EMEA Base Oil Price Report

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European, Middle Eastern and African base oil markets have responded to new higher crude and feedstock levels by moving ahead in new offers and deals completed this week.

Various crudes have reacted differently over the past few days: dated deliveries of Brent crude actually traded below West Texas Intermediate crude, with both around $41.40 per barrel. ICE LS Gas Oil has risen by some $20 per metric ton, to $369/t.

Prices for API Group I products have moved upwards by $10/t-$25/t depending on grade and location, with the possibilities of further price adjustments being considered by most producers and sellers whilst they await the outcome of recent increases in crude and feedstock values.

Some buyers are resisting, stating that increases were already built into base oil levels and that if anything, prices should remain flat until some decisive directions are reached regarding crude and feedstock levels. Others in the trade bluntly noted that base oil production costs have risen and hence prices would continue to rise until these costs were covered.

The increases may have dampened the number of enquiries for export sales, perhaps due to some buyers considering that prices may relapse again due to the weak crude and products picture emerging. But with a number of turnarounds being announced by some of the main suppliers, the supply scene for Group I base stocks may shorten up, increasing demand for available material.

Europe

Group I prices have moved upwards, with light solvent neutrals now $420/t-$445/t and SN500 at $445/t-$465/t. Bright stock has shown particular strength – perhaps due to higher demand – having moved to $860/t-$875/t.

Prices above refer to large export parcels of Group I grades available ex mainstream producers in mainland Europe.

Local supplies of Group I base stocks appear to have increased with similar upswings, with the heavier material showing the highest movements. Increases have been higher than were suggested last week, with some resellers pushing numbers up by as much as 15/t-25/t, and a few suggesting that they will be asking for even higher levels should crude and feedstock levels push further ahead.

Domestic prices in European markets are reported at 45/t-60/t higher than export levels.

Assessment of the Group II scene shows increases starting to filter down from source price adjustments made by principal producers, mainly in the U.S – which has reversed all discounting applied in late February. Suppliers in the Far East appear to be more relaxed about imposing fresh increases, and may see an opportunity to grab market share from incumbent suppliers, using price and sometimes approvals to entice buyers to at least share their offtake.

U.S.-imported lighter vis grades moved upwards to $470/t-$545/t, with heavier 500N and 600N grades now $610/t-$670/t. Additional premiums of 75- 100/t can be added for material priced on a delivered basis.

Group III prices are reportedly stable with no large movements in either direction. The market is balanced to the extent that there appears to be more than enough material to go around, and with producers and importers looking to preserve market shares, increases are not currently being considered. This is not say that producers would not like to apply increases, but in doing so they may risk opening the door for other suppliers.

Prices linked to the two main grades, 4 centiStoke and 6 cSt, are unchanged at 825/t-855/t ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Although prices across the board appear to have firmed, there are still some offers ex Baltic suppliers which can be described as keen or just below market. A number of traders and receivers in West Africa are showing interest, given that there is mounting pressure on suppliers to adjust upward.

Levels in respect of Russian SN150 and SN500 grades are at FOB levels between $420/t and $445/t, respectively. SN900 is at $570/t-$590/t, although more than one supplier has indicated that they are looking for higher numbers due to demand. Offers are few for large quantities since large parcels have been contracted by resellers and distributors in the Baltic to receivers in Antwerp-Rotterdam-Amsterdam, who in turn are distributing these and taking up any slack which may occur later this year as a result of the Group I refinery closure.

Black Sea trade reports a large cargo of 13,000 tons of base oils loading from STS Port in Kavkaz, Russia, with destination shown as Singapore. This unusual movement is possibly made up of mainly SN900, which could be in demand in Far East markets as a high vis blend component. Turkish buyers are looking at cargoes of around 3,000 tons coming from cross-Black Sea trade into Marmara ports such as Gebze, Turkey, and Aliaga, Turkey. Prices delivered into these ports are assessed higher this week with both FOB and freight rates starting to climb: around $445/t in respect of SN150 with SN500 now around $485/t.

Levels ex Mediterranean sources into Turkey are expected to be around $20 higher than last reported due to general increases to FOB prices for Group I products. Numbers delivered are estimated at $465/t-$495/t in respect of solvent neutrals, with bright stock at $900/t CIF.

Middle East Gulf

Group I markets are still being dominated both on price and activity by Iranian exports out of BIK and Bander Abbas, but Iranian sellers are attempting to push prices higher. Prices for Iranian SN500 were exceptionally low, and sellers suggested that they can be flexible when discussing prices with receivers in locations such as United Arab Emirates and the west coast of India. Alternative prices in respect of the quantities of SN500 being offered have seemingly firmed over the last few days, with sellers trying to push levels higher by $5/t-$10/t. Prices are $435/t-$440/t basis FOB, whilst the same material is available FOB U.A.E. at $465/t-$470/t.

Alternative higher-specification Group I imports into Middle East Gulf regions are able to achieve a price premium over Iranian normal production, although some Iranian suppliers can supply a higher-VI SN500, obviously at around $60/t higher. This would bring this type of grade into line with imports going into Oman and U.A.E. Bright stock, where imported, is assessed at $955/t-$980/t delivered.

Group II trade has been limited in Middle East Gulf markets mainly due to Far East suppliers almost shunning buyers in this region. A number of enquiries have been placed with traders for supplies out of the U.S., but sellers have limited avails at this time, with high demand from local and alternative export markets. Looking for large quantities of 500N or 600N grades, these buyers in Middle East Gulf areas do not fit every sellers ideal cargo, hence difficulties in serving this market. Also prices are expected to be very keen, and with new source increases to posted prices, U.S. suppliers have almost ruled themselves out of the game.

Prices offered from one U.S. source through a trader in respect of the light grade 100N are around $520/t-$545/t, and for the heavier 600N levels were $585/t-$610/t basis CFR/CIF U.A.E. ports.

Africa

South African markets are calming down a little after the summer high period, with many blenders looking to replenish stocks of base oils over the next couple of months. Traders and major suppliers are keen to establish shares of a new market which has evolved as a result of less avails from local suppliers.

North African imports from Livorno are reported to be continuing into Morocco and Tunisia with a parcel of 3,000 tons being loaded during March. Prices for SN150 and SN500 are deemed to be $485/t-$520/t, with supplies of bright stock at $920/t CIF.

West African Nigerian trade has reappeared after almost a month when no transactions were possible due to banking restrictions on foreign currency availability. European and Baltic suppliers have been active with new offers at higher price levels, trying to convince Nigerian receivers that the market has turned and that prices are moving higher.

Buyers in West Africa are arguing that price increases had already been built into former levels, since base oils had not been completely discounted when crude was at a low. This argument does hold some water, but with alternative options for placing cargo of SN900 and bright stock, sellers are holding all the cards.

Prices confirmed in offers this week in respect of Baltic supplies are $545/t-$560/t for SN150, and SN500 indicated at $585/t delivered into Apapa, Nigeria. Bright stock from European mainland sources has been quoted at $985/t this week – unsurprisingly some $40 lower than indications last week. SN900 has been offered at $755/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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