EMEA Base Oil Price Report

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European, Middle Eastern and African base oil prices were stable last week – perhaps due to the Easter holiday limiting some business opportunities – and have since inched up following crude and feedstock price spikes a couple of weeks back.

Dated deliveries of Brent crude are trading lower at around $37.95 per barrel, with West Texas Intermediate at $36.05 per bbl. This weaker picture was forecast in light of Saudi Arabia saying they would not reduce production unless Iran did, which appears to be out of the question. ICE LS Gas Oil is $315 per metric ton, down $30/t.

Europe

Some API Group I grades are reportedly short, due mainly to lower production rates and turnarounds rather than increased demand. This slack is being amply taken up with European imports from Russian refineries ex Baltic suppliers. West Africa trade into Nigeria is still being stymied by the lack of access to foreign currency, and with the temporary loss of this valuable export destination, there has been material available to fill gaps.

Light viscosity Group I solvent neutrals have moved off the lower levels by $5/t-$10/t, to $430/t-$450/t on an FOB basis. These increased less than heavier neutrals, which appear to be more in demand. Prices for SN500 and SN600 grades from mainstream production moved up $10/t-$15/t to $460/t-$475/t.

Bright stock continues to be in demand, but with Nigeria out of action, trade may be temporarily halted. Prices are only marginally higher, at $875/t-$890/t.

Prices shown above are in respect of large export parcels of Group I grades available FOB ex mainstream producers located in mainland Europe.

Whilst the underlying trend for local and domestic business is for prices to firm further, buyers are sending out signals to the market that with crude and feedstocks retrenching, base oil prices may not move further ahead. This has a number of large blenders holding back on purchases to see where the market might be heading, since the feeling is that levels might start to weaken again. This hesitation is causing storage containment problems at some terminals, forcing sellers to consider discounting prices to achieve throughput. This is preventing prices from increasing, and in some cases is actually moving levels lower.

Some sellers are trying to insist on contract volumes being met from storage, but large blenders appear to be in the driving seat, and even against the backdrop of reported tightness in the Group I market, prices are being reevaluated, with local prices for Group I base oils only 45/t-60/t higher than export levels.

Group II imported base stocks have seen varied responses to source increases, particularly from U.S. producers who are gradually recouping from the discounts of the last few months, prior to the reversal in crude and feedstock levels.

Some suppliers in Europe have commented that discounts and hence increments are only being applied to posted prices at source, and that most contracted barrels have not moved a great deal in price over the last few weeks. This is not to say that further upward moves may be applied, but in the light of the latest crude and feedstock moves, these may not be necessary.

Latest numbers in respect of prices for premium light vis grades are $485/t-$555/t with heavy vis 500N and 600N grades at $625/t-$685/t or euro equivalent on ex tank basis. A premium of 50/t-120/t can be added to the above prices in respect of base oils which are priced on a delivered basis.

Group III prices within Europe on an FCA basis have not moved this week and continue to show a considerable degree of stability. Whilst these prices may have not moved, they may not be totally acceptable to producers and resellers. Some sellers have hinted that increases are imminent, but holding existing business appears to be the number one priority, with market shares being paramount in light of further supplies of Group III grades coming on stream within the next six months.

However, within Europe, the two main Group III grades, 4 centiStoke and 6 cSt, are 830/t-860/t ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Russian and Belarussian exports through Baltic ports have stalled, mainly due to no large cargoes being loaded for Nigeria due to continuing problems regarding obtaining letters of credit for imports. A number of deals are waiting for progress to be made on this front, with sellers encountering problems regarding having stocks ready for cargoes to be lifted.

Contract cargoes of 3,000-5,000 tons of SN150 and SN500 continue to load ex Baltic ports for Antwerp-Rotterdam-Amsterdam, and are perhaps filling a void which might otherwise have been created due to plant closures and impending cessation of supplies from a number of sources in northwestern Europe.

Prices for these export grades have moved ahead by around $25/t over the past couple of weeks with FOB levels for Russian SN150 and SN500 grades around $435/t-$450/t, and $465/t-$485/t, respectively. Parcels of SN900 have also moved upwards at $620/t basis FCA for large bulk parcels – with smaller volumes of this grade being loaded into flexies at $665 basis FCA.

