EMEA Base Oil Price Report

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European, Middle Eastern and African base oil prices appear to be flat this week, perhaps due to the Easter holiday.

Dated deliveries of Brent crude are down $2 per barrel to around $39.30 per bbl and West Texas Intermediate crude is trading just below at $38.50 per bbl. ICE LS Gas Oil is also down some $25 per metric ton to $347/t. Weakness in crude values has alerted base oil buyers to the possibility that base oil prices may start to weaken, eradicating the recent small increases that naturally followed crude upticks.

Europe

API Group I export prices have basically remained unaltered the past few days. Some sellers have tried to uphold the impetus for rising levels, to which skeptical buyers are reluctant to accept. Even with upcoming turnarounds predicted to shorten the market, buyers appear to remain confident that supplies and availabilities of Group I base oils will not become threatened.

Lighter viscosity solvent neutrals remain between $420/t and $445/t on an FOB basis, whilst heavier neutrals such as SN500 are maintained at $445/t-$465/t.

Any positive movements this week can be attributed to bright stock, which continues to be in demand, and also is relatively scarce around Europe due to resurgence in activity from receivers in Nigeria. Levels for bright stock may have edged forward by $5/t-$10/t, as seen in offers this week, which at the same time have shown solvent neutrals as flat. Offered levels for bright stock are $870/t-$885/t.

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

Similarly, levels in respect of Group I purchases in the local or domestic European markets have remained steady with few signs of turbulent activity. Some sellers commented last week that they would be reviewing levels at the end of the month, but this week said that they may leave prices untouched until the market starts to show direction.

Prices in respect of local sales of Group I base oils are 55/t-65/t higher than export levels.

Group II prices remain buoyant, with sellers trying to recoup some of the discounting applied over the last few months. U.S. importers are moving to try to remain in line with source increments which have been announced by most of the major producers in the West. Other source suppliers from Far East have started to apply moderate increases to imported stocks. This is perhaps in response to prices rising due to lower production levels expected as a result of turnarounds looming in coming months.

Prices for lighter vis grades holding the most approvals are $480/t-$555/t, coupled with the heavier grades 500N and 600N grades now $620/t-$675/t. Additional premiums of 75-100/t can be added to the above numbers for material costed on a delivered basis.

Once again assessments are that European Group III prices are stable although some local producers said they would wish to apply necessary increases to prices should crude and feedstock costs continue to rise. They comment that Group III prices have not really changed since the quantum increase in dated deliveries of Brent crude levels some three weeks back and hence are overdue for reappraisal. Each seller is reluctant to make significant moves, however, due to risks in losing market share which appears to be the number one priority in Group III markets.

Current prices for the two main grades, 4 centiStoke and 6 cSt, are assessed at 830/t-860/t ex-tank Antwerp-Rotterdam-Amsterdam, perhaps nudging some 5/t higher this week.

Baltic and Black Sea

Baltic prices for Russian and Belarussian export grades have moved upwards again, perhaps in response to European mainstream levels gathering pace some two weeks back, but trade has been thin this week due to holidays taking out two trading days. The increases are not enormous, but reflect additional costs being paid to Russian refiners for replacement stocks which are currently moving to shore tanks.

FOB Levels for Russian SN150 and SN500 grades contained in offers this week are between $425/t and $455/t. Parcels of SN900 have been varied in price with some offers at $575/t-$595/t and other material offered in smaller quantities quoted as high as $625, basis FCA.

A number of contracted cargoes for SN150 and SN500 have been fixed into Antwerp-Rotterdam-Amsterdam, with a total monthly tonnage into this area approaching 45,000 tons of Russian export base oils.

A number of Black Sea trades have been confirmed by Turkish receivers who have taken around four or five cargoes of Russian grades into Marmara ports. Some of these requirements are already fixed and on the water whilst two are awaiting suitable vessels to lift parcels ex STS facilities in Port Kavkaz, Russia. Prices delivered for SN500 are $490/t-$505/t, with lesser quantities of SN150 being landed at $445/t-$455/t CIF.

