EMEA Base Oil Price Report

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Whether due to spikes in crude and feedstock prices or a natural calming in the markets, European, Middle Eastern and African base oil prices are mostly stable or edging up.

Dated deliveries of Brent crude spiked above $53 per barrel late last week then eroded to just above $50 per bbl. West Texas Intermediate followed, going above $50 per bbl then back to around $47.75 per bbl. ICE gas oil is showing at $455 per metric ton in front month settlement.

Base oil numbers havent caught up with the crude swings, mostly remaining in the same range these past few weeks. Prices have only started to move upward for heavy API Group I neutrals and bright stock.

Europe

European Group I prices for FOB offers and sales are $480/t-$495/t, perhaps coming off the recent lows. Heavier grades such as SN500/600 are still $585/t-$610/t. The lower prices are still available but not from all suppliers and not for all quantities, with larger parcels commanding slightly higher numbers. Bright stock in some offers has also moved slightly upward to $850/t-$885/t, perhaps reflecting continuing demand. These small increments are deemed to be opportunistic, and dont necessarily reflect current trends.

Levels reported above refer to larger parcels of Group I base oils offered or sold ex mainstream European supply points for export trades.

Some buyers have said that they are experiencing lower prices this month compared to September. However, they recognize continually falling prices may soon be over and that at best they can only hope for a continuation of current levels in November.

Surprisingly, one or two players have signaled that they are short on inventory and in some cases are finding it difficult to cover requirements. These instances are thought to be where imported Russian barrels have been coming into Antwerp-Rotterdam-Amsterdam for secondary distribution, and where in turn these supplies may have been slow in appearing from source producers.

Due to export prices rising slightly, a 45/t-60/t premium would be applied to local or domestic levels.

Group II prices appear to be flat. The last round of source adjustments from U.S. and Far East producers seems to have filtered through, and buyers appear to be satisfied that discounts applied to light vis grades in particular have been passed on, and are now reflected in buying levels.

With crude and raw material costs flattening out, prices may remain relatively constant over coming weeks, with lighter vis products still $520/t-$535/t and heavier cuts at $735/t-$780/t.

Group III prices are down 5/t-10/t this month, but large adjustments are missing, with most suppliers and buyers apparently satisfied with purchase prices for 4 centiStoke and 6 cSt grades at 845-865/t.

Baltic and Black Sea

Russian and Belarussian exports through Baltic ports have been quiet this week with only past reported loadings taking place for West Africa. The routine cargoes of 3,000-4,000 tons are loading for Antwerp-Rotterdam-Amsterdam, but activity appears to be centered around parcels for mainland Europe and the United Kingdom at this time. Some distributors are still reporting low inventories with replenishment stocks taking some time to appear on the market.

Prices for SN150 and SN500 remain in the same ballpark as last week, at $465/t-$480/t and $540/t-$570/t, respectively on an FOB basis. Small parcels of SN900 are being made available at $655/t-$715/t. Larger parcels can call for higher prices due to less availability, with some not available until late October.

There are also avails of various qualities of bright stock ranging from around $765/t FOB up to $830/t-$850/t FOB, but these avails are smaller and are mainly being shipped in flexies to regions such as South Africa, West Africa and Far East.

Other Russian outlets in the Black Sea report a few 3,000 – 4,000-ton cargoes loading out of Kavkaz, bound for Turkish receivers in Gebze. Prices are reported as being competitive at $585/t-$595/t in respect of SN500 CIF. Uzbek material has been circulated but Turkish importers are mainly looking for higher-quality base stocks which are only available ex European Mediterranean or Russian refineries.

Mediterranean cargoes ex Greece and Italy continue to be quoted, and prices for Group I solvent neutrals are from $525/t for SN150 up to $615/t for SN500/600, with small avails of bright stock coming into Turkish ports at $875/t-$895/t.

Group I cargoes continue to be fixed from Mediterranean supply points into Red Sea ports which would normally be exporting quantities of similar grades. The inception of Group II production at Yanbu may be affecting production of all base stocks, but this situation has not been confirmed by local suppliers.

Middle East Gulf

Middle East Gulf markets have slowed in demand, with Iranian exports recently dominating the scene with aggressive exporting and prices to match. This situation continues, although the lifting of sanctions has still not been fully ratified. However, it is presumed that this process will continue and will be fully implemented by spring. This has opened the doors for exports to flow from Iranian ports. Receivers in the west coast of India and East Africa, along with United Arab Emirates-based traders and blenders, have been the main beneficiaries.

Prices for Iranian exports of SN500 are being confirmed in relative dollar terms at $440/t-$450/t FOB. SN150 is also being quoted at the lower end of this spread, with very few avails of SN650 coming to the market at around $425/t. Sources report that sellers would like to increase these prices, but having made the decision to buy back market share from other local and imported barrels has set the scene with the current tariffs. Other regional Group I producers have found it hard to compete even using the quality argument.

With Iranian production now forming part of the supply chain, the region looks set to have a guaranteed supply of Group I grades, on which it heavily relies.

Bright stock, being in exception of this demand, is still contentious in that receivers looking for large parcels are still holding out for prices which many sellers cannot entertain. Many offers have been made and remade for parcels of bright stock from Europe and from U.S. but so far only two deals have been reported as fixed clean for some 6,000 tons of material coming into U.A.E. receivers. Prices for bright stock have varied depending on source and quality with the lows ranging around $885/t CIF/CFR, up to around $965/t in respect of prime European bright stock.

Group II imports into Middle East Gulf regions appear to have fallen, although some sources say this may in part be a function of the new local availability for these grades ex U.A.E. Sources also report that most of the new production is being utilized by the producer in the formulation of finished lubricants – therefore not directly affecting other business.

Prices remain contentious with the disparity between the light and heavier vis material always a source of discussion. Light vis grades from 70N to 220N are being offered for November at $550/t-$570/t, while heavier grades 500N and 600N are $745/t-$765/t.

Africa

West African receivers are in the market for year-end bargains which will have to be shipped out of storage prior to yearend. One buyer said that this required a great deal of planning, but that savings and margins from these purchases could make the difference to a company’s profitability for the total year. Whilst this may be slightly exaggerated, these purchases are seen as important and can be relied upon to yield benefits for importers in West Africa.

One agency commented that during January, some 60,000-75,000 tons of base stocks could arrive into West Africa, immediately boosting imports for 2016.

Cargoes loaded out of Baltic and mainland Europe are on the water now for Apapa and Tema, with further parcels being assembled and negotiated in coming weeks.

Prices for material already purchased for Nigeria are around $645/t for heavy neutrals SN500/600, down some $10/t from last estimates, coupled with bright stock at $945/t-$985/t, which has firmed up by $5/t-$10/t. SN900 in bulk out of the Baltic is estimated to land CIF/CFR into Nigeria at $795/t-$835/t, trading upward by around $70/t due to lack of avails large enough to form most of a standalone cargo. This material is still a viable alternative for bright stock for certain uses, but cannot cover all situations requiring high viscosity base oil.

There are also reports of West Africa receivers looking for smaller quantities of grades such as SN500 and SN900, which are being offered delivered CIF in flexies at $720/t and $875/t, respectively.

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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