EMEA Base Oil Price Report

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Baltic and European prices are being largely maintained, but levels in parts of the Middle East Gulf are tumbling as the lift of sanctions against Iran is imminent.

Dated deliveries of Brent crude fell below $48 per barrel, then stabilized at around $49.20 per barrel in front month September settlement. West Texas Intermediate levels widened the crack at around $43.10 per barrel. Crude levels have in turn spurred lower prices for gasoline and gas oil, with ICE reporting lowsulphurgasoil numbers below $474/t.

This unilateral contagion on petroleum prices has vacuum gas oil levels at a low, and will affect base oil production sooner rather than later.

Europe

Europes API Group I prices, whilst coming under some pressure, appear to be relatively stable, perhaps because its in the grips of vacation season.

Levels for light solvent neutrals are marginally downward this week, with a new spread between $510/t and $520/t coupled with heavier grades between $565/t and $580/t, down around $10/t. Bright stock is assessed $10/t-$20/t downward, but with only a few offers, and even fewer deals finalized, it has been difficult to pin this grade on the price chart. Offers are reflecting higher levels than completion prices, so bright stock is $910/t-$930/t. All prices are quoted on an FOB basis.

These prices refer to large export parcels of Group I base stocks made available ex mainstream European producers.

Domestic traffic is quiet with many sellers and blenders on holiday. This trade will not recommence on any real scale until the end of August, when the market regroups

In respect of the small amount of current business, the spread between the lower export prices and the local numbers applied to domestic trade is altered downward to take account of the slightly weaker export levels this week, now 55/t-75/t.

Announced this week was that a Canadian supplier of Group II will soon enter the frame, making imports to Europe more competitive. Buyers and receivers in Europe are keenly aware of any discounting or market moves which may be made by suppliers at sources in the Far East and the U.S.

Overall the market is relatively quiet, akin to the domestic Group I market at this time of year. Prices remain unchanged with light vis material between $695/t and $745/t and the heavier vis grades 500N and 600N between $780/t and$845/t. These prices apply to Antwerp Rotterdam Amsterdam ex tank sales.

There have been few reported Group III changes, with perhaps a hint that prices may trade weaker in coming weeks, with some external pressures arriving from importers who are continually looking to protect market share from any new sources.

For now prices are maintained, with the 4 centiStoke grades between 895 and 910/t, and 6 cSt material at 910-930/t ex tank Antwerp Rotterdam Amsterdam.

Baltic and Black Sea

Baltic prices appear sustained, with no reports of sellers having to discount deeply to meet buyers’ expectations, since no new large fixtures have taken place this week. Only the routine contracted 3,000 tons per month from Liepaja, Latvia, to the Antwerp Rotterdam Amsterdam area was evident.

Regional prices are relatively stable, although some buyers are nudging sellers to reconsider offers in light of potential export sales being supplied from other sources such as the U.S. Gulf Coast. Push has not yet come to shove, with distributors selling material which is already in tank and has been paid for, presumably at higher prices.

FOB numbers for SN150 and SN500, (according to one source there have been more sales of SN900 than SN150 through the first six months of 2015), are only slightly weaker than last week’s, at around $505/t and $560/t, respectively. SN900 is available in small quantities at $695/t-$725/t FCA, depending on quantity.

The various qualities of bright stock grades are still not available and news is that these will not be available until the last week of August.

Black Sea reports are that one parcel of some 3,000 tons of Russian export material has been loaded ex Kavkaz for United Arab Emirates receivers. This cargo may be made up of SN900 only since other Russian export grades would not appear to be competitive against newly released supplies of Iranian SN150 and SN500. Prices in respect of SN900 ex Black Sea are estimated to be $680/t-$710/t basis STS.

Other enquiries for August loading are in process from Italian or Greek ports, as well as one larger parcel being worked from Atlantic Iberian suppliers. These cargoes will not arrive into Turkish ports until after the holidays, replenishing stocks for the end of the year. Reported offers were $553/t for SN150 and $608/t for SN500. Quantities of bright stock are $955/t-$970/t.