Black Sea trade comprising of Russian exports into Turkey have increased over the past few weeks, perhaps as a result of buyers expecting that prices may rise and that by taking cargoes promptly, receivers can avoid increasing prices. Levels have moved upwards during the last couple of weeks. Ship-to-ship facilities at Port Kavkaz, Russia, have prices delivered into Gebze, Turkey, at $515/t-$535/t for SN500 – with SN150 around $30/t less, depending on cargo and parcel size.

Mediterranean-sourced parcels of Group I grades are expected to have moved in line with Russian export levels, and are now discharged into Turkish ports at $510/t-$565/t in respect of the range of solvent neutrals, with bright stock at $945/t-$960/t delivered CIF.

Another large cargo is being examined ex Black Sea sources for Middle East Gulf or receivers in the west coast of India. This will be formed of a large slug of SN900, perhaps topped off with a smaller quantity of SN500. Prices offered have not been confirmed yet, but estimates put the SN900 at around $640/t STS Port Kavkaz, Russia.

Middle East Gulf

Sources in United Arab Emirates have not confirmed further offers or sales to receivers in Aqaba, Jordan, but rumors are that a parcel offered to both Sudanese buyers and also to Jordanian receivers may have stemmed directly from Iranian exporters, who have been trying to resume trade into these regions post sanctions.

Iranian exports are to the fore again, with reported cargoes loading out of BIK and Bandar Abbas for receivers in the west coast of India. Substantial quantities of SN500 are also being offered to receivers in Singapore. Prices are being edged up gradually, with FOB levels at $455/t-$465/t basis FOB.

Middle East Gulf reports are that further Group I cargoes loaded ex Red Sea ports such as Yanbu and Jeddah are destined for receivers in Oman and the U.A.E. These are deemed to be contract supplies for which prices are not disclosed, but are estimated at $545/t-$575/t – with bright stock maintained at $955/t-$980/t delivered CIF.

Group II prices in new offers for receivers in Middle East Gulf areas have moved up by $20/t-$30/t from those last seen around three weeks ago. One offer has been based on supplies from the U.S. Gulf, with a cargo of around 6,000 tons of two grades being offered for early May arrival. Prices are reportedly $535/t CIF/CFR for light vis grades and $598/t for the heavy vis grade. These may be subject to revision since only buyers have divulged this information.

Far East suppliers have offered $5/t-$10/t lower levels for all viscosities, but with Middle East Gulf buyers looking to take larger quantities of the heavier vis grades, avails of these are not so plentiful as some months back with turnarounds and local demand perhaps starting to improve. U.S. producers said they have avails for the heavier grades and will be pleased to offer for May delivery, but again, lead time is important, with some buyers in Middle East Gulf saying they expect prices to fall again.

Africa

South African trade has reportedly seen fewer imports of base oil. This may be a function of local avails, or a seasonal downturn, with winter approaching. One distributor said that the seasons are increasingly important for agricultural markets, for example, although finished lubricant requirements vary depending on sector. Group II offtake has grown throughout the region and is forecast to make an even larger impact over the next year or so.

North African receivers have purchased cargoes of Group I and Group II grades from sources in mainland Europe and have issued a number of enquiries. It is considered that the main players have contracted supplies now with sources in Italy and Greece, and that these will continue now without the local Group I material coming out of Mohammedia, Morocco. Prices appear to have risen in line with FOB levels throughout Europe to $510/t-$555/t in respect of the solvent neutral grades, with bright stock around $955/t basis delivered CIF North African ports.

Nigeria is still being torn over the problems associated with the lack of foreign currency available to local banks. There are deals in place in which buyers have agreed on terms and prices with sellers in Europe, but without the banking system, these are all placed on the back burner. At least two cargoes of around 12,000 tons each are waiting to load out of the Baltic, with others planned from mainland European sources.

New offers in respect of Group I products are perhaps irrelevant until the import problem is sorted out – but for the record, Baltic offers contained SN500 and SN900 levels of $592/t, and $748/t, respectively.

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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