EMEA Base Oil Price Report

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Rare pockets of activity show sellers trying to maintain or even increase prices in offers, perhaps because many expect a market freefall after summer due to mounting pressure from both lower demand and sliding crude and feedstock levels.

Dated deliveries of Brent crude had broken through the resistance level of $50 per barrel Tuesday, then recovered a little to just above $50 for September front month settlement. Meanwhile West Texas Intermediate has fallen below $46 per barrel, with further weakening signs prevalent for both marker crudes. ICE gas oil has dipped to a new low of around $473 per metric ton, and with European markets now open for increasing supplies coming from new production in Saudi Arabia, the scene is set for wholesale gas oil prices to fall further.

API Group I European FOB numbers are left largely unchanged, with just a few tweaks to some of the higher vis levels where there have been reports of some shortages and hence prices tending to increase at the bottom of the range. Light solvent neutrals are $510/t-$525/t with the heavier neutrals now $575/t-$595/t. Bright stock remains in the same offer range of $925/t-$945/t, but with a number of buyers claiming recently that they were able to attain levels $25/t-$30/t below this spread.

These prices refer to large export parcels of Group I base oils made available and offered from mainstream suppliers based in mainland Europe.

Local or domestic sales are only continuing where contracted volumes have been arranged for delivery during the closed season. Many blenders within Europe are closed or are operating with skeleton crews merely maintaining plant machinery.

Prices are therefore left unchanged with the differential between local prices and export levels still 65-85/t.

Similarly, reports for Group II trade are muted with many sellers out of station in August. Prices have been under review, with some suppliers stating that they would want to pitch levels for the heavier vis grades higher due to demand for these products, but the European market is fickle, with light vis grades being most in demand, perhaps due to dwindling avails of Group I light neutrals.

This anomaly within the European market has meant that all prices have really remained stable, with only a few small changes taking place. Prices remain at last week’s levels with light vis material at $695/t-$745/t and heavier material such as 500N and 600N between $780/t and $845/t. These prices apply to Antwerp-Rotterdam-Amsterdam ex tank sales.

In discussions this week with sources within the industry, some light-heartedly commented that Group III prices have remained unchanged and unfazed by any movements affecting Group I and Group II base stocks. Prices remain for the 4 centiStoke grades at 895-910/t, and for the 6cst material between 910 and 930/t ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Most distributors and resellers in the region are quiet, although there are a couple of large enquiries for Nigeria which are taking prominence. There are also a large number of enquiries for all grades to be delivered in flexies, perhaps from those buyers who are unwilling to commit to large bulk purchases when the market may be about to start falling. Enquiries for West Africa and South Africa are reported this week with netback FOB prices reflecting the higher demand for the heavier end products such as SN500, bright stock and SN900. All offers for material delivered in flexies are on a delivered CFR/CIF basis.

FOB prices in respect of SN150 and SN500 are realigned at around $510/t and $570/t, respectively. SN900 is $595/t-$725/t FCA, but with bright stock grades being unavailable until the end of August. Prices are not being offered for these grades.

Black Sea trade is limited, although there are a number of enquiries out on the market, mostly from Turkish receivers to Mediterranean suppliers, although one 3,000-ton cargo is being reported loading ex Kavkaz. Mediterranean and northwestern European enquiries make up a possible total of around 20,000 tons to be delivered into Izmit and Gebze in Turkey, asserting that demand is still alive in this market and that buyers are keen to take delivery of large quantities of Group I neutrals and bright stock.

Prices delivered into Turkey on a CIF basis are around $555/t for SN150 with SN500 now being offered at $625/t. Quantities of bright stock are heard between $970/t and $990/t.

Middle East

In Middle East Gulf markets, base oil trading activity is exceptionally low with many players absent from their offices. Reports from the few sources still around indicate that large parcels of Iranian exports are being planned for August either on a direct basis ex Bandar Bushehr or BIK, or on a re-export basis with cargoes loading out of United Arab Emirates ports for destinations such as the west coast of India.

Prices have dipped again, perhaps sparking off new demand for Iranian grades, with FOB levels reckoned now to be offered at $545/t-$555/t in respect of the SN500 grade with slightly lower levels for smaller avails of SN150 and SN650. Bright stock has also been mentioned in offers, but with no price info yet.

Local production of Group I grades including Saudi Arabian material are $585/t-$620/t for solvent neutrals, with bright stock at $985/t-$1015/t CFR/CIF Middle East Gulf ports.

Group II business is missing in any form of offer this week, and although its still the early days of August, offers from sellers in Far East and the U.S. were expected to hit buyers for September deliveries. Some rumors are that buyers have turned down almost all offers of rising prices for the heavier vis grades, in light of falling crude and raw material costs, although sellers are adamant that supplies are tight, particularly for the higher vis grades, with the end result that buyers may not be able to cover all requirements for the next couple of months. Indication prices are reported at $645/t-$665/t in respect of the lighter vis material with the heavier grades between $795/t and $840/t.

Africa

East African and South African markets are quiet this month with buyers only looking to receive supplies of base oils sometime into September. Local supplies appear to be competing against imported Group I grades. Prices are $675/t-$745/t for solvent neutrals with quantities of SN900 offered at $945/t, with no reported offers for bright stock until September.

West African sources have confirmed that they are looking at further supplies both from the Baltic Sea and from U.S. Gulf Coast suppliers, with at least two large cargoes being planned from each supply point. These parcels will possibly each comprise around 12,000 tons of mixed grades including SN900, SN500, SN150 and bright stock from the U.S. Gulf Coast source.

The enquiry for some 6,000 tons loading ex U.A.E. for Lagos is still on the table, but it is hard to predict what grades and prices would be attached to such a cargo. On the basis that SN500 and some local bright stock would form the basis for this movement, other more competitive supplies would be available ex Europe or U.S.

Surprisingly, prices for heavier vis Group I grades are moving upward by $10/t-$20/t this week in light of demand for these grades into regions in West Africa. With buyers looking for prices to fall, this appears to go against the grain, and some are questioning rising levels in the light of raw material costs and falling crude levels, which are otherwise affecting many of the West Africa economies such as Nigeria.

Offers are therefore realigned to $635/t-$720/t for the range of solvent neutrals with bright stock slightly lower at $1045/t-$1075/t basis CFR/CIF. SN900 is available in flexies at around $895/t delivered.

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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