EMEA Base Oil Price Report

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Base oil markets throughout Europe, the Middle East and Africa appear to have plateaued on prices, after a brief period of increases across the board, due mainly to crude and feedstock levels coming off the lows and remaining in a relatively narrow range.

Dated Brent is a shade down this week, at around $56.65 per barrel, and West Texas Intermediate is remaining just below $49 per barrel. ICE gas oil front month is showing at $546 per metric ton. Many players expect this may last, with few driving factors expected to bear on fundamentals in the foreseeable future.

A degree of stability in the base oil market would give both buyers and sellers time to take stock on the past few months, when prices crashed at a rate not seen before in base oil markets. With blenders trying to offer finished lubes at prices which can be fixed for a period of time, buyers may be able to forecast costs for more than one week ahead.

The API Group I market in Europe remains relatively unchanged after a flurry of increases in the last two weeks. Prices are higher this week, with light neutrals at $575-$595/t and heavier neutrals such as SN 500 closing the gap, and in some cases going shorter on avails. Levels of $585-$595/t are predominant in offers for SN 500, with bright stock remaining relatively bullish between $675/t and $710/t.

Prices above refer to FOB sales and offers of base oil for export, being sold in large parcels ex mainstream supply points in Europe and North Africa.

Domestic or local sales of Group I base stocks prices have flattened out, and remain around 45-70/t higher than export levels. Reports are that demand is increasing across much of Europe with markets in the Mediterranean witnessing a resurgence in requirements for base oil. In some isolated cases, this has caused some shortages of material which in turn has allowed some sellers and resellers to increase prices, which has added to comments that the market may be turning, and that further price increases may be on the way. This has been played down by producers who are relieved that base oils are flowing once again, and since refining margins are still more than acceptable, further price increases may be unlikely in the face of sellers trying to retain market share.

Group II, whilst being slower to react, appears to be sustaining its premium over Group I. Levels appear unchanged after some adjustments were made following the crude oil hike. Prices do not appear to have moved upward much, but instead have stopped falling and are now $590-$620/t for the range of light vis grades from 100N through to 220N, with the heavier 500N and 600N grades settling between $615/t and $660/t.

The European markets for Group III products do not appear to be adversely affected by the loss of Shell production in Qatar. Some European producers of Group III base stocks said that the European market would be totally cushioned from any potential shortage of this base oil, given that European production, coupled with imported material, could more than supply all demand from the market. On the other side, blenders confirmed that availabilities of Group III grades were unaffected and that they could secure all requirements both now and going forward.

One negative aspect to this market has been the continuing weakening of the euro versus the dollar. With the exchange rate dipping below 1.08, euro sales of these products are coming under pressure to move prices higher. Some reports this week have confirmed that some sellers have moved numbers 15-20/t higher, looking to offset exchange losses. Prices are therefore reported as 870-910/t for ex tank sales.

Baltic and Black Sea

Baltic FOB prices in respect of Russian and Belarusian base oils have firmed further after sinking to extremely low levels some four weeks ago. The bounce effect has lifted prices for the two Russian main grades SN 150 and SN 500 to around $600/t and $660/t, respectively, with mainstream quality products from Belarus commanding a premium, at around $650/t for parcels of SN 150. Reports from the market are that material is short for March, and that only small parcels of both grades would be available. SN 500 is said to be very short, with little product available over the next 4 to 6 weeks. This rise in Baltic prices may be responsible for fuelling mainstream prices to rise further.

SN 900 is available in small quantities, some say too small for shipments to West Africa, although one Russian producer does have avails of this material which is now priced higher due to demand, at around $695/t basis FCA.

Black Sea markets are showing some availabilities of Russian SN 150 and SN 500, but with prices being hiked higher, some receivers in Turkey are declining offers, stating that they consider that base oil prices have rebounded too far, and that levels should be pitched lower. Lower-priced material is available from Uzbekistan, but receivers are not keen to routinely use this product due to lower specifications and negative attitude toward these supplies.

Prices for Russian SN 150 and SN 500 are not dissimilar to Baltic levels, with delivered numbers being offered CIF Turkey at $675-$690/t. Other reports pinned these grades at almost $200/t less than market assessments, but sellers of these grades said the reports were unfounded.

A large parcel of two grades is being worked, possibly for West Africa or Middle East Gulf receivers for loading around the first half of April. Prices for this cargo are being retained until market changes between present and loading dates can be observed.

Mediterranean cargoes are still favored by some receivers in Turkey, with Greek and Italian parcels being considered at this time. Prices have moved higher, with delivered levels offered at $685-$715/t basis CIF ports such as Gebze.

Middle East

Middle East regions report base oil trade continuing in areas such as Syria and northern Iraq, but business is sporadic, with supply routes not identified by participants due to reprisal and interference by insurgents.

More routinely, Middle East Gulf base oil trade continues almost as normal with a number of enquiries for material to be imported into the area from origins in Brazil, Black Sea and the Mediterranean. Some of these enquiries are for large cargoes of 8,000 – 10,000 tons, with this material presumably being required for local markets with the many smaller blending operations supplied by the main United Arab Emirates traders.

Iranian SN 500 has moved forward in pricing terms and is now relatively short in the Middle East Gulf regions. Offers of this material to the west coast of India are being considered at the moment, with one large parcel of 10,000 tons ex Bushehr being proposed by traders. Prices gleaned from the market for this grade are $645-$660/t basis FOB U.A.E. ports. Some unusual enquiries are on the table for these supplies, such as a parcel of 6,000 tons of SN 500 for Yemen, whilst imports of Saudi-produced material ex Yanbu and Jeddah continue into Oman and U.A.E. The latest prices for these supplies of Group I neutrals are in line with European Mediterranean FOB levels plus freight, at around $700/t delivered.

Group II parcels arriving into Middle East Gulf receivers appear to have dropped in number, although a few buyers commented that they are looking to purchase now for April arrival. Some are asking for prices which were last seen some six weeks ago, but with the market having begun moving upward, these receivers are being asked to pay higher levels than previously offered. Only a week back, prices were putting on a weak show, but the European pricing bug appears to have found its way into Middle East Gulf markets, and levels are due to rise.

Prices for April contained in offers have been heard between $655/t and $680/t for the light grades, with 500N coming in between $685/t and $720/t on basis CFR U.A.E. ports.

Africa

West African prices for Group I base oils have moved ahead by $100-$150/t in some cases, with European FOB numbers contributing to the escalation. Baltic FOB prices have moved upward by more than $120/t from the lows established some 4 to 6 weeks ago, and with these increments, freight has also moved forward for this particular market.

Cargoes from Antwerp-Rotterdam-Amsterdam have been loaded for Abidjan in Ivory Coast and Conakry in Guinea, and with the next Ghana requirement booked from the Mediterranean for Tema, Nigeria stands out as the destination which appears not to have all requirements covered.

Receivers in Nigeria are desperately looking to source quantities of SN 900 and also bright stock, which is proving problematic. SN 500 going short in the Baltic may also pressure prices higher in this market.

Prices now established in offers are $725-$765/t in respect of the Group I solvent neutral range, with bright stock being offered as high as $895/t, all basis CFR/CIF Lagos. SN 900 has been offered in one large quantity of 5,000 tons. The actual source of the quantity of material is unknown, but price quoted is around $745/t.

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

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