Mainstream Mediterranean levels in respect of Group I supplies are expected to be discharged into Eastern Turkish ports at $475/t-$520/t in respect of the range of solvent neutrals with smaller quantities of bright stock, usually between 500-1,000 tons, at $900/t-$925/t delivered CIF.

Middle East Gulf

There are reports of further cargoes being offered from United Arab Emirates sources into Aqaba in the Red Sea. One previous movement of this type was noted six weeks ago, and now further exports of Iranian sourced material from U.A.E. are being considered. Alongside this parcel are additional base oil supplies ex Saudi Arabia, which had previously been the incumbent supplier for receivers in Aqaba.

Group I markets throughout Middle East Gulf regions are showing further exports from Iran with a couple of movements reported from BIK and Bandar Abbas – one being offered to receivers in the west coast of India and another on offer to the Far East, where the arbitrage appears to be open with the latest prices out of Iran. Prices for Iranian SN500 continue to move up from the recent lows, touted in offers this week at $445/t-$455/t basis FOB, with additional freight and handling charges being applied to re-exports from U.A.E. ports.

Higher-specification Group I imports into Middle East Gulf regions from Saudi Arabia continue to be favored by blenders who produce finished lubricants to international formulations. Prices in respect of these Saudi exports are not available and can only be estimated at $510/t-$535/t in respect of Group I solvent neutrals, with bright stock at $955/t-$980/t delivered CIF. One Iranian producer has offered quantities of SN500 for this market with higher specs, which include a minimum viscosity index of 98.

Group II business in Middle East Gulf regions has been thin this week with no reports of completed trades. U.S. producers have again tried to offer material into this market, but with voyage time significantly higher than from Far East sources, most still prefer Korean material.

With a number of large cargoes from Far East having been fixed for discharge into the west coast of India and freight costs and logistics in favor of including Middle East Gulf receivers in these movements, it might have been assumed that Group II base stocks would be coming into the Middle East Gulf from these sources. However, no material appears to have been allocated to buyers in the Middle East Gulf.

Similar prices have been indicated from both U.S. and Far East traders for April discharge into Middle East Gulf ports and are heard at $530/t-$550/t in respect of the light grades 100N or 180N. The heavier 600N or 500N levels were $590/t-$620/t basis CFR/CIF U.A.E. ports.

Africa

East African receivers have reported taking Iranian-sourced grades ex U.A.E. into ports in Kenya and Tanzania in mostly smaller qualities in flexies. Prices are competitive against supplies from India or from Black Sea or Baltic sources.

Similarly, South African receivers in Durban have also issued a number of enquiries for Group I grades – mainly SN500 and SN150 -to be delivered in flexies. The most competitive sources for these purchases appear to be in the Baltic due to container freight prices which on occasion can compete with larger bulk trades.

Further reports of Group I imports going into Mohammedia, Morocco, have circulated in the market with a regular trade apparently being established between Livorno, Italy, and Morocco. Prices have moved upwards according to sources due to the revisions to FOB levels over the past few weeks, and SN150 and SN500 are now $495/t-$535/t, with quantities of bright stock around $935/t CIF.

Reports that Nigerian receivers had solved some of the problems regarding foreign currency appear to have been exaggerated, with a number of receivers still waiting for banking instruments to be issued. Delays to cargoes are occurring with sellers in some cases experiencing containment problems due to holding stock thats ready for loading. Without the ability to issue letters of credit, import documents cannot be authorized.

Frustrations are rising since many offers are now out of validity, with new prices having to be offered which are obviously higher than those of one month ago. Buyers are trying to contract with sellers to hold prices, with a number of different processes being adopted to enable protection against changing prices. On a couple of trades, the use of an exchange has been employed to ultimately hold prices that were agreed upon at the date of contract.

Mainland European and Baltic offers were in line at $555/t-$565/t for SN150, SN500 at $590/t and SN900 at $755/t. Bright stock ex European sources was indicated at $998/t.

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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