EMEA Base Oil Price Report

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Poor demand throughout Europe, the Middle East and Africa – coupled with many buyers resisting upward price movements – makes for a lackluster base oils market.

Sellers and producers are trying to lift prices in almost all offers apart from bright stock -which is in demand, unlike the other grades. However, buyers are negotiating prices back down to where they perceive they should be.

Crude levels have risen, which will aid sellers in upping prices, with Dated Brent at $62.75 per barrel. West Texas Intermediate also moved, to above $56.50 per barrel. ICE gas oil increased to around $570/t.

API Group I prices within Europe stayed at existing levels. But with fundamentals moving ahead, there may soon be pressure to apply increments to all base oil numbers. Light neutrals are suspended between $610/t and $635/t, with the range of heavier grades SN 500 and SN 600 remaining at $645-$660/t. The exception to these static prices is bright stock, which due to high demand from western Africa and the Middle East Gulf regions, has pushed ahead by another $30-$50/t, to $885/t-$910/t. Producers of bright stock are almost unanimously looking to impose further increases in the next few weeks.

Referenced Group I prices pertain to cargoes of base oils offered and sold ex mainstream producers in Europe and North Africa, subject to availability.

Domestic European base oil prices have started to reflect increases which were first noticed through export sales, and ultimately many sellers are hinting that levels will increase w.e.f. May 1, or shortly thereafter. With many buyers enjoying fixed monthly tariffs, prices are expected to rise 30-55/t, although some sellers have been applying smaller increments on a weekly basis, flattening out the potentially dramatic change in prices.

The average premium for local pricing over export numbers has widened to 75/t-90/t, but is expected to close after export levels rise in conjunction with hikes in domestic pricing.

Group II grades are also unchanged, since many of these grades are being sold or resold through distributors on a monthly price basis geared to volume offtake. Should this quantity be increased then sellers retain the right to price up extra supplies to reflect the current direction of the market. May 1 will certainly see revisions of price levels since the increases advised by almost all source producers in Far East and U.S. are now starting to filter through to imports into Europe.

Levels are $645/t and $665/t in respect of the light vis grades and $710/t -$760/t for the heavier vis 500N and 600N.

Group III and Group III+ base oil prices are starting to move upward. Reports are that sellers are not trying to hike levels to unrealistic highs, but are content with increments of 10/t -15/t. Availability is still good for all Group III base oils, with 4 cSt and 6 cSt viscosities at 890/t – 925/t on basis of ex tank supplies Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic sales of Russian and Belarusian Group I base oils have shown more availabilities after turnarounds at a number of Russian refineries, freeing up export stocks which are now being made available ex Baltic ports. Small increases are applied based on demand for each grade. Heavier vis material appears to be more in demand, although substantial quantities of SN 150 have been sold into Antwerp-Rotterdam-Amsterdam and United Kingdom storage.

Levels in respect of FOB sales for the two main grades SN 150 and SN 500 are reported at $575/t-$585/t for SN 150 with SN 500 at $585-$595/t. One offer for a large parcel of SN 500 has been noted at $618/t, being loaded in conjunction with a substantial quantity of SN 900 offered at $694/t, both on an FOB basis. It is not clear whether the SN 500 is standard Russian export material being pushed higher due to the availability of SN 900, or perhaps Belarusian production which tends to carry a premium, being of higher overall specification.

Black Sea traffic reports that two large parcels of around 5,000 tons each are to be loaded out of Kavkaz for discharge in Gebze, whilst northwestern European and Mediterranean parcels of around 3,000 tons to 4,000 tons, each of mixed grades, are also making their way to Gebze. Prices in respect of the Russian export material are expected to be between $585/t and $595/t CIF for both SN 150 and SN 500 grades. The perhaps higher-quality material ex Mediterranean suppliers in Greece and Italy will be $35-$50 higher.

Further cargoes are planned ex Azov and Batumi for early May for Turkish importers in Gebze, but the reports are that these prices have been lifted in offers by $20-$25/t, reflecting both demand and rising FOB levels for Russian exports.

