EMEA Base Oil Price Report

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Despite a positive mood throughout EMEA markets, some buyers are refusing price increments, saying a revival of Russian and Belarus supplies next month will mend the current shortage.

Most sellers, however, believe that the increasing crude and feedstock prices call for subsequently higher priced base oils. With shortages reported over the last few weeks, particularly in Europe, sellers have found it relatively simple to impose higher prices for prompt spot export sales and to bring local prices in line with these levels.

Crude oil has moved about $1 higher, with Dated Brent trading at around $109.25 per barrel. ICE gas oil has flatlined at $921 per metric ton, perhaps indicating the adjustment from winter heating needs to the summer driving season where peaks are yet to be reached.

With limited avails for sizeable parcels of base oils, API Group I levels within European mainland have continued moving upwards, but sellers are responding with refusal and significant counters. Rising offers have appeared as stable-to-weak in counters. Some buyers have conceded that prices had to move forwards, whilst others remain resolute that Russian exports arriving in the Baltic may ease pressure.

Group I light neutrals offers are slightly lower than last week, at $1010/t-$1040/t. However, heavier and medium vis grades offers are higher, between $1040/t and $1080/t, with few offers for large quantities. Similarly, few producers have large parcels of bright stock available and appear to be unwilling to sell these parcels to traders, preferring to deal directly with receivers in export destinations on a delivered basis. Price assessments for 2,500-5,000 ton parcels of bright stock on an FOB basis fall between $1225/t and $1240/t.

These prices refer to bulk cargoes of base oils being offered ex suppliers and producers within the European mainland, including North African suppliers with Group I avails.

Europes local Group I prices have also flattened. Some sellers say they are aiming for another round of increases from May 1, and buyers have responded with mixed reactions. Some accept, whilst those with high inventories (due to demand for finished lubricants being lower than forecasted) will stall until the market shows more clarity.

Truck- and barge-delivered Group I trade is around 35-50/t higher than equivalent grades offered for export, reflecting the higher costs involved in dispensing these products with extra storage, handling and delivery charges.

With globally higher feedstock costs, Group II products entering the European markets have been subject to production source increases which are filtering through to landed prices and finally to products being sold ex tank. Producers in both the U.S. and the Far East have hiked Group II grades some $20-$45/t, and whilst these increments have necessary, theyve been easier to assert, considering the concurrent Group I increases.

Some buyers are suggesting that Group II will start to go long later this year with new production in the West and in Russia later this quarter. Prices may come under pressure at that stage, but in the meantime, numbers are moving up within Europe with light vis grades at $1090-$1125/t for the light vis material and heavier vis 500N and 600N selling at $1195-$1285/t for ex tank sales from Antwerp-Rotterdam-Amsterdam.

Group III levels have started to rise with higher production and feedstock costs. Some sellers have increased prices for the heavier 6 cSt grade, but mainly, levels are due to move some $15-$20/t only after May 1.

Levels are now 945-960/t for 4 cSt and 960-970/t for 6 cSt.

Baltic and Black Seas

After turnarounds and disruption from the events in Ukraine, production from Russia and Belarus refineries will resume soon and most distributors are reporting availabilities for May.

Prices still depend upon what happens to mainstream European supplies. Some say that Russian refineries have moved FCA prices higher, with the result that DAF border levels will probably be around $975-$990/t, yielding FOB levels at around $1015-$1025/t in respect of the two main grades SN 150 and SN 500.

Two sources said that parcels of SN 900 will be available. One source added that some 4,000 tons had been allocated in advance to a trader at an undisclosed price. Estimates of FOB levels for this grade would be around $1065-$1075/t, reflecting increased bright stock values from mainland production.

Black Sea trade is increasingly relying on Uzbek and Turkmeni availabilities rather than looking for Russian barrels for markets such as Turkey. With the hope of business returning to normal through Ukrainian and Crimean load ports, Russian SN 500 and SN 150 parcels are being planned for end of May loading for deep-sea markets such as Middle East Gulf and India.

Prices for SN 150 and SN 180 and SN 350 ex Turkmenistan are offered at $975-$980/t basis CIF Gebze range, along with heavier material such as I-50A being used as a high vis bright stock substitute by some Turkish buyers.

Light viscosity SN 100 is also available from Black Sea sources at around $945/t basis FOB.

With Syria holding pseudo-democratic elections soon, the base oil scene is expected to continue as is, and will exclude a return to former imports of European Mediterranean material into ports such as Lattakia. Egyptian tender business for bright stock appears to have disappeared with one incumbent supplier able to service this business on a continuous basis. Unconfirmed reports from sources within Egypt have estimated delivered prices for bright stock on an FOB index linked basis plus a premium of some $120/t.

Middle East

Group I material loading ex U.S. and Brazil are forming part of the supply scene into United Arab Emirates. Iranian supplies of SN 150, SN 500 and SN 650 are still available in small quantities ex southern Iranian ports, but with many traders and suppliers in Middle East Gulf opting out of reliance on these supplies, prices are weakening with re-exports of SN 500 at $980-$990/t FOB. Premium supplies are arriving at $1055-$1085/t in respect of the solvent neutrals, with bright stock -which is relatively short and in demand – landing at around $1180/t.

Middle East Gulf prices for Group I base oils have remained more or less stable over the past months, giving blenders in this region an opportunity to consolidate finished lubricant prices on an extended-term basis with buyers. With a heavy reliance on many Group I grades throughout this region, many are predicting that prices will soon start to rise given that Group II and Group III prices are also set to increase. At a recent conference, there were still talks among locals that the U.A.E. could get a new Group I facility attached to an existing refinery. The offtake from such an operation could be vital in the future for the local Middle East Gulf markets, considering falling Group I production in Europe, the U.S and Far East.

Group II supplies into the region are also increasing along with local Group III availabilities. Prices for Group II imports are set to rise in line with source increases in Korea, Taiwan and Singapore, although buyers are resolute that prices do not need to increase with an impending surplus of Group II material about to hit this region within the next year. Forecasts are that imports from Far East accompanied by material from the U.S. will target the Middle East Gulf region as an expanding market for Group II grades, particularly for the quickly expanding automotive sector.

Prices for Group II material into Middle East Gulf regions are being negotiated for May delivery at $1110-$1125/t for the lighter vis grades along with heavier vis material such as 500N and 600N at $1155-$1235/t CIF Middle East Gulf ports.

Africa

East Africa imports of Group I grades from U.A.E. and South Africa are showing new higher levels with prices for SN 150 and SN 500 around $1175-$1190/t, sometimes accompanied by bright stock, which is around $1365/t. These grades tend to be delivered either in flexies or by truck from South African supply points, which is reflected in higher costs, and hence, higher selling prices.

West African receivers have welcomed the news that Baltic supplies could be returning to help assuage the growing number of enquiries that have been put on hold. Nigerian traders in particular have been unwilling to accept the higher prices for those limited avails ex Europe and the U.S. and are expecting Baltic levels to bring prices back down to what existed some three months ago. But with increases to FCA levels and traders looking to build realistic offers, prices are estimated to be levied at or above the rates outlined last week.

One offer including a part cargo loading during May ex Baltic has already pitched prices of $1175/t in respect of SN 500, with SN 900 offered at $1225/t.

A further offer for 4,000 tons of bright stock ex Mediterranean has been circulated at close to $1400/t, with suggested levels at $1385/t basis delivered CFR Apapa. At the same time, U.S. sources report that Group I export avails have gone tight, with few suppliers offering suitable FOB cargoes for May. This could tighten the supply scene even further for West Africa regions along with further price increases in the pipeline.

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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