EMEA Base Oil Price Report


Europe shows signs of shortages, which is impinging on parts of Africa, whilst for markets such as the Middle East, availability does not appear to be of concern.

Generally, prices are showing signs of becoming stronger this week due to a number of reasons. In Europe, material from the Baltic has gone extremely short due to Russian refinery turnarounds. Mainland European sources have had to take up the slack, although many have not been running near full capacity because of previous limp demand.

Another reason is that sellers – recognizing an opportunity to lift prices – have been pushing higher numbers in offers, hoping that these levels will stick and take prices back to even more attractive contribution levels.

Fundamentals meanwhile are still relatively weak, with crude oil falling back this week. Dated Brent fell to almost $52 per barrel. Current levels are around $55 per barrel for this crude, with West Texas Intermediate at around $47.50 per barrel. Bullish forecasts call for levels to move back to around $75-$80 per barrel, whilst more dovish estimates are that crude could still fall to around $40 per barrel.

ICE gas oil front month numbers, however, are around $520 per metric ton – some $20/t over last week’s levels.

API Group I prices for FOB offers and sales are assessed slightly higher this week, particularly for the heavier viscosity grades. Light solvent neutrals remain between $575/t and $595/t, whilst heavier neutrals such as SN 500 and SN 600 have moved to $610-$630/t. Bright stock has been the subject of keen demand this week, but strangely is still being offered at between $690/t and $725/t for large parcels of this grade.

These price levels refer to large parcels of Group I base oils offered and bought for export sales, from mainland Europe and North Africa, always subject to availability.

Local European prices have not really moved, but there have been suggestions that some prices may be revised w.e.f. April 1. The revision call will likely only be upward at this time, since the last major changes in prices (around the end of February) were when levels were much lower and availability pressures had not yet kicked in. Most contracted quantities being delivered in mainland Europe are not under availability threat with product being loaded and delivered as normal.

Local prices are still 45-70/t higher than export sales, on the basis that local or domestic prices may start to move toward the end of this week.

Group II base oils are showing strength both in pricing terms, and also acceptability in the European market. Prices have edged ahead slightly with small and selective increases of $10-$20/t (or euro equivalent) in response to both source increments which are geared to feedstock and production levels, and to the rising exchange rate costs which have been sharply felt in terms of euro sales of Group II grades.

Sources from this sector report that suppliers are trying to build relationships to protect market share ahead of the huge new production facility being formed in Rotterdam by one of the majors. This unit will come into production in 2017, and until then existing suppliers will concentrate on retaining business. There are rumors that ExxonMobil may try to import stocks into the European market ahead of the Rotterdam production starting up, but this information has not been confirmed.

Numbers for the light vis grades have remained static at $590-$620/t, whilst the heavier vis grades of 500N and 600N have moved swiftly upward to $655-$690/t. Sources report that the light grades may be kept lower in order to compete or replace Group I solvent neutral light grades.

Group III news this week is the massive turnaround reported to be almost underway in Porvoo, Finland. Although the report does not specify base oil production, this will obviously be affected, although with storage contingencies, and alternative supplies possible from a shared production in Bahrain, no shortages or supply problems are being forecast. Other indigenous European suppliers and importers report that prices remain stable with no real impetus to move in either direction. Again there are rumors of price revisions on April 1, but no specific levels have been confirmed.

Prices are therefore maintained at 870-910/t in respect of ex tank sales for both 4 cSt and 6 cSt grades.

Baltic & Black Sea

Sales from the Baltic are being stymied by a shortage of export grades from Russia. Many producing refineries are in turnaround, with the result that the remaining sources have hiked prices by $100-$150/t from some six weeks ago. There have been a couple of smaller cargoes of around 3,000-4,000 tons loaded for Antwerp-Rotterdam-Amsterdam and the west coast of the United Kingdom, and one large parcel of around 10,000 tons of mixed grades loaded for West Africa.

Russian SN 150 and SN 500 are now $585-$630 with SN 900 for April loading offered at around $665/t, on the basis of an FCA sale. This would promote an FOB price of around $685/t.