SN 900 is available again in large quantities for early May loading with sellers looking for prices close to $700/t basis FOB. With bright stock prices elsewhere moving ever higher due to demand, SN 900 levels may start to increase in line with the heavier cuts. For every large parcel of SN 900 there is interest from at least three traders or receivers, which is helping to support prices for this grade. One seller has commented that the next availabilities of SN 900 will be priced some $50/t higher due to the raft of enquiries for this base oil, along with SN 500. Receivers in Middle East Gulf regions and western Africa are showing active interest in this grade.

Middle East Gulf

Red Sea traffic confirms a couple of large exports from Yanbu and Jeddah, destined for Singapore and another 10,000-ton-plus cargo moving to Oman and the United Arab Emirates on the usual supply route. These cargoes are larger than normal, perhaps reacting to the rising demand for Group I base oils in the Middle East Gulf regions.

Local supplies of Middle East Gulf base oils continue to figure in the supply pattern with quantities mostly of SN 500 being lifted ex south Iranian ports and brought into storage in U.A.E. Some of this material is being regularly exported to markets in the west coast of India, but escalating prices have ruled out some of these re-exports since levels for these grades are now reaching $690/t basis FOB.

Iranian producers are eagerly awaiting the outcome of the talks between Iran and the West, which could result in sanctions being lifted. This would open up Iranian exports to the nearby regions without the necessity to double-handle and reload out of U.A.E., and could pave the way to Iranian base oils being involved in markets such as East Africa to a much greater extent.

Group I prices on a CIF delivered basis into Middle East Gulf ports are firming in line with Far East and European markets and are now $695-$735/t in respect of the range of solvent neutrals, with bright stock offered at $1,020/t basis CIF/CFR U.A.E. ports. Base oils continually arrive into Middle East Gulf regions, but at the same time are exported form these shores in large quantities. This region has now become a net exporter of base oils, but still relies heavily on Group I products.

Some FOB re-exports of premium quality bright stock are remarkably being offered at levels below the new import tariff. Levels at around $980/t have been confirmed for small parcels of this grade, perhaps due to in-tank stocks purchased some time back at much lower prices.

Group II imports into the region are maintained at around 7,000-10,000 tons per month, but it remains to be seen how the local new production at Al Ruwais will affect the market. The refiners of these new Group II base stocks have implied that much of the production will go into in-house or other local finished lubricants and that the more distant parts of the Middle East Gulf markets will be largely unaffected.

Prices for imported material continue to increase further, echoing the market sentiments of source producers. May offers have been confirmed at another $20-$30/t higher than current landed prices, particularly for the heavier vis grades 500N and 600N. Lighter grades 100N, 150N and 220N have bucked the trend with prices remaining around the levels currently offered. Offer levels on a CIF/CFR basis are now $665/t-$680/t for light grades but with heavier grades moving ahead to around $735/t-$780/t in respect of some Group II+ material.

Africa

East African reports are tame this week with few new developments taking place along the seaboard. One notable import for South Africa comes in the form of a 6,000-ton parcel loading out of a major’s facility in southern U.K. It is not clear whether this is major company intra-trade or trader-driven.

West African receivers in Nigeria have confirmed another two cargoes arriving either this week or next containing some 17,000 tons of assorted base oils. All material is Group I, with one cargo loaded out of the Baltic and Iberian Mediterranean with SN 500, SN 900 and bright stock on board, and the other loaded out of Antwerp-Rotterdam-Amsterdam.

Prices for these two cargoes are undisclosed, but estimates including FOB levels plus freight and trader margins would indicate that solvent neutrals would be landed at $625-$645/t, with SN 900 possibly close to $685/t. Bright stock on basis of a two-port load for the freight element is assessed at $865/t-$880/t. All prices are basis CFR or in some cases CIF Apapa port.

These levels pertain to cargoes which would have been loaded at least four to five weeks ago, with FOB numbers at that time much lower than those of today. Cargoes loading currently will be $60-$100/t higher in some cases.

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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