EMEA Base Oil Price Report


Base oil prices within Europe, the Middle East and Africa have fallen further in the first real exchanges between buyers and sellers for some time.

Dated Brent moved up some $2, to $48.15 per barrel. West Texas Intermediate went lower, to around $46.40. ICE gas oil, perhaps in response to colder weather throughout Europe, has inched up $25 per metric ton, to $473/t.

Despite this, base oils have continued to decline. With virtually zero demand, stocks almost at tank tops, and buyers determined efforts to have these products realigned, Europes been hit the hardest.

There are two sets of market prices: sellers stubbornly high offers, and buyers expectations based on other products percentage drops. The lower levels are starting to triumph, with sellers having to capitulate.

The lows of API Group I FOB offers, including some finalized sales, have so far only been seen in markets such as the Far East. Light solvent neutrals are $620-$635/t, with heavier counterparts such as SN 500 in some cases lower, at $610-$640/t.

Bright stock, which had maintained a disproportionate differential over SN 500 for some months, took a hammering. Due to apparent abundance and artificially high prices, levels collapsed to $740-$775/t, bringing it in line with other Group I grades.

The Egyptian General Petroleum Corp.’s announcement of a tender for some 5,000 tons of bright stock yielded some extraordinary prices, which still require corroboration.

Domestic or local prices have also felt the brunt of the latest cull in base oil numbers, with many buyers able to buy spot quantities of Group I base oils at extremely attractive levels, sometimes inside or close to export ranges listed above. Contract buyers have been rethinking quantities under new proposals from suppliers from Jan. 1, with many blenders choosing not to contract any further Group I barrels. Instead, they will rely on spot arrangements for Group I grades where required, retaining options on suppliers and quantities, and also leaving flexibility in some cases, to moving toward using Group II grades.

A premium applied to local or domestic supplies would acknowledge the 20-30/t extra for storing, handling and delivering these mainly smaller quantities.

Group II prices have also declined, as an oversupply situation is building even in Europe, which has minimal production. Even premium suppliers able to hang their hats on quality and approvals to a certain extent feel the pressures. Imports of these grades have ballooned into Europe over the last six months, with many grades sold around or below Group I levels.

Light vis grades levels of $655-$690/t are commonplace, with the heavier 500N and 600N moving down some $30/t this week, to $660-$710/t.

European Group III prices are dipping, with buyers pressuring suppliers to review prices in light of other base oils movements. Prices are falling, perhaps not as quickly as some buyers would wish, but with the supply/demand scenario playing an active part, and an increasing glut, there is only one way 4 cSt and 6 cSt prices are going. Levels are now 685-710/t, but are continually under reassessment, and may fall 10-15 this week.

Baltic and Black Seas

Baltic sales of the two main Russian Group I export grades, SN 150 and SN 500, have been increasing, perhaps due to SN 150 FOB drops to $555-$575/t, and SN 500, with typical viscosity index of around 90, somewhat lower, to $530-$545/t.

One 5,000-ton parcel of SN 900 will be made available – either FCA at around $650/t, or FOB at around $665/t. This parcel will be destined for West Africa, along with 2,000-3,000 tons of SN 500. It would appear that the further Baltic prices fall, the greater the effect on northwestern Europe mainstream prices, which in turn create a knock-on effect for all other European levels. The point is that Baltic export levels for Russian and Belarus material are effectively at the root of all European Group I numbers.

Black Sea FOB prices have yet to reach the lower Baltic levels, with SN 150 and SN 500 exports some $25-$40/t higher on the basis of netback prices for material delivered into Turkish ports such as Gebze and Aliaga, where delivered CIF prices reflect these levels plus freight of $35-$50/t.

Levels around $585-$598/t have been recorded in offers for the two grades. Other imports into Turkey consist of Mediterranean-originated cargoes containing quantities of bright stock, which are now almost competing with Russian barrels on price, given a slight edge on quality. Turkish receivers have been galvanized to make enquiries for standalone quantities of bright stock to be delivered into main Turkish Mediterranean ports, following the rumored levels in regard to the EGPC tender.

Middle East Gulf

Middle East Gulf prices remain under pressure with local levels for Iranian exported Group I base oils falling to the lowest levels seen for some six years. SN 500 is being re-exported from United Arab Emirates ports at $560-$575/t – levels deemed uncompetitive compared to exports to local markets such as the west coast of India, where local prices are posted downward at every turn.

Group I local prices in Middle East Gulf have also moved lower, in step with both Far East and European levels. Latest reports put solvent neutrals between $565/t and $625/t for SN 500, but $20/t higher for SN 150, which is limited.

Bright stock imports have been slow in moving into the area, but with the latest downward movements from Europe, the arbitrage appears to be wide open, with a number of receivers looking to load cargoes during the first half of February. It is reckoned that CIF/CFR prices will land around $800/t into U.A.E. ports, based on current levels available FOB mainland European ports.

Offers of bright stock from U.S sources have been mainly declined due to the distances involved, since the long lead time between loading and discharge is described as dead time when prices can continue to fall after fixing a cargo at a higher level. Once again, the rate of decline in prices has been a large deterrent to receivers in areas such as Middle East Gulf looking further afield.

Group II trades have been few and far between within Middle East Gulf, with receivers still unconvinced that the market is close to bottoming out. Even with crude marking time this week, buyers in these regions maintain that with the typical drag time involved for base oil prices versus other petroleum product levels, prices have further to fall.

This may be correct – with Far East producers cutting source prices again, exports from those regions will only continue downward. Offers of $685-$700/t for all vis types for February deliveries have been received with muted interest. With counters of $575/t basis CIF, either receivers are correct, or buyers are being typically optimistic.

U.S. offers for parcels of Group II grades have also been declined on a similar basis for bright stock, since with long voyage times between loading and discharge, the markets can move enough to render the material uncompetitive when landed.


East African buyers have reported a quiet market. Those privileged to sustain business without purchasing fresh supplies are envied. These small blenders are able to eke out stocks, waiting for the market to reach new lows. There have been a few enquiries for recycled base stocks this week, but these prices have not followed the base oil market downward by the same percentages.

Sellers of recycled base oils in the Middle East Gulf and Red Sea said that the cost of collecting, storing and treating waste oils has not fallen like virgin base oil prices have, and that these costs will only fall after finished lubricant prices have been adjusted downward to reflect raw material costs. Finished lubricant prices will be the last item addressed by sellers.

South African prices have been brought into line with European levels, but the levels quoted this week applied to mainstream European prices of some six weeks ago. Sources from this market said, “it will take time for prices to adjust fully to global standards in these regions, due to the complex nature of the market, in terms of distribution and reselling.

West African markets are gearing up for what could be described as a massive buying spree, and almost an assault on European, U.S. and Russian export markets, since many receivers are either extremely short of inventory, or are assessing that the base oil market may be close to nadir.

If mass purchasing does commence, enormous quantities of base oil may be destined for the shores of Nigeria, Ghana, Cote dIvoire and Senegal. Prices are being negotiated currently with a view to cargoes arriving into West Africa during March or April.

At the moment, prices contained in offers are reflecting either exceptionally keen current pricing, or futuristic forecast prices which may or may not be possible in weeks to come.

For Group I parcels ex Europe and the U.S., solvent neutrals – mainly SN 500 or heavier – levels are $615-$645/t, with SN 900 at around $735/t. Bright stock offers are as low as $745/t, but are typically $795-$820/t. All offers are basis CFR or CIF delivered West Africa main ports in large parcels in bulk.

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

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