EMEA Base Oil Price Report

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There is widespread sentiment in European, Middle Eastern and African base oil markets that prices face downward pressure, but as usual, some sellers are still trying to nab every cent they can get for grades such as heavier neutrals and bright stock.

Dated deliveries of Brent crude are around $47.10 per barrel, only marginally lower than last week. West Texas Intermediate is at $43.45 per bbl. ICE gas oil appears almost identical to last week at $439 per metric ton.

Europe

News broke this week that Gunvor Group has agreed to purchased Kuwait Petroleum Internationals API Group I base oil refinery in Rotterdam and cease Group I base oil production there. This follows a trend of refinery sales that resulted in the cessastion of base oil production in favor of other petroleum products.

FOB levels in respect of European Group I grades have not moved greatly, with light solvent neutrals at $480/t-$495/t and heavier neutrals SN500/600 at $590/t-$610/t. Whilst demand appears stronger, prices will not hold up to the increases that some sellers have tried to impose, and this week sees levels coming off by $5/t-$10/t.

Bright stock remains in demand particularly for West Africa receivers, but again prices appear to be softening, perhaps reflecting the relative value of this grade measured against other Group I base stocks. Levels for bright stock across Europe are $855/t-$890/t, with one or two sellers prepared to offer lower numbers for combination cargoes of two or more Group I grades.

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

Local European ex rack prices have remained steady, although with month end approaching, many expect prices to be reviewed. Most players accept that without further crude and feedstock movements, prices are possibly accurate. But with yearend imminent, blenders are somewhat discouraged from replacing stocks, with many only purchasing essential quantities of grades to tide over until January.

The 55-75/t premium levied on domestic or local prices over that of export levels has increased slightly due to local numbers remaining unchanged, whilst export levels have slipped a little.

European Group II levels remain unchanged, but with news that producers in the U.S. have pursued another round of price decreases, its likely that prices may start to alter downward in coming weeks, since buyers are alert to market moves and trends from source suppliers who import grades into Europe.

Prices remain unaltered with light vis grades at $520/t-$530/t and heavier vis material at $740/t-$780/t.

Group III prices within Europe remain in their protected state, with few changes reported. Some sellers said competition is increasing, with more material becoming available from local production. Levels for 4 centiStoke and 6 cSt are 845-865/t. Prices are in respect of sales ex tank in Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic sellers report high interest in December or end of November cargoes, mainly for West Africa destinations. The trick appears to be to load material which will be in transit on the high seas at yearend, when it will not form part of sellers’ nor buyers’ inventories. Thus cargoes may start to load around the last week of November, with financials and shipping coming into place over the next three weeks.

Prices for Russian export barrels appear to be holding up but with only one private and confidential cargo loaded in the last week for the east coast of the United Kingdom, prices have been difficult to check. Offers for material abound, suggesting that levels reported last week still apply to the main grades SN150 and SN500. FOB levels are $470/t-$485/t for SN150 and $550/t-$575/t in respect of SN500. SN900 remains $660/t-$725/t depending on producer and parcel size.

Black Sea buyers have acknowledged a few cargoes which have arrived into Gebze from Batumi and Kavkaz. These are assumed to be mainly SN500, with perhaps smaller quantities of SN150 from Batumi.

Prices for Russian export grades are in line with Baltic material, although some reports suggest more flexibility when it comes to Black Sea pricing. In other words, some buyers are able to negotiate prices of $10/t-$15/t lower than market levels, possibly representing buyers final counters.

Rates are around $520/t and $615/t, basis CIF Gebze for SN150 and SN500, respectively. Lower priced SN150 can be made available from Uzbekistan, and could be landed into Gebze at $475/t-$480/t CIF.

Other Mediterranean cargoes are being lined up from Greece and Italy and will be delivered into Gebze and Izmit during the last few days of October. Prices for these grades are considered to carry a $15/t-$20/t premium over Russian export prices depending on grade. Bright stock where delivered is estimated to land at around $895/t CIF.

Middle East Gulf

Red Sea shipping reports mention a couple of parcels loading out of Jeddah both bound for different ports in United Arab Emirates. No pricing information is available, but the assumption is that the parcels will comprise of various quantities of light solvent neutrals, heavy neutrals and bright stock.

Middle East Gulf trade is reported to be on the up again after a spell when demand appeared to be missing, particularly for finished lubricants. A number of blenders in U.A.E. have indicated that business is picking up and that they have an increasing order book for all types of finished lubes. This is good news for base oil business since requirements will rise, utilizing both local production and imported barrels from sources in Europe, the U.S. and Far East.

Iranian avails are still very much to the fore with another cargo of around 2,000 tons of SN500 being shipped to Mumbai anchorage. Prices for the main grade, SN500, appear to have stabilized, and quantities are on offer both on an FOB basis, and also on delivered contract. Delivered offers are only for main ports within U.A.E. and also the west coast of India, with prices that when netted back to FOB would be around $445/t. Offers of SN500material FOB U.A.E. basis are $475/t-$480/t.

Receivers in U.A.E. report that they are regularly buying small parcels of one grade of base oils coming from Antwerp. Receivers were unwilling to divulge any further information, but it is possible that this could be SN900 being transshipped through Antwerp-Rotterdam-Amsterdam from Baltic sources. Prices could be $775/t-$790/t CFR/CIF which would be an excellent value for such an import.

There are no further reports of bright stock imports, although offers are with receivers. Buyers may be waiting for yearend sales to fix cargoes either out of Europe or the U.S. With lead times for delivery very different from each source, the next couple of weeks could confirm trades of this grade. Target prices are still sub $900/t delivered.

Group II business appears to be remote on the Middle East Gulf regions if imports are anything to go by. Few cargoes have been nominated to arrive into Middle East Gulf receivers, with only a small parcel of around 1,500 tons being mentioned. Far East suppliers have made countless offers to buyers, but interest is low. Even the new production in Abu Dhabi cannot be responsible for the lack of buying of Group II grades.

Some blenders say that their inventories are sufficient to last out the year and that they will only be looking for material in December.

Offers are lower, with the light vis grades, 70N, 100N, 150N and 220N at $535/t-$545/t and 500N and 600N now being discounted against previous levels to $735/t-$750/t. All these prices are based on CIF/CFR southern Middle East Gulf ports.

Africa

With no new reports of South African imports, the market is busy moving to the summer period when agricultural use of finished lubricants peaks, so perhaps the recent spate of imports has covered the seasonal demand.

Nigerian buyers are back in the Baltic and European markets looking for various combination cargoes made up of SN500, SN900 and bright stock in the main. One enquiry is floated in the market for up to 8,000 tons of Baltic material to load in early November, and this is coupled with another interesting enquiry for around 10,000 tons of Group I base oils to be shipped from the west coast of India to Apapa.

This intriguing movement obviously involves thinking outside the box, but is highly unlikely unless one of the Indian national producers wants to move material quickly and at a very low price out of the local markets. More information is being gleaned on this subject.

Prices for material to be loaded during the first part of November are estimated on the basis of current FOB numbers plus the relevant freight depending on parcel size and source. Assessments are around $640/t for heavy neutrals, with bright stock between $955/t and $970/t and SN900 loading ex Baltic landing into Nigeria at $725/t-$750/t. Buyers suggested that they are now looking for prices at as much as $50/t-$70/t lower than assessed numbers.

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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