EMEA Base Oil Price Report


EMEA base oil markets have gone into hibernation, with a handful of rather large transactions standing out.

For example, unconfirmed reports suggest 11,000-13,000 tons may be moved to West Africa during August in response to an enquiry from Nigerian principals. Other enquiries from Far East sources have initiated Black Sea offers, but levels have so far been unable to unlock the arbitrage due to high freight costs and index-linked FOB numbers.

News broke that the first condensate cargo has shipped from the United States to South Korea. This may herald relaxation on U.S.s ban on crude exports, which could free up further trades for both crude and condensate. Although this does not have a direct effect on base oils, falling crude and feedstock prices will certainly matter.

Dated Brent fell to around $104 per barrel for the first time in months. Although levels have tried to rally to around $104.50 in Tuesday trading, the writing may be on the wall for future crude prices. West Texas Intermediate remains well below $100, with further downward adjustments to both markers forecasted. ICE gas oil front month numbers have dipped further to $874 per metric ton.

European API Group I base oil prices, however, remain fairly flat. Light solvent neutrals are $1010-$1015/t, with heavy neutrals SN 500/600 at $1010-$1030/t. Bright stock levels are trimmed from last week, with some willing to discount this grade against balanced combination cargoes. Levels are between $1170/t and $1220/t.

These prices pertain to FOB offers and sales of Group I base stocks which may be made available ex mainland Europe or North African suppliers where availability allows.

The domestic European markets are extremely quiet with only routine contracted deliveries and pre-programmed supplies of base oils finding their way to blenders. Some installations are closed or are running on minimum staff until September. The price differential between local and export sales is therefore maintained at 110-130/t with no reports of any likely movement in the short term.

Imports make as much as 95 percent of all Group II and Group II+ sales in Europe, with only small quantities of local production in Polish producers hands. Prices appear to be firm, maintaining a healthy premium over Group I material, at least within the European boundaries. With very little local production of these grades, prices may steady and preclude an oversupply situation. Other markets, such as the U.S. and the Far East, have reasoned fears that with potential current and future overproduction of Group II products, price erosion could happen on a grand scale.

European markets appear to be cocooned from this effect, with distributors having just the right quantities of material rather than flooding the marketplace with unnecessary volumes. Prices are still maintained at $1095-$1140/t for the light vis grades from 70N to 220N, with heavier 500N and 600N between $1215/t and $1315/t. Prices are basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III grades remain unchallenged, with levels remaining at 960-975/t in respect of the raft of 4 cSt grades, with 6 cSt being sold ex tank at 965-980/t. Numbers are based on ex tank sales from storage facilities around Antwerp-Rotterdam-Amsterdam. This sector of the market has also cooled during summer, with buyers and sellers looking forward for the currently slothful mainland Europe markets to pick up later this year.

Baltic and Black Seas

Baltic sales and offers in respect of Russian and Belarus exports have slowed over the past weeks with only a couple of traders trying to organize parcels for West Africa. Cargoes destined for near-continent and U.K. appear to be postponed until September. The emphasis in the market appears to be on locating large quantities of SN 900 for shipment to Nigeria with FCA prices around $1005/t. This grade will not be generally available until September, and then only in parcels of around 3,000 tons each. Bidding is strong for these grades, since with limited avails and demand in Nigeria outstripping supply, higher margins are to be made in shipping these grades to West Africa. SN 150 and SN 500 are available from most distributors in the Baltic in varying quantities. Offers range from $970 to $988/t.

Black Sea fortunes are mixed, with local Uzbek and Russian base oils conceding to supplies from Mediterranean sources, with Turkish buyers preferring to buy mainstream Group I base oils from sellers in Spain, Italy and Greece which can now compete on a delivered price basis with the local material coming out of Fergana and Volgograd. A number of combination cargoes with SN 150, SN 500 and bright stock have been delivered to receivers in Gebze, Aliaga and Izmir, at prices which are obviously competitive and taking account of quality differential. Material has been delivered CIF Gebze at $1035-$1055/t in respect of mainstream solvent neutrals, with bright stock reported to be selling at around $1190/t. Traders are in the market to move large parcels from Theodosia with destinations in Far East, west coast of India and Middle East Gulf being touted as likely targets.

