EMEA Base Oil Price Report


The high points of the selling ranges have eroded for API Group l prices, a sign that the market is stable to weak.

European sellers are playing a quiet game, with many declaring that they have little or no material to offer on a spot prompt basis, and that larger parcels for export must be planned in advance. Middle East and parts of Africa are in a balanced supply-demand situation.

Buyers are showing no real concern, with the parts of the market which traditionally suck up any surplus availability appearing almost switched off. These regions such as West Africa, Turkey, and some parts of the Middle East are currently sated. There are still cargoes moving into areas such as West Africa, but not on the scale seen in the past.

Providing stability, Dated Brent has been hovering around the same levels for the last month. This marker was $109.60 per barrel in late Tuesday trading. WTI is maintaining almost the same crack against DB, posting around $99/bbl. Front month ICE gas oil is $930 per metric ton, keeping a negative differential of around $80 between this product and the mean price for European export SN 500. This delta is an important indicator for pressure being exerted on base oil prices.

FOB prices are slightly revised this week for Group l grades, to take account of the erosion at the top of the ranges, with light solvent neutral grades banded between $985-$1000/t, and the heavier neutrals such as SN 500 between $1010-$1020/t. Bright stock prices have risen reflecting demand for large parcels of this grade, which are becoming rarer in the European mainstream markets. Levels are now $1155-$1195/t for the few export parcels offered.

The large difference in price between SN 500 and bright stock has taken a number of buyers and receivers by surprise. Many lament that the spread is too wide and that bright stock should be priced much lower. Cargoes of this grade from the U.S. have been much lower in price and have attracted a number of traders selling into West Africa, India and the Middle East.

The prices above refer to FOB offers and reported sales from mainstream European and North African facilities where availability allows.

Local European prices remained stable this week with no reports of discounting. Blenders within Europe are not unhappy with this situation and indeed prefer price stability over an extended period to the potential large swings. This affords players time to price finished lubes at levels which are sustainable, and which do not have to fluctuate with every peak and trough of the base oil market.

Levels for local or domestic sales of Group l products are around 60-100/t over export prices. Bright stock operates with a delta of only some 25/t over export values.

Baltic & Black Seas
Baltic activity for Russian and Belarus base oils has been quiet again this week, with a number of suppliers trying to push up prices for the light SN 150 grades. There has been a widening variation between the prices for SN 150 and SN 500 for some time, with the latter being more in demand for deep-sea locations such as West Africa. Of late some small increase in demand for the lighter ends has been seen from mainland Europe, moving the FOB levels for this material up to around $935/t. SN 500 is offered from $955 to $985/t depending on parcel size and destination. SN 500 delivered into mainland Europe and U.K. is priced at the higher end, in line with mainstream avails.

SN 900 grades are still in demand, particularly with bright stock prices moving higher, but there are few avails. Prices for this grade are around $1065-$1090/t.

Black Sea trade has emerged from its cocoon this week with a number of enquiries from Turkish importers looking to buy Russian SN 500, and some smaller parcels of SN 150. This reversal of buying pattern, where previously the light neutral grades were more popular, perhaps reflects the government crackdown on base oil imports for uses other than blending finished lubricants, such as fuel dilution.

Prices are stable with Russian SN 150 priced at $925-$940/t FOB Black Sea loadports, with SN 500 around $10/t higher on the same basis. CIF prices take into account freight rates of $40-$55/t for cargoes between 2,000-3,000 tons.

Middle East
Near Middle East base oil supplies have one positive note, the award of the Egyptian General Petroleum Corp. tender for only 5,000 tons of bright stock for the period to December. Markets in Syria and Lebanon are suspended with small supplies of Turkish, Iranian, and Saudi Arabian base oils finding their tortuous ways through Jordan, Kurdistan and across the Turkish/Syrian border. Sudanese receivers are in the market once again with a tender for Group l material, but quite how realistic these enquiries are remains to be seen, with price checking being one of the main reasons for the issuance of some of these tenders.

Middle East Gulf prices for Group l base oil have firmed marginally this week on the back of local demand in UAE and from areas such as West Coast India and East Africa. Prices are still two-tiered, with higher specification material landed into UAE and Oman from suppliers in Saudi Arabia at levels around $1025-$1075 for the range of solvent neutrals. Small quantities of bright stock are landing from suppliers in Indonesia and Iran around $1245/t, with one large parcel arriving into UAE from U.S. later this month.

Lower quality Group l solvent neutrals are landed into the Middle East Gulf from various locations with prices reflecting the lower specs, $960-$985/t, basis CFR UAE.

Iranian prices for SN 500 have been lifted to around $980-$990/t FOB BIK and BB, but with the market for Group l still oversupplied it is difficult to see what is driving the prices higher.

East African receivers have issued enquiries for supplies to be delivered prior to year-end. Although these individual parcels are small, when assembled together some 5,000 to 8,000 tons of various grades of Group l base oils will be delivered to ports such as Mombasa, Beira, and Durban. Prices are firm around $1165-$1185/t basis CIF for SN 500 delivered in flexibags.

West Africa has seen the first of the new Ghana tender cargoes arriving in Tema. The 5,000 ton parcel contains the three main Group l grades and is supplied from sources in West-central Mediterranean. Prices are index-linked based on published prices, with a premium of some $83.50/t to cover freight, margin, and other incidentals.

Nigerian buyers have received parcels of U.S. bright stock and heavy neutrals which have been more aggressively priced than the same material coming from European sources including the Baltic. There is demand for heavy SN 900, but the demand will be difficult to cover.

Two cargoes are being tabled from Baltic supply points for Nigeria, but no firm commitments have yet been put in place along with shipping fixtures. Prices for material being supplied into Nigerian ports remain as previous, with the exception of European bright stock which has gathered pace in pricing. The likelihood is that bright stock from the U.S. or other sources such as Brazil will be substituted for European material.

Levels for the Group l solvent neutrals will still be $1045-$1085/t, with U.S. bright stock delivered around $1165-$1200/t, all on the basis of CFR Nigerian ports. European bright stock would not land into Nigeria at less than $1245/t, given current FOB rates and freight.

Groups II/III
Group II prices in Europe appear to be dividing, with U.S. imports a little higher and Far East material slightly lower. However, these prices reflect Far East postings from as long ago as August, and with that market moving higher over the past few weeks, these differentials may start to disappear.

Prices are relatively stable however, with the light grades at $1090-$1155/t and higher viscosity, heavier material ex tank Northwest Europe at $1145-$1210/t.

Group II prices in the Middle East Gulf are stable, but with more cargoes from South Korea and Taiwan, an oversupply situation is not impossible to forecast. CIF offers reflect this situation, between $1080-$1110/t for light vis grades, and the more popular heavy grades at $1165-$1180/t.

Within the European Group III scene, demand is the word on everyones lips, since without demand there are fears of serious oversupply. Suppliers are keen to maintain sales and are prepared to leave prices alone. Prices for the two main grades are 975-995/t basis ex tank NW Europe or Med. Some suppliers have tried to increase prices by some 5-10/t, but no sooner have these increases been announced than discounts, TVAs and other reductions have been implemented to mollify increases.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.

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