 per barrel between now and January.

ICE gas oil has lost some of the seasonal impetus and is now around $907 per metric ton, only marginally off last weeks lows. All these stats point to a weak to stable market in which base oils can in a small part remain within forecast ranges.

Group I prices within mainland Europe are largely unchanged, with only small alterations to supplies on a local basis. Light solvent neutral grades SN 70 through to SN 150 are maintained between $985-$1015/t, with higher vis material such as SN 500 sold and offered between $1010-$1030/t. Bright stock within the European mainland is still available in bulk and is offered this week between $1085-$1100/t, with smaller parcels at $1120-$1140/t.

These levels refer to FOB sales and offers for Group I products ex mainstream production from European and North African supply points.

Without any push to raise prices at the beginning of October, the domestic scene appears to have stabilized in line with export sales and offers.

A number of blenders have commented that they now anticipate price reviews almost every month, but the lack of action from sellers has instilled an element of price stability. Not having to tinker with finished product prices on an ongoing basis and being able to commit to contracts for longer than three months has been a welcome respite for some in the industry.

The question now is, how long can this stability last?

Differentials between local and export prices remain between 75-120/t over the levels expressed above.

Baltic & Black Seas
Baltic sales appear to be steady. Offers and negotiations are slower than previously noted, with buyers searching for the best deal possible given that there are now options to buy from a number of distributors and re-sellers. Prices again remain in the same ballpark as last week. Levels for SN 150 and SN 500 are still based on numbers between $985-$1020/t basis FOB Baltic ports. SN 900 is available, although large quantities appear difficult to find, but prices are around the $1100/t level.

Black Sea cross-trades remain weak with Turkish buyers staying away from purchasing large quantities of Russian and Uzbek base oils. Prices on offers heard during the week started to drop a little from previous levels, with sellers perhaps trying to instill some demand into the market by posting more attractive levels?

Russian sellers offered around 3,000 tons of SN 500 at $1025/t basis CIF Gebze, but with buyers looking for levels $30-$40/t lower, this offer was declined.

Fergana refinery material continues to be offered into Turkey, with SN 150 around $975/t basis delivered CIF.

Middle East
Near Middle East markets report little news for base oil business with most of the domestic trade confined to the local production of finished lubes using whatever blendstock can be bought from traders taking material through Jordan and Turkey into Syria and Lebanon. Attempts at seaborne cargoes are being reconsidered with a few Russian backed deals offered into Banayas and Lattakia, although no firm outcome has been announced.

Egyptian imports are once again at the center of base oil activity with requirements for a number of cargoes of bright stock to be delivered under the Egyptian General Petroleum Corporation tender. Participants are few for this business due to constraints on payment arrangements along with prospects of significant demurrage at Alexandria port. No information has been offered yet on companies responding to the tender.

Middle East Gulf trade of Group I base oils is two-tiered with imports from Saudi Arabia forming the mainstay of the premium market and Iranian and Pakistan exports forming the lower end of the spectrum. Talks this week involved Iranian SN 500 being pushed higher with bids to purchase material ex tank on an FOB basis ex BIK port at around $920-$935/t. Iranian sellers have moved levels upwards after disastrous selling around $855-$875/t dollar equivalent. Offers were heard at $935-$955/t from Iranian traders but for small quantities of SN 150 and SN 500 only.

United Arab Emirates traders are scaling down on Group I base oil use with large parts of the market opting to use Group III grades in many finished lubes formulations. Marine lube blenders are looking for quantities of bright stock for continuous production of these oils into the future with a requirement for high vis products not covered under the Group II banner.

East African trade has been brisk of late with a number of new enquiries for Group I along with recycled base oils to be supplied ex Middle East Gulf and Red Sea. Prices for material delivered into these regions have moved upwards slightly following increases during August and September in source locations. Levels for SN 150 and SN 500 landed into East Africa ports in flexies are now $1145-$1175/t, with bright stock in containers being supplied at around $1300/t.

South African supply remains dependent on local refinery production of Group I base oils and the vast distribution system which takes these grades not only across South Africa but also into regions of Botswana, Mozambique and Zimbabwe. Prices local to refineries, for example in Durban, are comparable to European Group I levels, whereas material delivered into parts of Mozambique can be priced some $250-$300/t over these refinery gate levels.

West African requirements are building once again, with a number of enquiries being floated from the usual raft of receivers and traders in Nigeria. The third party traders who cover this region are in negotiations with Baltic and European suppliers to facilitate cargoes for delivery during October and November.

Nigeria buyers who had announced target prices which were unattainable appear to have come around, and are considering more meaningful offers. Offers are now around $1060-$1095/t for solvent neutral grades, and $1180-$1200/t for bright stock. SN 900, where available, will be offered around $1150/t, all basis CFR Nigerian ports.

Buyers in Cameroon have made enquiries for Group I or Group II grades to be made available on a delivered basis in flexies. The suggestion is that this material is not being used locally but may be routed into Chad and Central African Republic. The requirements are mostly for SN 500 or 500N type material.

Group II/III
Group II base oil prices within Europe are also stable with the latest round of increases in the past. Levels have settled down with both buyers and sellers not expecting adjustment in the coming months, in the event that nothing upsets the market. Sellers and distributors of Group II appear to be content with current margins and realizations on the products. At the same time buyers are starting to see the importance of these grades as perhaps the next step in the supply and formulation patterns within Europe, since as emission controls become more stringent, low sulphur base oils will perhaps play a much more important role in production of finished lubes.

Prices remain unaltered with no news of any changes. Light vis grades such as 150N are being sold ex tank at $1090-$1155/t, whilst the heavier 500N material is selling at $1185-$1255/t.

Middle East Gulf supplies of Group II are growing, amidst attempts by producers to increase prices in line with moves in the local Far East markets. These have been resisted, and now with production coming back to full ahead in the source locations, these grades will possibly become more available which in turn may cause pressure for prices to come down.

Levels are between $1075-$1090 for supplies of the light vis grades and the heavier grades 500N and 600N landed CIF Middle East Gulf ports are $1160-$1175/t.

European markets for Group III grades remain under supply pressure, with sellers trying to move prices back to levels seen some eighteen months ago. Buyers are resisting these approaches, citing choice of supplier and abounding stocks of the main grades throughout mainland Europe.

Many blenders remain with approved suppliers and maintain pressure to keep prices in line. Suppliers have also commented that although prices have fallen due to oversupply, levels attained within the European markets are still sustainable, and are acceptable against some other regions where a similar oversupply has caused prices to collapse.

Currently, exchange rates are not helping dollar-based production, causing additional headaches for some suppliers in this tight market.

Prices remain as reported last week with light 4 cSt vis material coupled together with 6 cSt grades at 965-985/t.

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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