EMEA Base Oil Price Report

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Base oil markets in Europe, the Middle East and Africa appear oddly brisk this week, with cargoes fixed and a number of serious enquiries hitting the desks of suppliers throughout the regions.

This scene is surprising because it is playing out against a backdrop of the summer recess in Europe and Eid holidays throughout the Middle East territories. Normally this is a recipe for quiet markets because many players are out of station.

Another factor that would normally tend to quiet markets is the bearish state of crude and petroleum product price fundamentals. Dated deliveries of Brent crude are languishing around $57.10 per barrel while West Texas Intermediate holds the $6 crack firm at around $51.10. ICE gas oil is trading lower at $513 per metric ton in front-month settlement.

Europe

API Group I European base oil prices are standing up relatively well in the face of lower raw material costs. Some markets in other regions are going through pricing turmoil, with producers trying to hoist prices for specific products that may be tight, but these increases appear to be vague and in some cases are being frustrated almost as soon as they are implemented.

Comments by producers this week suggest that because many of the biggest buyers are missing, discounting may be averted until the summer recess is over. There is recognition among both sellers and buyers, though, that the market is slowing and that this could exert downward pricing pressure in coming months if fundamentals remain the same or weaken.

With added activity this week, some Group I FOB prices within the European mainland have slipped while other grades such as bright stock seem to be holding up. Some sellers are willing to make deals by loading a combination of grades at the same time. Prices are showing flexibility depending on volumes.

Light solvent neutrals such as SN100 and SN150 have retreated to levels between $520/t-$530/t with heavier neutrals coming in between $560/t-$575/t. Bright stock is relatively stable between $925/t-$945/t, but with some suppliers asking for premiums as high as $30/t above that range. With European prices weakening, a number of intra-company arbitrage cargo movements have sent material east to Singapore from Northwestern Europe, and west to the United States from the Mediterranean.

These FOB levels pertain to large parcels of Group I base stocks being offered or sold ex mainstream facilities in Europe or in some cases North Africa.

By comparison, sales within Europe of lower Group I volumes have been more subdued this week. With many blending plants scheduled for maintenance shutdowns the next few weeks, buying activity is at a low, with only routine contracted volumes being delivered to Western European distributors from Baltic Sea and German sources. Onward sales ex-tank from centers such as Antwerp-Rotterdam-Amsterdam are muted and not expected to revive until summer ends.

For record purposes only, the premium for local prices over export cargo sales is remains 65/t-85/t for Group I base stocks being sold ex-tank and delivered by truck or barge.

Group II prices appear steady, but with purchasing activity probably at a seasonal low, it is difficult to gauge the markets reaction to some importers trying to hike prices, particularly for higher viscosity grades. Price hikes last month by overseas producers of these oils appear to have been absorbed without much friction between buyers and sellers. Weaker Group I prices appear to be calming Group II prices, with few sellers pushing for markups at this time.

Light Group II grades, some of which are being used as substitutes for Group I oils, are pitched slightly lower than last week at $705/t-$745/t, while heavier cuts remain at $780/t-$845/t. These prices apply to ex-tank sales from Antwerp-Rotterdam-Amsterdam storage.

After small movements last week, Group III prices appear to have stabilized, but again the weeks-old drought in buying activity makes it difficult to where this lies or where it is headed. Many users of these grades have expressed doubts as to whether the market can accept any increases, given that prices for Group IIII products are being pitched substantially higher in Europe than in other comparable markets. It will be interesting to evaluate Group III grades after summer. Currently, prices for 4 centiStoke stocks are around 895/t-910/t, and 6 cSt grades are 910/t-930/t, all basis ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic prices for Russian exports appear stable with reports of one large cargo of 12,000-15,000 tons being loaded out of two Baltic ports, with top-off material possibly bright stock, being added ex-Northwestern Europe. This cargo is for Nigeria, and with another similar parcel being negotiated presently for Middle East receivers in United Arab Emirates, demand is still brisk for keenly priced Russian exports.

