EMEA Base Oil Price Report

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It was a very quiet week in the European, Middle Eastern and African base oil markets, with many respondents actively doing nothing to arrange transactions. Its rare that such inactivity applies to all sectors of the market, but in this case, API Group I exports and local sales of Group I, II, and III base oils have all been very slow, punctuated only by continually ongoing contract business.

Scuttlebutt suggests that at least some players are waiting for producers to discount prices for yearend sales that would minimize inventories. Buyers of export volumes do not want to move just yet, preferring to have cargoes on the water on Dec. 31 so that they do not qualify as stock inventory. Still, some sources postulate that the low-inventory effect is overcooked since base oils in tanks at year-end have little consequence on refinery accounting.

With crude prices dipping again by over $3 per barrel, some are forecasting lower base oil prices during December. Dated deliveries of Brent crude are trading around $43.70 per bbl and West Texas Intermediate crude is holding the $3 per bbl crack at $40.75 per bbl. With the OPEC Vienna meeting around the corner and the likelihood that production quotas will endure, the writing is on the wall for a crude oil glut. As an indicator of sympathetic product prices, ICE gas oil is $420 per metric ton, down some $25/t.

Rebuffing geopolitics attempts to throw just about every negative possible to create fears around supplies of crude, prices have continued to weaken.

Europe

European Group I FOB levels have not changed significantly due to few deals being quoted this week and the sentiment is the same: weak, with further dips in offered prices from suppliers who in some cases are pushing sales to maintain shares.

Other refiners appear relaxed, only responding to serious enquiries from regular proven buyers. New business seems to be a thing of the past.

Light solvent neutrals have receded again after a brief spurt in late October and early November, to $485/t-$499/t. Heavier SN500/600 fell to $595/t-$620/t. These levels reflect offered prices heard this week for parcels lifting from mainland suppliers during the first half of December.

Bright stock, having bucked the trend in past weeks, has also succumbed to lower numbers while maintaining the low end of the spread, and is now $895/t-$910/t for 1,500 – 4,000-ton parcels.

These levels are in respect of export offers and sales of Group I grades available ex mainstream suppliers in mainland Europe.

Locally supplied Group I base oils throughout Europe have also trended downward but without any large falls.

These domestic markets appear flat, with perhaps a slight increase in the premium paid in this sector over export prices, which is now 75/t-90/t.

Group II trade follows, but with marked differences in buyers’ attitudes. Many note heavy discounting from source producers in the Far East and the U.S., which has a marked influence in mainland Europe, where almost all Group II base oils are imported and subsequently redistributed.

Some United Kingdom buyers of premium Group II products suggested that the decreases of $60/t-$70/t for the lighter grades and $20/t-$30/t for heavier vis grades have yet to be reflected in selling levels within Europe.

Prices for the Group II grades have come under a little pressure and levels have altered slightly. Light vis grades are $510/t-$540/t, noticeably not too distant from Group I light neutral values, with heavier 500N and 600N grades clinging on to higher demand and specifications, at $690/t-$745/t ex tank within Antwerp-Rotterdam-Amsterdam.

For another month Group III prices appear to be wavering, and certainly not rising. More avails of Group III grades are appearing in Europe, with further supplies of this material on the cards for 2016. Both importers and indigenous producers are determined to retain market shares in what is still a growing sector.

The problem is that availability stemming from new production is also looking for a home, and although some imports have been reduced due to sellers now having local production, the overall scene is certainly one of oversupply.

Prices – the main tools for retaining market share – are being trimmed accordingly. Both 4 centiStoke and 6 cSt grades are 825/t-845/t, basis ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic regions are fairly quiet, with a few cargoes being lined up for loading during December. The timing of these parcels out of storage will be crucial for those trying to take advantage of inventory depletion at year-end. There are not huge quantities of material available, with only one large slug of SN900 available for West Africa trade.

Other routine cargoes from Liepaja into Antwerp-Rotterdam-Amsterdam will form some of the trade between now and end of December. Prices noted for the two most common grades, SN150 and SN500, are in the ballpark of $485/t-$510/t and $555/t-$610/t, respectively. The high end of SN500 prices pertains to higher spec material which is not always available.

