EMEA Base Oil Price Report


The EMEA markets are fragmented, with parts such as the Middle East Gulf and South Africa seeing determined growth whilst others such as mainland Europe witness faltering demand and an uninspiring market for both sellers and buyers.

Despite apparently successful nuclear negotiations between the United States and Iran, crude levels have picked up, with Dated Brent up some $4 to above $111 per barrel and West Texas Intermediate around $94, pushing the crack to around $17. Markets are intent on reporting falling Dated Brent prices, but evidence shows otherwise. ICE gas oil front month futures have climbed to around $944 per metric ton, moving up some $30/t over last weeks levels.

Crude levels are not doing any favors to European API Group I production levels, which struggle against poor demand and buyers expectations. Levels for lighter viscosity solvent neutrals are weak amidst relatively poor availabilities, but with sellers digging their heels in, numbers maintain between $945-$955/t. SN 500 and other heavier neutrals appear to be somewhat resilient to pressure, being pushed up $5-$10 wherever possible to $975-$990/t. Bright stock export pricing remains buoyant at $1125-$1140/t, with sellers unwilling to favor discounts.

One 11,000 – 13,000 ton cargo of light and heavy neutrals plus a large slug of bright stock is being considered for a two-port load out of northwestern Europe and Atlantic Europe, with disports in Aqaba, Jeddah and Kuwait. This export enterprise will require support from both FOB pricing and freight to become effective.

With some suppliers supporting local European markets, prices for smaller quantities delivered by road and barge are holding higher levels. With a slight surge in demand measured from buyers last week, these sales are becoming more appealing than large slugs of material for export. More than three sellers commented that they are able to sell more in smaller quantities, but at $60-$80/t higher in some cases. This bears out a differential between export and local domestic sales for Group I base oils of 60-75/t.

Baltic and Black Seas
Baltic numbers remain weak for the large quantities of base oils required for cargoes destined for West Africa, while prices for smaller quantities of SN 150 and SN 500 have been static for the last few weeks. FOB prices for the light material are $890-$910 and $920-$930/t for SN 500. However, there are reports of lower prices being negotiated for particular one-off deals. There are a number of enquiries for material to be loaded in flexies for supplies to southern, eastern, and western Africa, possibly for transportation in containers away from the coast to hinterland users. Most distributors only have SN 900 in small quantities. No new prices have been quoted since last reported levels around $975-$985/t basis FCA, reflecting FOB levels at $1015-$1025/t.

Black Sea prices are marginally higher, but with thin trading activity these could dip if large lifters apply pressure. A parcel from Theodosia is believed to be under offer to the west coast of India and United Arab Emirates, with sellers awaiting confirmation on sales. FOB levels have not been disclosed and perhaps have not been finally negotiated.

Generally, trans-Black Sea pricing remains around $925-$935/t basis FOB for Russian grades, with Fergana SN 150 still offered in small lots at around $950/t CIF Gebze port.

Middle East
Problems in Syria and Lebanon still trouble Near Middle East regions. With only the Egyptian General Petroleum Corporation tender — supplied with bright stock — going into Alexandria, activity is scant. Shipping reports named small quantities of Israeli Group I material into southern Turkish ports, but quantities and prices were not available.

With the proposal to discharge European base oil into Aqaba, and presumably bright stock into Jeddah, these could be new supply positions for traders. The balance of this cargo is rumored to be destined for Kuwait, again perhaps with a heavy emphasis on bright stock supply.

Middle East Gulf supplies of Group I base oils are increasingly limited to neutrals coming into the region from the Red Sea and local supplies from Iranian producers. It is not yet clear what effects the latest U.S. and Iran talks may have on base oils (and other products) being freed up for export. Perhaps a relaxation on banking sanctions, which have proven to be one of the major obstacles to trading, along with the lifting of a current shipping ban for many foreign-flagged vessels.

Prices for Iranian grades, predominantly SN 500, have moved back up this week, perhaps in response to the negotiations, and are now offered at $925-$950/t, a reversal of last weeks perceptions. As noted previously, this may reflect the more positive opportunities brought by lessening sanctions.

Locally produced Group I base oils in the Middle East Gulf still compose a large part of the supply of this group of products into the region. These are higher spec grades than the bulk of the Iranian production and are priced more in line with Red Sea or European exports. Current levels are higher, at $985-$1035 for the range of solvent neutrals, with the smaller bright stock production at $1100-$1135/t.

As noted, East Africa and South Africa are looking for extra supplies of base oil over the next few months. One unusual parcel of some 6,000 of solvent neutrals loading out of the Baltic at very low reported numbers has been identified as destined for Durban. Perhaps the seasonal elements require increments to the South African slate since a movement like this has not been seen for around a year. Landed prices are estimated around $1045-$1070/t in respect of SN 150 and SN 500.

West Africa has a number of cargoes arriving between now and mid-January. Around four of these parcels are being loaded from Baltic sources, along with some top-off quantities added ex northwestern Europe, Atlantic European and Mediterranean supply points. The latest large cargo inquiry has been identified as some 12,000 tons of mixed Group I loading ex United States Gulf Coast for discharge into Nigeria or other West Africa ports.

Pricing is assessed as follows, with variations due to loading sources. Baltic material will land at $995-$1035/t in respect of the SN 150 and SN 500 grades with SN 900 landing around $1120/t.

European Group I solvent neutrals will be delivered some $30 higher at $1025-$1060/t, with bright stock from these sources at $1165-$1185/t, whilst U.S. lower quality bright stock may land around $1120-$1145/t. All prices refer to levels CFR or CIF West Africa ports.

Group II/III
European Group II levels are being bolstered by prices achieved in other markets, and sellers are trying to move numbers higher to reflect higher production costs. Prices are being realigned and with a modicum of strength creeping back into the Group I market due to low avails, these slight increases may not be so hard to effect. One importer of Group II material has effectively commented that selling prices cannot continue at current levels and that increases would be required, if not from Dec. 1, then certainly from Jan. 1 2014.

Offer levels are assessed at $1065-$1090/t for the light grades such as 150N, with the higher viscosity 500N and 600N grades between $1120 and $1175/t.

Middle East Gulf Group II grades are being sold in a totally different market, where price pressure has been coming through from perceived overproduction of these grades from Far East sources. However this week comments received from producers and sellers in this market have suggested that the oversupply has been overcooked and that with Chinese buyers lifting more of this type of material, the market looks to be more balanced than previously thought.

Suppliers are resisting calls to decrease prices and are sticking to offers for December and now January which have been on the table for some weeks. Levels have not moved up, but if other markets are to be brought into the equation, then numbers could start to rise in the New Year.

Prices are maintained at this stage, with light vis material at $1020-$1035/t and the heavier grades 500N and 600N between $1110-$1135/t.

Group III European mainland prices are still languishing below sellers preferences and anticipations, but with more reports of increasing demand, hope springs eternal. Although many still believe Group III grades are too expensive, others are seeing the overall benefits of using these oils and this movement is spreading.

Forecasts are that first quarter 2014 will bring higher demand, but at the moment the distributors, resellers and other producers of these grades must sit it out and aim for the future.

Sales are still around 910/t for 4 cSt, and around 920/t for 6 cSt, on basis of ex tank Antwerp-Rotterdam-Amsterdam.

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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