Black Sea trade appears to have reawakened with a number of cargoes of Russian exports being loaded on STS basis ex Kavkaz/Azov. Most of these have been sold into Turkey, discharging at Gebze port. Prices for SN 150 and SN 500 are slightly lower than Baltic levels due to longer availability and Turkish buyers being unwilling to pay inflated prices. Levels are $595-$625/t CIF delivered, yielding FOB rates of $35-$50/t lower.

One large slug of some 12,000 tons of two grades, nominally SN 500 and SN 900, is loading promptly for the United Arab Emirates. This was fixed some time ago, with prices which would have been much lower, around $520/t and $575/t, respectively.

Mediterranean sales ex Aghio and Livorno are marked down for import into Turkey with prices which may only be marginally higher than the Russian levels above.

North African sources report a large parcel of some 8,000 tons has been sold under contract from Greece into Libya, which will possibly comprise of SN 150 and SN 600, although a quantity of imported bright stock may be added to this parcel too.

Middle East Gulf

Red Sea cargoes of Group I grades ex Yanbu and Jeddah continue to load for U.A.E., with prices moving some $20/t over the last round of delivered material. Levels are now $695-$710/t CFR in respect of the SN 150 and SN 600 grades.

Other Middle East Gulf trade in Group I base oils is not confined to trading in Iranian exports and re-exports, but these grades have been discounted to meet competition from Russian and Brazilian offers for material delivered into U.A.E.. The level for Iranian SN 500 has retreated this week to $630-$655/t depending on parcel size. SN 150 and SN 650 are also being made available -at around $10/t higher and around $25/t lower than the SN 500 level, respectively.

Group I base oils ex Brazil which were on offer to U.A.E. buyers appear to be discharging only in the west coast of India, with the 12,000-ton Russian Black Sea export cargo possibly taking precedence. News from local sources states there are no more U.S. cargoes of Group I grades, including bright stock planned for U.A.E. receivers, since this arbitrage appears to be firmly closed with U.S. prices for some Group I grades having risen.

Group II cargoes are once again coming into Middle East Gulf ports, with one 7,000-ton parcel discharging in Sharjah port, possibly for new India-based receivers converting this material into transformer oils. Another cargo is for buyers in U.A.E. and Qatar. Prices for some of the range of Group II products coming into Middle East Gulf have firmed on the back of source increases in the Far East. Levels are $645-$660/t in respect of the light vis grades, but 500N and 600N expected to be around $695-$725/t, all basis CFR U.A.E. or Qatar ports.

With the Al Ruwais refinery almost commissioned, the region will soon be privy to having its own supplies of Group II (in addition to Group III) base oil.

South African receivers are taking two cargoes from a United Kingdom refinery into Durban to supplement local production. These two parcels – around 9,500 tons in total – will form a new import route for material into this region but as yet, it is not determined if this is Group I material or a large quantity of Group III grades.

Other imports into Durban continue with Baltic-loaded Russian base oil in flexies, although with shortages during March loading, there would appear to be gap in these supplies. Estimated prices are around $725/t in respect of SN 500. These levels are still competitive against local supplies, hence the door may still be open for this trade to expand.


West African trading continues with two large cargoes loaded during March, one of 12,000 tons ex Antwerp-Rotterdam-Amsterdam, and another of 10,000 tons from the Baltic. These are both bound for Apapa, Nigeria, whilst at the same time there are reports of the next Ghana tender parcel loading out of Livorno for discharge into Tema.

Two unusual movements are reported this week, the first being a small parcel of Group I grades going into Congo Republic, where few if any base oil cargoes have ever gone before. More information is being sought on this new initiative. The second oddball cargo is some 5,000 tons of undisclosed material moving from the west coast of India to Lagos.

These movements aside, new prices are contained in offers for April and May cargoes which are substantially higher than current prices being landed into Nigeria. Levels are $695-$755/t in respect of the range of light to heavy Group I solvent neutrals, coupled with bright stock offered this week ex Europe at $852/t s CFR Lagos. SN 900 ex Baltic is being offered at between $765-$780/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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