Europe-MidEast-Africa Base Oil Price Report

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By the end of last week many producers announced substantial increases to base oil prices across the EMEA regions except around the Middle East Gulf. There the base oil market feels the effects of Far East supply, where prices have been flat-lining due to stifled demand.

As Institute of Petroleum Week gets under way in London, many key players from within the EMEA base oil community are either attending meetings or en route to the principal base oil conference of the year.

Dated Brent crude oil still maintains a position just below $117 per barrel with very little movement from that value. ICE gas oil has vacillated between $1000 and $1015 per metric ton during the past few days but shows no signs of falling back to lower levels. With feedstock values remaining high, base oils will continue to respond to higher prices until an acceptable premium is established above gas oil alternatives.

API Group I solvent neutral prices for FOB sales have moved further ahead with the range of light grades showing at $970-$1025/t, accompanied by offered price levels for the heavier oils at $985-$1035/t. The bottom ends of the pricing bands have seen more movement than top ends due to some suppliers who were initially holding back on increases, but who are now hoisting the lower numbers to acceptable levels.

Bright stock demand is relatively strong, and prices are $1075-$1110/t.

The FOB prices above refer to bulk parcels of base oils supplied ex mainland European and North African ports, mainly, though not exclusively, for export sales beyond Europe.

Local prices are finally starting to rise in line with the numbers above. The differentials in pricing between large bulk sales and smaller truck and barge delivered volumes are now around 70-85/t, but this price gap is growing with the current rise in local rates.

Baltic and Black Seas
The Baltic export trade for Russian and Belarus base oils has seen increases of some $20-$30/t this week, with levels for the two principal grades SN 150 and SN 500 at $965-$980/t FOB. SN 900 still remains in short supply, with asking prices for the limited quantities available at $995-$1020/t.

Five large cargoes with around 35,000 tons of all grades have been reported sold from Baltic ports destined for West Africa, for February and early March loading. It is assumed these parcels were agreed at the previous lower levels, and now cargoes for second half March and April will reflect the higher FOB levels.

Relatively large quantities of SN 150 and SN 500 are being loaded out of this region in flexies. Although volumes are obviously not the same as bulk parcels, margins for flexies are attractive to sellers. Premiums to bulk supply are around $60-$75/t.

Black Sea markets are almost a mirror image of the Baltic, with price increases announced for the two main grades. New levels are reported at $970/t basis FOB Ukrainian ports, with one Turkish bidder hitting the market with a requirement for 1500 tons of SN 150 per month spread across March, April and May, at a fixed price of $1030/t CIF Turkish port. On the basis of freight of around $40/t, this could be a case of clever forward buying.

Other supplies of 3000 tons of two grades from Kavkaz to Marmara and a smaller cargo of 2500 tons from Cartagena to Gebze make up the reported deals for this week. Turkish buyers are currently in the market to buy prompt cargoes of SN 150 and SN 500 but are concerned due to the possibility that Turkish government regulations will be altered in the near future, affecting the importation of base oils into this area.

Middle East
Near Middle East markets remain subdued due to the Syrian situation which is affecting all nearby locations. Egyptian tender business may be open again within the next few weeks, with the regular supply of bright stock negotiated for the next quarter.

South Sudanese buyers are looking for small quantities of Group l, or as an option Group II, which will probably be offered in flexi-bags, should a suitable loading installation be found.

Middle East Gulf base oil markets and U.A.E. in particular are importing and re-exporting Group l grades from a variety of sources. Loading ports for various parcels of base oil are cited as BIK in Iran, Kandla in India and Cilicap in Indonesia. At the same time two Saudi Arabian cargoes are destined from Red Sea into Jebel Ali.

Movements of Iranian exports continue to be reported for late February loading out of BIK, with a cargo of 3000 tons made up of three grades destined for the west coast of India, using U.A.E. as a bridging point. Middle East Gulf Group l business is based on high quality material flowing into the region, with lower quality grades, for example from Iran, being imported and then re-exported out of the area.

Prices for exports are established at increased levels this week, with SN 500 reportedly sold FOB Hamriyah port around $955-$1020/t, whilst SN 150 either in combination or sold on its own, is claimed to be selling between $925-$1000/t.

Iranian bright stock has been offered ex BIK, but with small quantities and lower quality, this material priced at around $1075/t, will possibly be utilised within U.A.E.

Africa
No cargoes have been reported into East Africa this week, but a number of receivers in Kenya and Tanzania took delivery of Group l grades in flexies sourced and loaded out of U.A.E. Landed prices are reported to be $1130-$1155/t for solvent neutrals, with small quantities of bright stock sold at close to $1300/t CIF.

A small cargo of SN 500 is marked down for Mozambique out of Durban, from a South Africa major. This 700 ton bulk cargo is for regular supply into Nacala.

Imports continue to arrive into Durban in flexies, although a number of South African receivers have voiced concerns that prices are drifting too high, and that for the future they may be more inclined to switch back to local supplies, where both quality and price are now more attractive. Levels are between $1125-$1160/t for SN 500.

European exports have recently been tried into South Africa, and the latest is a 2500 ton cargo from either Spain or Portugal sold into Durban. No prices could be verified for this movement but on freight and FOB estimates for Group l neutrals, this material would be landed into South Africa around $1095/t CIF basis.

West Africa is preparing for the next round of arrivals which appear to have been booked prior to the latest price moves. Within the next month some 65000 tons of base oil will arrive into West Africa, the majority into Nigeria.

Nigerian cargoes are loading ex Baltic, Atlantic and the Mediterranean. Most are bound for Apapa, but at least one large parcel is going into Port Harcourt. One Mediterranean supply of around 9400 tons is booked for Ghana.

Landed prices are confirmed around $1040-$1065/t for solvent neutrals from SN 150 through to SN 500/600. Bright stock prices will vary depending on quality and parcel size, with small quantities of 90 VI material being loaded out of the Baltic, and larger parcels ex mainstream suppliers. CFR levels are assessed at $1145-$1185/t.

Group II/III
Latest reports are that large increases are being sought for European Group II grades, in the range of some $60-$100/t, but distributors in Europe are keen not to discourage expansion of sales within the mainland. A fine balance is being kept, with levels now indicated at $1095-$1145/t for the light vis grades, and with 500N and 600N at $1225-$1260/t, all prices basis ex tank, Northwest Europe or Med storage.

Group II prices in Middle East Gulf regions are firming slowly in line with levels applied from Far East source suppliers. Landed numbers quoted for this week are $1055-$1070/t for grades 60N through 220N. Higher vis grades, mainly 500N but also including supplies of 600N, are $1110-$1165/t.

Increases have been applied to Group III grades within mainland Europe, but some say these increases are wide ranging and do not apply to all buyers. This is hotly denied by suppliers who state that any increases have been fairly spread across the board, and buyers who have not experienced price increases as yet have possibly not made any purchases since the inception of price reviews. Levels are quoted by a number of buyers between 990-1040/t, for both 4 cSt and 6 cSt material for ex tank supplies.

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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