Middle East

Near Middle East problems continue with regions such as Syria and Iraq still in the grips of civil strife. Reporting from these markets is exceptionally difficult, given the nature of the supply dynamics now employed in these areas.

Middle East Gulf markets are also quiet with Eid holidays and the warmest time of the year keeping many players away until September.

Prices for local Iranian SN 500 have been heard lower than last week, with plentiful avails for FOB sales in the southern ports. Estimated levels are $1000-$1010/t, with re-exports ex United Arab Emirates storage around $1025-$1030/t. There are not many buyers for these grades although some offers have been made to receivers in Far East, where demand for Group I appears to be growing in light of lower quantities of locally produced material being available. Offers have been made to Malaysian and Chinese buyers for large parcels of SN 500 accompanied by smaller quantities of SN 150.

Group I material appears to be relatively short in Middle East Gulf, according to local sources, with a number of receivers posting enquiries for heavy neutrals and bright stock for September arrival into the area. Counters for European parcels are some $50-$70/t below current market expectation. Buyers are seeking out alternative sources for Group I with Brazil and the U.S. figuring high on the priority list, although sellers from these sources report that they can attain better margins by selling into the Far East.

Group II imports into Middle East Gulf have declined this month with few buyers looking to take cargoes of material into installations before September. This hiatus has not helped future pricing, which is always under buyers scrutiny. With new production coming on stream and more options for sourcing Group II base oils, asking levels for both light and heavy vis grades have fallen some $20/t for material delivered in September. Estimated bid levels are now $1050-$1065/t for both light and heavy vis grades.


East African enquiries are being made for deliveries in flexies for Group I neutrals and bright stock. These are to be programmed for the last quarter of the year with supplies being contracted for delivery. Offers are being received for material from Europe, Middle East Gulf and Black Sea, with emphasis on price rather than quality. At the same time, recycled base oils have been requested by a number of receivers looking to avoid a crackdown on substandard base oils finding their way into Kenya and Tanzania markets.

South African receivers report the arrival of further quantities of Baltic or European SN 500 base oil, which has been put into storage in Durban for FCA sales to blenders and resellers. Exact details were not forthcoming regarding this parcel, but shipping agents confirmed that the material was cleared for import. It is anticipated that this parcel would have landed at CIF prices of around $1135/t, perhaps some $40/t lower than the local market.

West African receivers in Nigeria have issued an enquiry for around 12,000 tons of heavy solvent neutral, expected to be SN 900. This parcel may be composed of blended material with additional components to achieve viscosity and color parameters. Since decent-quality SN 900 is rare in quantities such as this, some buyers may take blended material using furfural extract, which in itself lacks other important parameters which can affect the utility value of the base oil. Selling levels for are rumored to be around $1120/t, netting back after freight costs to an FOB level of some $1035, which is in line for FOB levels pertaining to Russian/Uzbek export blend SN 900.

Prices contained in offers of Group I neutrals ex Baltic remain as per last week, with bright stock perhaps slipping $5-$10/t. Levels are $1035-$1065/t in respect of SN 150 and SN 500 with the heavier grades such as SN 850 and SN 900 landing at $1085-$1155/t, depending on spec and source.

As mentioned, bright stock levels have been tempered some $5-$10/t in new offers, yielding future landed prices estimated to be $1255-$1295/t, basis CFR Lagos. September offers are being made to receivers based on material coming from Brazil and the U.S., although its not clear which grades are involved. It is considered that heavier grades such as SN 850 and SN 900 may be accessed from these sources.

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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