EMEA Base Oil Price Report


Base oil markets in Europe, the Middle East and Africa appear to be calm with activity in Northwestern Europe and the Mediterranean limited to intra-company parcel movements. The Middle East and Africa are relatively quiet – particularly on the Group l front – with a few reports of activity in the Group ll and Group lll sectors.

A number of cargoes have been reported loading out of the Baltic Sea, where traffic is returning to normal levels after some three weeks of no base oils being exported from Russian refineries. That supply hiatus appears over with trains now moving oils into shore storage at Baltic ports.

Behind the scenes, crude and feedstock values leveled off around last weeks values. Dated Brent currently stands at approximately $48.50 per barrel, with West Texas Intermediate maintaining the narrow crack of $2.5 at $46.00/bbl. Gas oil prices on the ICE retreated from last weeks spike to around $441 in front-month settlement.

Now that the latest crude hike has used up its momentum, pundits are forecasting lower prices during the fourth quarter and further reductions going into 2016. Some of these predictions are based on expectations that Iranian oil will hit the market following the withdrawal of Western economic sanctions. Since most oil-producing nations are keen to protect market shares, new supply could exert downward pressure on crude prices.

Some European Group l prices remained flat this week. Light solvent neutral grades again ranged between $480 per ton and $495/t. There seems stronger for heavier grades such as SN500 and 600, as these products held firm and in some cases moved slightly to range between $595/t-$620/t.

Demand for bright stock remains healthy, and prices in some offers have increased. This grade is now priced at $860/t-$899/t. Prices reported above refer to parcels of Group l base oils offered or sold for export from mainstream European supply points.

As rumors circulates of financial shortfalls at a refinery in Morocco and of operational problems at other facilities, more and more trade is being transacted between Mediterranean suppliers and receivers in North Africa that had previously been supplied by Moroccos Samir. Calls to this supplier went unanswered this week, escalating concerns of long-term disruptions there.

Domestic European base oil prices remain unchanged this week, with a number of buyers reckoning that the end of October may bring some price revisions for some Group I grades – upward for some grades and downward for others. Other sources have said they do not expect any changes between now and the end of the year due to factors such as declining finished lubricant demand throughout European markets.

Distributors in Amsterdam, Rotterdam and Antwerp are relieved this week to see Russian export barrels returning to the market, and with these shipments appearing, gaps in the supply chain have now been plugged.

With export volumes rising again, differentials between intra-European prices and those applying to exports have increased slightly, although exact numbers will only be established at the beginning of next month. This columns assessment for the price delta is now a premium of 45/t-60/t applied to inter-continental transactions.

Trends for Group II prices appear to have been mixed this week, with some buyers reporting small markups to higher-viscosity material, whilst others advising of decreases for some lighter grades. The picture is complicated by some U.S producers experiencing shortages while others cut prices. At the same time, Far Eastern suppliers are looking to expand sales into European markets, and seem prepared to buy business by heavily discounting some grades.

When all was said and done, however, Group II prices in Europe remained relatively steady, with the light oils $520/t-$530/t and heavier grades $740/t-$780/t.

Group III prices within Europe remain flat this week – around 845/t-865/t for both 4 centiStoke and 6cst grades.

News that Russian base oil exports are once again moving through Baltic ports relieved temporary shortages for exports of some grades. The cause of the interruptions remains unclear; some sources cite government restrictions while others blame customs officials and train operators.

The refreshed supplies spurred a number of West African buyers to try to close purchases from the region, but for many negotiations have just begun.

FOB prices being quoted for the two staple grades – SN150 and SN500 – have changed slightly, with the SN150 rising slightly to $470/t-$485/t while SN500 and SN900 apparently increased by $5/t-$10/t. SN500 oils are now $550/t-$575/t, and SN900s said to be $660/t-$725/t, though values of the latter grade are more difficult to gauge.

Bright stocks are available in smaller quantities with FCA prices of approximately $765/t and FOB levels at $830/t-$850/t. All of these prices apply to volumes being shipped in flexi-tanks and sold on a CIF basis.

Black Sea trade has been brisk this week, with cargoes fixed out of Kavkaz, Russia; Greece; and Batumi, Georgia. The first parcel sold into Bulgaria consists of Russian SN500, while the Greek shipment consisted of SN150 and SN600, and the Batumi parcel may have been Uzbek grades from the Fergana refinery. The latter two parcels are for Turkish receivers in Yarimca and Gebze.

Prices for these parcels were reported to be $618/t CIF for the SN500, with the Mediterranean-sourced material landing at $525/t-$630/t. Uzbek stocks were assessed lower at $475/t FOB Batumi.

Another parcel of 3,000 tons of SN900 was loaded ex Kavkaz on STS basis for export to Fujairah with an estimated delivered price of $725/t-$740/t CFR/CIF.

There are many theories but no clear explanation of why base oil imports to the Middle East appear to be slowing. Many say requirements for finished lubricants have fallen, while others report that growing dependence on Group II and III stocks is reducing the regions consumption of Group I. Some claim that overall production of lubricants within the region is rising, with new players in the United Arab Emirates and Qatar grabbing most of the new sales and others based on Indias West Coast taking smaller shares.

Iranian Group l exports still play a major role in base oil supply for the region, but fewer parcels seemed available for direct shipment this week. Some cargoes are still being transshipped through the U.A.E. at price tags of $470/t-$480/t for FOB resales. With costs on transshipment $25/t-$30/t, these prices netback to approximately the same levels recorded last week for SN500.

Middle East Group II trade is thin, with fewer imports of these oils reported than last month. Offers of material from the U.S. Gulf Coast are competing directly with offers from Far East producers, and one U.S supplier lowered prices to attract export business. One Middle East receiver reported having sufficient inventory from September purchases to last until December and expressed hopes that prices will be heavily discounted then.

South African imports of Group l grades are once again figuring in this market, with cargoes of some 10,000 tons being worked for arrival into Durban between November and January. Mediterranean suppliers are preparing to sell SN150, SN500 and bright stock to cover demand in this market. Landed prices are estimated at $56/t and $635/t, respectively for SN150 and SN500, while bright stock is pegged at $955/t. These are not reselling prices, which will possibly be $150/t higher to account for storage, handling and distribution margins.

West African enquiries cover a number of receivers in the usual locations of Ghana and Nigeria, but other buyers in Guinea and Cote dIvoire are also looking to import European or Russian base oils by the end of the year. One Mediterranean supplier is loading a 5,500 cargo SN500 and bright stock bound for Lagos.

Prices relating to cargoes loading now or during November may slightly increase, but many expect suppliers to mark down prices in December in order to attract buyers and draw down inventories. Prices for prompt loading are pegged at $655/t for heavy neutrals – which represents an increase of $10/t – and $965/t-$985/t for bright stock, an increase of $10/t-$15/t. SN900 loading ex Baltic will be landed into Nigeria at around $735/t-$760/t.

Prices for December sales out of Europe and/or U.S. are expected to be up to $50/t lower, but these discounts will very much depend on what occurs in market between now and end November.

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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