EMEA Base Oil Price Report

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EMEA base oil trade seems more stable, thanks to more available material. Demand is also slowing, perhaps due to the Wests possible accord with Iran and its potential to weaken crude and feedstock levels.

Dated Brent crude oil moved up some $2.50 per barrel to trade at around $57.80 per barrel. West Texas Intermediate has also moved upward, to $51.65. ICE gas oil shares the sentiment, rising around $15 per metric ton to $540 for front month settlement.

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As predicted, the overall effect of a relatively static crude and feedstock market has supported base oil price stability, which is perhaps only responding to local changes and events in some parts of Europe, the Middle East and Africa.

European API Group I prices have remained mostly steady, with light solvent neutrals at $595-$630/t, and heavier products such as SN 500 slightly lower this week, at $625-$645/t.

Bright stock remains in demand, with only a few suppliers having large quantities on a prompt basis loading during April. Prices are maintained at $785-$840/t.

The levels above pertain to FOB prices of Group I base oils offered or sold ex mainstream European and North African supply points, subject to availability.

Domestic prices for smaller European-delivered and ex rack loading deals are also near last week’s levels, with no real impetus in either direction. Some buyers had anticipated that prices would rise from April 1. However, many of these possible hikes appear to have been put on hold, at least until European base oil markets directions seem more clear.

Some sellers said this week that there is no real case for increasing prices, with raw material costs bought forward by at least three months at around current levels. These sentiments also add to a measure of stability coming into the local markets, which will be a welcome change from the hectic falling prices of the last nine months.

The differential for domestic prices over export levels remains relatively small due to purchasing choices, at 35-50/t.

European Group II business had seen prices rising significantly on the back of Group I shortages, and source increments posted by overseas producers. However, this week the Group II markets stabilized in line with Group I, but of course at the higher levels established last week.

With buyers adding concerns that Group II grades could be pricing themselves out of the European marketplace, levels do not appear to have altered much from last showing. Some buyers say that increases were applied too quickly and were also too large, given the small increases to raw material costs.

According to these buyers, the increases may be justified in established markets such as the U.S. and Far East, but where Group II grades are still trying to become accustomed to within European context, levels are being pitched too high. Prices are maintained this week, at least until the market sorts out, and then these levels may have to be revised.

Levels are $635-$660/t for the range of light vis grades, with higher viscosity material at $695-$745/t.

Group III grades remain relatively unaffected by all the other pricing activities, at 870-910/t.

Baltic and Black Sea

Russian and Belarussian exports have become more available after March, during which these grades went extremely short. The result has been that prices have at best flattened, with some discounting taking place. The two main grades SN 150 and SN 500 have returned to Baltic shore tanks at levels which may be coming under a little pressure to compete with mainland European Group I avails. FOB for these two grades are $565/t in respect of SN 150, with SN 500 around $575-$585/t in respect of Russian standard grades.

A number of enquiries have been placed for Antwerp-Rotterdam-Amsterdam and for the west coast of the United Kingdom for both grades, with SN 900 being sought for buyers in Nigeria. Prices for this grade have weakened a little the last few days, with reports of one large slug of some 4,000 tons being offered at $645/t basis FCA.

A number of Black Sea trades have been confirmed through shipping channels, coming out of Azov/Kavkaz on STS basis. These cargoes of mainly SN 500 and SN 900, with smaller quantities of SN 150, are bound for receivers in the United Arab Emirates, and also in one case for West Africa. Prices are being kept strictly private and confidential, but reports from buyers in the U.A.E. suggest that FOB levels would work out at around $545/t in respect of the SN 150 and SN 150, with SN 900 being sold at around $625/t.

Smaller parcels are being worked and offered ex Mediterranean suppliers into Turkish receivers in ports such as Gebze. Some Russian parcels of SN 500 are also on offer to Turkish receivers at $585/t CIF Gebze port.

Middle East Gulf

Unlike European markets, Middle East Gulf regions are seeing prices moving upward, particularly for Group I supplies. This area is heavily reliant on Group I base oils, especially the higher vis grades such as SN 500 and bright stock. These are coming from the Black Sea, Far East, U.S. and the Mediterranean, in addition to routine supplies from Saudi Arabia and Iran.

Prices are attractive to importers, since local levels have moved ahead by $20-$30/t for SN 500, for example, to around $665/t basis ex tank U.A.E. ports.

Delivered prices are confusing, since some cargoes that were loaded some five weeks ago from the U.S. are showing much lower numbers than can be achieved in offers today. Buyers are aware that the market may be turning yet again in Europe and the U.S., and that if crude oil movements are destined to fall further in the light of an Iranian pact with the West, then prices for base stocks will ultimately follow suit.

In other words, there is more than a chance that this is a short-term peak in the base oil markets and that lower prices may be around the bend.

Group II imports in Middle East Gulf regions have also been pushed upward, with offers from Far Eastern producers carrying a premium of $20-$30/t over last months delivered levels. This is again due in part to turnarounds, which have created a temporary snugness in Far East avails. With the bulk of Group II supplies coming to Middle East Gulf receivers from these sources, offers have been revised upward. U.S producers are experiencing a slight tightness in their markets and are no longer keen to discount heavily to move material into U.A.E. and India.

Offers are $665-$680/t in respect of the light vis grades, with heavier vis material at $715/t and $765/t basis CFR/CIF Middle East Gulf destinations.

Africa

Reports from East Africa and southern Africa show a growing number of enquiries for imported material, with a number of buyers looking at alternatives to U.A.E., India and Saudi Arabia due to escalating levels from those sources. Enquiries are being fed through to suppliers in the Baltic and Black Sea, particularly for Group I base oil delivered in flexies. With stable or weaker prices coming out of European sources, there may be some interesting changes to supply chains in these regions.

West African receivers have come back to the Baltic markets looking for prompt supplies of all Russian export grades, which were unavailable during March. There have been three or four large cargo enquiries for parcels in excess of 10,000 tons, mostly for SN 500 and SN 900 grades. Bright stock is also in demand, since buyers consider current European levels more attractive than any offers from the U.S. or Brazil, and there are a number of planned cargoes out of Antwerp-Rotterdam-Amsterdam and Mediterranean supply points.

Prices are now not expected to rise for new business during April and May, and some believe that levels may start to retrench after the potential crude moves from Middle East Gulf suppliers such as Saudi Arabia and Iran.

Levels quoted in offers this week are $625-$700/t in respect of Group I solvent neutrals depending on source, quality and quantity. Bright stock is now expected to be offered at close to $900/t, but with quantities of SN 900 at around $775/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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