EMEA Base Oil Price Report

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Higher crude values have some sellers trying to push European, Middle Eastern and African base oil prices higher, while some buyers are eager to close deals at current levels and others wait for direction in the market.

Dated deliveries of Brent crude touched $40 per barrel last week but currently trade at $38.50 per bbl. West Texas Intermediate crude is offered at $36.30 per bbl for front month settlement. ICE LS Gas Oil has moved to $350 per metric ton, but players are still anxious as to where crude and product prices will eventually land.

Europe

European API Group I prices have essentially not moved since last week, although there are suggestions that new offers contain slightly higher numbers than last seen. Levels are not expected to rise dramatically even against the background of the relatively large-percentage crude oil hikes. Some said base oils had further to fall when crude was at its lowest, so any small increases had already been factored in to current prices.

Export levels are maintained for light solvent neutrals at $405/t-$425/t and heavier neutrals SN500/600 at $405/t-$425/t. Bright stock has started to emerge as a more favored grade, although some buyers said it was overpriced previously and should be realigned with SN500 prices. Even so, interim prices are $10/t higher this week at $835/t-$855/t.

The prices above refer to large parcels of Group I grades marked for export ex mainstream producers in mainland Europe.

Domestic or local Group I remained at recent levels, although some suppliers have indicated that they will act this month to raise levels by $5/t-$10/t or euro equivalent to reflect higher refinery gate prices, which some say are beginning to filter through ex-tank numbers. These increases may reflect similar increases being applied to export levels, even if this hasnt happened yet.

It is becoming difficult again to divide the markets between export and local levels with increasing amounts of Baltic material flowing in to take up the slack of missing production from some of the latest base oil refinery closures. Generally prices in the local European markets are 35/t-50/t higher than export levels, taking account of higher handling storage and delivery costs.

Group II markets have gone into reverse action mode with a number of U.S. producers increasing posted prices. Other imports from Far East producers have yet to show any potential increases. Local blenders are aware that they may be asked to pay increased prices for material after Marchs end, with varying amounts being quoted.

Prices are yet to be altered according to sources, hence levels remain as per previously reported with the range of lighter vis grades between $440/t and $525/t, along with heavier material 500N and 600N at $600/t-$645/t. Prices for material on a delivered basis may be 75-100/t higher.

Group III levels appear to have stabilized, but a number of sellers of these grades are seizing the opportunity of higher crude levels to announce that prices may be moved higher. Amid increasing oversupply, perhaps increasing prices is not realistic in this sector at the moment, but levels may stop eroding and start flattening out in coming weeks. Prices in respect of the two main grades, 4 centiStoke and 6 cSt, are 825/t-855/t ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic trade has picked up, with a number of West Africa enquiries hitting the market after receivers secured letters of credit from local Nigerian banks. A number of parcels of Russian-exported Group I base oils have been identified as possible cargoes to Nigeria, and with prices remaining competitive against mainland European supplies, there are a number of buyers who are keen to finalize deals to attain the lowest prices.

SN150 and SN500 have been offered at delivered prices which would netback to FOB levels of around $400/t and $430/t respectively, or some $15/t-$25 higher than last week. SN900 is also in demand, with prices which would yield $565/t-$580/t FOB. These offers now contain short validities, suggesting that prices may start to rise further in the near future, although sellers appear to be relaxed in the knowledge that their products are in demand, and with Nigerian buyers back in the market, there may be limited avails of Baltic material to go around.

In addition to West Africa export trade, more medium sized cargoes of some 3,000-4,000 tons are being regularly delivered into Antwerp-Rotterdam-Amsterdam for onward distribution to the local northwestern European markets. Prices for these parcels are competitive against mainstream Group I production, in addition to being in place to fill gaps left as a result of closures.

Turkish importers are taking spot cargoes out of Port Kavkaz, Russia, made up of SN500 in the main with smaller quantities of SN150. Prices delivered into ports such as Gebze, Turkey, are around $425/t – along with parcels of SN500 at around $465/t.

Mediterranean sources are also supplying cargoes in Turkey from Greece, Italy and Spain. These parcels contain Group I solvent neutrals and with Spanish and Italian supplies, bright stock is also included. Prices are competitive against Russian export supply, but reports are that numbers moved upwards some $10/t.

Middle East Gulf

Middle East Gulf Group I markets are still being affected by the large quantities of Iranian exports which show little sign of relenting. A couple of large parcels have been nominated for shipping out of BIK and Bandar Bushehr, while prices for SN500 being offered have seemingly firmed over the last few days, with sellers trying to push levels $5/t-$10/t higher. Prices are now $435/t-$440/t basis FOB, whilst the same material is available FOB United Arab Emirates at $465/t-$470/t.

Other Group I imports are carrying higher levels than Iranian exports – but higher specification material is flowing from sources such as Saudi Arabia into receivers in Oman and the United Arab Emirates. Prices are estimated to be $30/t-$50/t higher on a delivered basis, and also include the supply of bright stock.

Group II trade has been reportedly thin in the Middle East Gulf, perhaps due to Far East suppliers looking more to their local markets than to export locations. Buyers are in the market for a couple of large cargoes of Group II base oils – particularly substantial quantities of 500N or 600N. Offers have been reported as $555/t-$570/t in the most recent communications, but suppliers said they would be offering around $25/t higher now in respect of the heavier grades, although they would be flexible when looking at quantities of the lighter vis 150N and 180N.

Grades 100N through 220N are still $465/t-$480/t.

Africa

South African receivers report a large increase in Group II activity with a number of major producers identifying that market as being primed for substantial growth. This may be due to a number of factors, one being the gradual decrease of avails of Group I base oils, and also that this market is rapidly progressing to higher-quality finished lubricants in almost all sectors of industry.

North African imports continue to be prominent from Italy and Spain with Group I base oils being targeted into these markets where gaps had been left due to the Mohammedia, Morocco, refinery shutdown. It has been rumored that this unit will never produce base oils again, and that Morocco will import all base oils for the foreseeable future.

West African trade into Nigeria appears to have gained some respite from the banking and foreign exchange problems which were dogging the country during recent weeks. At least some of the receivers have indicated that they are in a position to open letters of credit, which are required in Nigeria due to exchange controls within the country.

This has opened the door for cargoes to be sought from mainland Europe, Baltic and the U.S. for Group I base stocks. Baltic suppliers have indicated that there could be around 25,000 tons of material to be loaded this month if financial requirements are able to be met.

Prices contained in offers and indications this week in respect of Baltic avails are reported at $520-530/t for SN150, and $555/t delivered to Apapa, Nigeria, port. Bright stock became the subject of intense discussions during the week when one supplier offered a large quantity of this grade at $1015/t basis CFR Lagos, Nigeria, which was deemed too high, whilst higher viscosity material SN900 has been offered at $710/t CIF/CFR.

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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