FOB prices for the two main Russian grades, SN150 and SN500, are assessed this week around $515/t and $565/t, respectively. Light oils from Belarus with viscosity index of 120 are coming in around $665/t, competing with some Group II imports. Parcels of SN900 which are being pitched around $55/t higher than SN500 at $620/t, basis FCA.

Lower specification bright stock is now being made available in smaller volumes for approximately $810/t, FOB Baltic ports.

Reports from the Black Sea describe a couple back-to-back 3,000-ton cargoes of Group I solvent neutrals from Greece into Gebze, Turkey, and more enquiries are being made for similar parcels for the same direction.

There are fewer reports of shipments from Kavkaz, Russia, being unloaded at western Turkey ports, so Mediterranean stocks are competing on price with Russian exports. Prices heard this week were $542/t and $568/t, respectively, for SN150 and SN500, with cargoes of bright stock bringing around $988/t, all basis delivered CIF.

Middle East Gulf

Red Sea traffic appears to be picking up after the holy month of Ramadan and Eid holidays. Sources note a number of proposed cargoes moving from Jeddah and Yanbu al Bahr, Saudi Arabia, into the United Arab Emirates, the West Coast of India and Turkey – possibly totaling some 20,000 tons. These Group I cargoes will include SN150, SN500 and bright stock, with FOB price indications on basis of netback calculations, giving numbers around $525/t, $565/t and $1025/t, respectively.

Middle East Gulf business is slowing for the summer as the holiday period is about to start in earnest. Nevertheless, sources confirm that cargoes are being entering and leaving the U.A.E., to and from the Far East. Grades differ, and specifications are mixed.

One large enquiry has been issued from a U.A.E. receiver for product to load out of Baltic for discharge into U.A.E. With FOB levels as they are this week, this will be a tough nut to crack due to freight costs. At the same time, Iranian material is available out of Bandar Imam Khomeini – a package of three grades, though local sources say it will be mostly SN500. Prices FOB are around $575/t for the SN500.

Lower offers were heard this week for European Mediterranean supplies of Group I base oils, purportedly around $575/t-$610/t for the solvent neutrals with bright stock around $985/t, basis CFR/CIF U.A.E. ports. These may represent positions being taken rather than firm offers from suppliers in the Med, but may be close to prices to be offered in two to three weeks.

The battle over Group II prices continues in the Middle East Gulf as suppliers from both the Far East and the U.S. are pushing markups, particularly on 500 and 600 neutrals. Buyers are resisting with comments about crude and feedstock values and downward trends in Far East economies. Middle East Gulf receivers contend that Group II oils are going long and that prices should take cognizance of that.

With many buyers away the next few weeks, suppliers not expecting to make sales may be making that are offers that are a bit tongue in cheek. The upshot is that prices are unchanged from corroborated offers received at the end of last week for August supply. Light oils are pegged at $655/t-$675/t, while heavier grades are $810/t-$825/t.

Africa

In South Africa there was no word of new imports of bulk material from Europe, but many blenders in South Africa are now looking for smaller volumes arriving into Durban in flexies during late August early September. Prices for SN150 are quoted at $685/t, SN500 at $735/t, and lower quality bright stock with viscosity index of at around $975/t, all CIF Durban port.

Nigerian buyers have booked two new cargoes, one from Baltic sources and another out of the U.S. Gulf Coast. At least two more large parcels are being considered out of the Baltic as well as Northwestern Europe, which will be firmed before end July.

As elsewhere, many of the key players in Nigeria are travelling during the next month, so fixtures may not be happening as quickly as some suppliers would want. A few Baltic and Northwest European producers and distributors may face containment problems over the next month if sales are not completed. This is strange since only a week ago some West African receivers were saying they could not cover all requirements, although they may have referred to specific grades such as SN900 and bright stock.

Prices in West Africa remain unaltered this week except perhaps for trimming on future parcels for August and September. Solvent neutrals range from $635/t-$690/t while bright stock is being offered and sold at $1,045/t-$1,070/t, basis CFR/CIF Nigerian and other West Africa ports.

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

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