Generic SN900 FOB prices are estimated at $675/t-$710/t depending on quantity and specification which varies from 19-21 cSt to 16 cSt.

Black Sea reports are varied. With Turkish licenses for importing base oils running out at the end of December, it would be imaginable for all to be purchasing large quantities of base stocks. Instead, there appears to be little interest in Group II-type grades being offered from Turkmenistan.

SN180 and SN350 are offered in parcels of 3,000 tons each with a price tag of around $550/t, basis FOB Batumi.

Blenders based in Turkey claim that they have all bought cargoes in the last week or so from Russian and mainland Mediterranean sources, but sellers deny most of this activity.

The arbitrage is closed for heavy neutrals and even SN900 to move from Black Sea to Middle East Gulf and the west coast of India due to the plethora of Iranian cargoes available at low prices. Some traders are trying to move material from Black Sea to West Africa but shipping is difficult and freight costs more from mainland Europe and Baltic, and often the grades are not ideally split.

CIF prices for Group I grades filtering into Gebze and Aliaga are thought to be in the region of $525/t for SN150 and $685/t for SN500.

Red Sea shipping reports large cargo movements of around 11,000 – 15,000 tons being considered out of Yanbu and/or Jeddah with destinations of Jordan and Middle East Gulf.

Middle East Gulf

Middle East Gulf markets are mixed, with a great deal of activity surrounding further avails of Iranian SN500. Another parcel of 5,000 – 8,000 tons is available ex Bandar Bushehr for prompt loading.

Prices have been mentioned by traders in United Arab Emirates at levels below those previously considered, putting SN500 around $430/t basis FOB southern Iranian ports such as BIK and BB. Availabilities of SN150 and SN650 have also been noted, but with demand into U.A.E. and the west coast of India running high for SN500, this appears to be the primary export grade.

The region is relatively quiet on the import front, although exports of Group III grades are increasing from Bahrain and Qatar (the latter is only intra-affiliate trade).

Once again receivers in U.A.E. are looking for bright stock, which has been offered from Europe, Far East and the U.S. Parcels ranging from 4,000 tons to 8,000 tons have been offered to receivers but prices are still believed to be negotiable with December looming.

Perhaps within the next week or so, news will break regarding these purchases. Offers are $975/t-$1000/t depending on quality and source, but buyers are still holding out for levels below $900/t, which they believe will be possible after the latest crude and feedstock decreases, and with year-end approaching.

Group II trade is flat, with Far East offers not generating the interest required to firm into deals. Prices mentioned by buyers are $510/t-$535/t for the light vis range of grades coupled with the heavy 500N and 600N material being offered lower this week, at $660/t-$675/t.

These are considered exceptionally low prices and are only reported from receivers in U.A.E. With options for these offers to go into the west coast of India, sellers may be playing for the best option.

Africa

East African and South African markets have not reported any significant import activity this week, although it has been confirmed that quantities of Group II and Group III grades have been going in through Durban to be redistributed to traders and blenders inland. These have been loaded in flexies in containers.

West African receivers are preparing for the last buying spree of the year, but many are being disappointed due to lack of avails in markets such as Baltic, mainland Europe and the U.S., where perhaps the combinations of grades required are not available.

Looking all the time for large parcels of heavy Group I grades, traders are starting to place a premium on these grades which now appear to going to the highest bidder. There are sufficient avails, but many local traders are purchasing small quantities of base oil locally from the big import players rather than investing in stocks due to the downturn in the finished lubricants markets in countries such as Nigeria.

One large cargo has been arranged from Italian sources to cover the Ghana tender along with other requirements in Cote d’Ivoire and Guinea.

Prices on CIF/CFR basis are currently $655/t-$680/t for medium to heavy neutrals such as SN500 and SN600.

Bright stock remains elusive in the quantities that some require, with parcels of 3,000 -4,000 tons needing to be topped off with grades such as SN900 or SN500 to make the freight economics work. Bright stock is $985/t-$1025/t along with SN900 at anything from $775/t to $845/t in bulk, and around $875/t in flexies.

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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