EMEA Base Oil Price Report

Share

With crude oil prices rebounding a bit, other petroleum products may follow. Even so, base oil buyers throughout Europe, the Middle East and Africa are in no rush to fill inventories.

Many are unsure of the reasons that Dated Brent shot back up to around $57.50 per barrel, West Texas Intermediate rose to above $52 per barrel, and ICE gas oil levels hiked up some $65 per metric ton to around $546/t. A producers’ strike in the United States would not likely have effect on global stocks, but has been cited as a possibility. Others say the sudden sharp increase may be no more than a blip.

European API Group I light neutrals are now $590-$620/t, with heavier neutrals at $580-$620/t. Both ranges are marginally lower than last week, but bright stock has retreated even further, to $683-$720/t.

These prices refer to sales and offers of large parcels of base oils stemming from producers and suppliers based in the European mainland.

Group I domestic or local prices in Europe have remained relatively static, with few new offers. With most blenders buying on a hand-to-mouth basis, the market is dreary, with few signs therell be a spring spree.

Many European blenders are buying material on a truck-by-truck basis, as most in the buying fraternity still expect local prices to fall further, even if crude and feedstock levels start to increase. A premium over export prices of 25-40/t still applies to base oils delivered into the local markets around Europe.

Demand is missing from a number of key markets in Europe, and with further economic ructions in countries such Greece, Spain and Italy, it is difficult to forecast growth.

Group II base oils have also seen prices softening, to almost be on par with Group I. At the outset, Group II grades could safely be awarded a substantial premium over Group I, but this delta has been chipped away over the last few months, due to Group II prices coming under pressure from all fronts. In addition to a general price realignment of all base oils, these grades have also been subject to growing oversupply.

Not all Group II base stocks can be classed together, just as some Group I specifications exceed other Group I grades. Whilst almost all Group II production is technically similar, finished lube producers are more attracted to Group II stocks that have been approved on a global basis, rather than those that have not gained or sought approval.

For example, some Group II grades sell at $25-$40/t higher than others, at $555-$570/t for 100N – 220N viscosities. Heavier 600N is $565-$595/t. Non-approved grades can in some cases be close or equal to Group I prices.

Exchange rate is still an issue for all sales made in euros, with some suppliers preferring to sell in dollars.

Perhaps because of this, Group III prices have not moved downward, remaining 825-855/t for both 4 cSt and 6 cSt. Imports appear to be more at risk than domestically produced Group III, but all sources are eventually accounting in dollars, hence no suppliers of Group III are totally protected from a weakening euro.

Baltic and Black Sea

Baltic suppliers are running almost risk free, with very low stocks of Russian or Belarusian base oils in tank, which is disguising the true market prices for these grades. Buyers looking to load parcels of Russian base oils will have to wait until the material is sourced and then transported to Baltic shore tanks, the price for that parcel being particular to only that batch of oil. All prices have come under severe pressure, with levels falling back to under $500/t in some late reports this week.

Levels for the two main standard spec grades SN 150 and SN 500 are $490-$525/t on basis of FOB levels. Other higher-viscosity SN 150 material coming out of Belarus can be priced at around $550/t. SN 900 is assessed and indicated only at around $595/t, basis FOB supplies in bulk.

This delay in buying may be undermining prices, which buyers are having to estimate some three weeks in advance. This guessing process is driving the market lower than possibly would occur normally. Baltic prices then snowball into northwestern European levels, which have to respond to be able to compete just to move stocks out of tank.

Black Sea reports are thin, with few Russian exports. With renewed problems affecting parts of Ukraine, commercial activity is being stymied. Turkish buyers are turning back to supplies of base oil coming out of the Mediterranean where stocks can be guaranteed and cargoes can be arranged within an acceptable timescale.

Prices are based on European FOB levels plus freight, so Group I parcels of SN 150 and SN 500 are arriving into discharge ports in Turkey at around $575-$610/t. Lower-priced Russian material is being sought by some buyers in Black Sea, but supplies are not certain and the time drag can be as much as four weeks from order to discharge in ports such as Gebze. This is not favored in pricing terms, since four weeks is a long time in this market.

Middle East Gulf

Middle East Gulf areas report an unusually high degree of activity. Many players in this region are sensing that the market may be turning, and they are actively looking to purchase large quantities of Group I base oils in particular. Enquiries have been made to suppliers in Europe, the U.S., and Far East for heavy neutrals and bright stock.

Bids from potential buyers in the Middle East Gulf regions are in some cases extremely low compared to current market levels. Bids have been submitted for a parcel of some 4,000 tons of SN 500 with 3,000 tons of bright stock. The solvent neutral quantity was bid at $465/t, whilst bright stock was touted at $545/t. These prices are on the table, with no outright declining from sellers’ side.

Current prices heard reflect levels some $50-$75/t higher than above, with Iranian SN 500 and SN 150 being made available at around $515/t basis FOB United Arab Emirates ports, although counters at around $475/t have been mentioned in discussions this week.

Imported Group I parcels are not showing these very low numbers, with prices being confirmed at $568/t in respect of SN 500, and bright stock at $694/t, on basis of CFR/CIF U.A.E. Routine contracted sales of Group I base oils have been made into Oman and U.A.E., from European and Red Sea sources. Prices for these supplies are on an index-linked basis and have not been revealed.

Group II supplies from Korea still form a major part of each month’s imports into the Middle East Gulf regions, along with some material exported from the U.S. Unconfirmed reports of prices being offered for February cargoes are lower than previously offered, with levels for the low vis and higher vis grades both at $655/t basis CIF, although counter bids from more than one receiver have been tabled at around $620/t CIF.

Africa

South African importers have continued to look for support from Russian exported Group I base oils, which can be landed into ports such as Durban at extremely attractive prices. Levels for SN 500 are believed to be in the region of $735/t CIF delivered in flexies. There are ancillary costs such as duty, transportation and handling, but with imported levels a great deal lower than locally produced material, there are distinct advantages to be gleaned from this course of action.

East African importers in Kenya and Tanzania are also assessing material from Russia, such as SN 500 and SN 900 as alternative sources of base oil for future blending.

West African buyers are struggling to come to terms with the situation in the Baltic, where a distinct lack of base oils in tank does nothing to encourage Nigerian buyers to book parcels forward.

Receivers and traders are looking to European mainland supplies for quantities of Group I neutrals and large quantities of bright stock. Those buyers who smell that the base oil market may be approaching or have already reached a low have already galvanized themselves into action enquiring into U.S. and European suppliers for suitable cargoes.

One cargo is fixed from Baltic sources, however, and will load around mid- February for Apapa discharge. The parcel is understood to comprise of some 3,000 tons of SN 500 and 4,000 tons of SN 900.

Prices for Group I or Group II cargoes arriving into West Africa ports in bulk during February and March are estimated to be $575-$595/t in respect of Baltic and European SN 500, with SN 900 around $695/t CIF. European mainstream specification bright stock in large quantities of around 3,000 tons can now be landed at $755-$770/t CFR/CIF, whilst other lower-quality bright stock may be landed $25-$30/t lower.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly atpumacrown@email.com.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other