EMEA Base Oil Price Report


With a number of players in Dubai for the annual Middle East base oil conference, some activity is missing from the EMEA markets, with the exception of API Group II moving into the Middle East Gulf.

The Europe, Middle East, and Africa markets saw few signs of direction this week — perhaps the only exception was API Group II moving into the Middle East Gulf, where prices for second half October are expected to reflect possible Far East source increases of $10-$25 per metric ton.

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Sellers throughout Europe, Middle East and Africa confirm that Group I trade is slow, with few active buyers and few notable cargoes moving out of the main European supply points. This may be due to restrictions imposed on receiving markets where the arbitrage is closed either because FOB source prices are too high or local production is more attractive in terms of maintaining lower inventories and being able to transact in local currencies.

Crude oil prices have stayed within small ranges this week, with Dated Brent edging up to stabilize around $110.50 per barrel in late Tuesday trading. West Texas Intermediate has maintained a similar crack against DB, trading under $104 per barrel. ICE gas oil has moved ahead of last weeks levels to around $935/t, but is vacillating around $20/t on a week-to-week basis, a stability which has decreased the pressure to move in either direction.

Refiners comments this week bear out the scene where Group I production has been cut across the board. At the same time, available volume appears to be satisfying buyers requirements. The stark reality is that the use of Group I base oils within Europe may be falling at a faster rate than expected, but the slack does not appear to have been taken up by Group II and Group III supply.

Overall, industrial output has not yet returned to pre-2008 levels, and the markets may take considerable time to re-align. Given this backdrop, Group I base oil prices within Europe have moved only slightly. Light neutrals are offered between $990-$1020/t, heavier grades such as SN 500 are offered at $1010-$1035/t, and bright stock in cargo-sized parcels is available at $1085-$1100/t.

These are FOB offers pertaining to material ex mainstream supply points located within mainland Europe or North Africa, where availability allows.

Local markets within Europe are also maintaining current levels with the suggestion of slight demand increases across the board due to an uptick in commercial activity. This may be a welcome respite for some smaller producers who have been finding it tough to locate buyers.

The only pressure comes from the USD/euro exchange rate, and some have commented that they would like to raise prices by $15-$20/t to compensate. Many blenders, however, refuse to accept any increases in light of wide availabilities.

The differential between local/domestic sales and prices attached to cargo -sized parcels is maintained at 75-120/t above the export ranges.

Baltic & Black Seas
Baltic trade for Russian and Belarus-produced base oils has been markedly thin, with few enquiries placed for Nigerian receivers. But with a stable element to well-known market prices, many traders are not making fresh enquiries without first negotiating with buyers. FOB sales ex Baltic ports are almost unchanged from last week at $985-$1010/t for the two main grades SN 150 and SN 500, the SN 500 high just marginally dipping. The heavier SN 900 material is available from more than one source with large quantities considered for export to West Africa, Middle East Gulf, and the west coast of India. FOB offered prices for this grade move between $1085-$1110/t.

Black Sea sources are pushing to supply more to Turkish third parties. Buyers counters, however — far below selling levels at around $900/t basis CFR Gebze — dont enhance the reputation of many of these buyers. The result is selling parties only offering to receivers with a track record.

Prices for SN 150 and SN 500 from Russian sellers has been trimmed to between $975-$995/t, with Uzbek SN 150 offered around $960/t, all basis CIF main northern Turkish ports.

Middle East
Egyptian supplies of bright stock do not appear to have resumed yet, with clarification of the new tender not yet established. Government problems appear to be delaying Egyptian General Petroleum Corporation imports, with payment for some already-delivered cargoes not yet accounted for. Some traders seem confident to continue this business, whilst others have declined involvement.

Other supplies of base oils into Near Middle East destinations are few and far between but another attempt to supply Russian grades into Syrian seaports is now on the cards. The assumption is that port storage is intact and that the necessary logistics can handle the import of base oils into the war-torn region. Supplies from Turkey and Jordan have been taking place by truck.

Red Sea exports from Saudi Arabia continue to load parcels primarily for United Arab Emirates and Omani receivers with more competitive prices than European Mediterranean supplies — acceptable to Saudi producers in terms of margin. FOB basis levels are around $1000-$1035/t in respect of the Group I solvent neutrals, with bright stock loading at $1100-$1125/t.

U.A.E. Group I markets have been dominated by the Saudi Arabian supplies at the higher-quality-end of the market, with Iranian exports still stubbornly playing a useful role for U.A.E. traders who can supply these grades to East African receivers who do not require first class products. Prices on an FOB basis ex southern Iranian ports is (in dollar equivalent) $920-$940/t.

Iranian SN 500 is predominantly the grade being supplied with smaller amounts of SN 150 and SN 650 also included in parcels sold to the East African seaboard. Supplies are almost all made in flexies within containers, with some recycled material ex Bahrain supplied in drums. Prices for the SN 500 are reported at $1125-$1150 CIF, ports such as Mombasa, and Beira with South African imports into Durban around $20/t lower due to the vagaries of container freight costs.

West African buyers have seen a couple of Baltic and mainstream European cargoes landed so far this month, with at least another two vessels loading or en route to Apapa. These Nigerian imports are price-assessed on a higher basis than previous cargoes imported into this region. Levels have moved up by some $25-$50/t for the Group I heavy solvent neutrals to around $1055-$1095/t with bright stock now landing at $1165-$1200/t — all grades pricing determined by source and quantities loaded.

Receivers and traders have contacted suppliers in U.S.A. to investigate possibilities for large parcels of bright stock, but as of this date no reported cargoes have been successfully sourced. Quantities of 5,000 tons and over are required to enable freight costs to play a manageable part in these deliveries.

Group II/III
Group II base oils within Europe are seeing a number of enquiries from blenders and large finished lube manufacturers looking to employ these grades in formulations for motor oils, industrial process oils, and almost everything in between.

There are unconfirmed reports this week that one European-based major is considering conversion or addition of a Group II facility to a refinery already producing Group I. This is in addition to the Spanish project which is still targeted to produce Group II. More information on this announcement is being sought.

Prices for Group II have stabilized, with light viscosity material 150N sold at $1090-$1155/t, and higher viscosity, heavier 500N and 600N oils leaving storage tanks at $1185-$1255/t.

With price pressures from source producers in the Far East, exports arriving into Middle East Gulf for Group II may be set to rise by some $10-$25/t across all viscosities, with larger increases for the higher vis grades. This is due to demand in Far East local markets stepping up over the past few months. Also, with a number of turnarounds curbing production in a number of plants in these regions, Group II supply has become tight.

This may not continue since many sellers are now restarting production, which may mean more availability and less price pressure. Sellers, however, are trying to establish higher prices on the basis that once in place, these may be easier to maintain.

Offer levels for November delivery are pitched some $10-$20/t higher than current levels, with 100N-220N coming in at $1085-$1115/t for light vis grades and $1180-$1195/t for the heavy grades.

Prompt Group III European sales may be starting to rise for the first time in months, with some buyers believing that prices will increase soon due to exchange rate differentials and higher raw material/feedstock values, coupled with external inflation costs hitting the refineries promoting these grades.

Prices rose by around 10/t this week, with sellers suggesting that further increments may be necessary to counter increasing costs. Prices still apply to both grades in the viscosity range, with 4 cSt and 6 cSt sold ex tank at 975-995/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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