Turkish buyers say they are in no rush to complete these cargoes since they now believe that there is enough Group I material ex Mediterranean supply points to offset what appears to be a temporary short situation coming out of the Russian refineries, and in addition they commented that they could also link bright stock requirements into these cargoes where they could not work that grade from Russian suppliers.

Turkish receivers are looking to import quantities of Group II grades around 150N and 500N vis, and are looking to Far East and the U.S. for supplies.

Middle East

In last week’s report it was mentioned that base oil supplies from Red Sea refineries in Saudi Arabia, in addition to other local Middle East Gulf production, had been offered at $585/t-$620/t in respect of Group I solvent neutrals, with bright stock at $985/t-$1015/t. These prices have been refuted by the Saudi Arabian supplier and consequently are withdrawn from this report, since they may have been inaccurate and reflected target price levels sought by receivers who formed the basis for these reports.

Until we are able to satisfy our confidence in their accuracy, this column will not report prices for oils from Saudi Arabia.

Iranian SN150 and SN500 have been offered on an FOB basis at around $470/t and $480/t, respectively. These grades have apparently been suddenly discounted by $40/t-$50/t. These levels have been checked with traders and receivers in U.A.E., and also with Iranian exporters who are apparently keen to push their supplies back into the market to regain market share following the long period of sanctions which made exports of base oils nigh impossible.

With the end of sanctions imminent, opportunities are being seized to push material into Middle East Gulf receivers as well as the Indian and East African base oil markets.

When Iranian barrels are back on the market, the arbitrage into this region may be closed for imports of SN150 and SN500 from Black Sea suppliers unless Russian exporters start cutting levels accordingly.

A number of cargoes of Iranian production, mainly SN500, is already marked for import into the west coast of India, with one parcel of 5,000 tons already apparently booked and loaded.

Group II trade around the Middle East has been thin this week, with a number of key players out of station. Some offers have filtered through from the Far East and the U.S., but buyers are not interested in large parcels currently. Price may have weakened a little, even in respect of the heavier 500N and 600N grades, with some random reports of numbers falling across the grades by some $10/t.

Were this to be the case, indications for September delivery into Middle East Gulf regions would be $635/t-$655/t for light-vis grades 100N through to 220N, with 500N and 600N at $785/t-$825/t, basis CIF/CFR.

Africa

Group I imports into South Africa continue to be slow, with a number of receivers that were looking for material for September arrival postponing purchases until later this month. With Iranian barrels available directly from U.A.E. traders, the market for imports of SN150 and SN500 from those sources may open up given the new pricing.

Reports are that SN900 has been offered into this region in flexitanks at around $945/t CIF, while there is news of another potential bulk cargo being shipped to Sapref in Durban from one of the South African refinery’s partners loading in Spain.

West Africa is presently taking a number of cargoes that were loaded around – to mid-July from the Baltic Sea, Northwest Europe, the Mediterranean and the U.S. In addition to these, another large slug has been booked out of the U.S. Gulf Coast for discharge into the Nigerian port of Onne. Another parcel of around the same quantity, 12,000 tons to 15,000 tons, is being worked for the second half of August.

Another European parcel ex Rotterdam will follow this cargo, but so far no parcels have been fixed out of the Baltic, perhaps due to the holiday season, but perhaps more importantly because Nigerian buyers believe that base oil prices are about to fall in line with other products.

Sources in Nigeria said that they will not yet move on requirements, due to comfortable inventory and the possibility that prices will fall. Other receivers who are running short are looking to buy smaller parcels, some in cooperation with rivals, and also in flexies, affording them a cushion against the possibility of lower prices to come.

The famous enquiry for 6,000 tons of Iranian material to load out of the U.A.E. for Apapa could now become a reality. Tonnage is tight coming out of that region, and with this rather unorthodox voyage it may be difficult to find a suitable ship to make the cargo work, even with lower FOB numbers.

Prices have not moved much over the past few weeks, with only small downward tweaks being made to CIF/CFR prices. Estimated levels are $595/t-$685/t for solvent neutrals SN150 through to SN500/600, with bright stock spread at $1020/t-$1045/t basis CFR/CIF. SN900 ex Baltic is offered 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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