EMEA Base Oil Price Report

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Base oil prices in Europe, the Middle East and Africa continued their firming trend over the past few days, and it appears that upward pricing pressure still bears on these markets due to rising crude costs and a measure of tightness appearing for Group l markets in Europe.

Should Nigerian trade make any sort of comeback within the next few weeks, then the market could go short for certain products, primarily API Group l solvent neutral 500 and bright stock. There are cargoes which have been booked for Nigeria and are firm to load, but without financial instruments to transact these deals they remain at impasses. Prices are being revised for expired offers, with numbers increasing by some U.S. $25 to $50 per metric ton in most cases.

Crude oil has spiked again this week, rising around $8 per barrel for dated deliveries of Brent crude, which traded Tuesday at $44.50. That represented an increase of approximately 20 percent from last week. The price for West Texas Intermediate rose a similar amount to $42/bbl, driven partly by data showing lower-than-expected U.S. crude inventories.

Europe

Prices for Group l light solvent neutrals have risen some $10/t-$15/t this week, perhaps only now responding to crude and feedstock hikes last month. These grades are now priced between $450/t-$465/t, basis FOB. SN 500 and SN 600 have also tilted higher and now range between $475/t-$495/t. Bright stock remains tight but has only risen $10 to $15, up to $890/t-$910/t, due to the slack that the Nigerian scene is keeping in the market.

Resolution of the situation in West Africa would lead to a surge in demand for bright stock and other heavy grades such as SN 900, leaving the market short for these grades.

There has been some talk of substituting heavy Group II viscosity grades for Group l SN 500, but current price differentials rule this out for most exports. Prices referred to above are for bulk supplies of Group I grades available in large volumes basis FOB from mainstream producers in mainland Europe.

Prices within Europe have started to track exports, with a number of suppliers initiating mid-month increases to both spot and some contract prices. Buyers are starting to acknowledge that base oil prices are possibly not going to revert to the lows seen during the winter months, and with spring demand showing positive signs, there are few reasons to delay re-stocking inventories. This realization by itself has caused a bit of a run on purchasing as a number of large and medium-sized blending operations called for larger quantities of Group l grades.

Suddenly the market has turned from being firmly in the buyers’ camp to giving sellers the upper hand. With prices rising over the past few days, price differentials between local sales and exports are assessed slightly higher at 60/t-85/t. This is due mainly to the speed at which local prices are changing versus less elastic export prices, which are generally associated with larger spot transactions.

Group II grades have seen a number of markups, and some sources say increments reflect hikes announced the past few weeks by United States and Far East importers. Group II prices have edged upwards around 25/t-30/t. Buyers reported premium light vis grades have risen to $510/t-$575/t and that 500N and 600N now range between $640/t-$695/t on ex- tank basis. A delivery premium of 50/t-120/t is applied for products delivered to satellite storage facilities or sold on a delivered basis.

European Group III prices once again are following their own trend, remaining in the same range that theyve hovered in recent weeks: 830/t-860/t for 4 centiStoke and 6 cSt grades, ex-tank Antwerp, Rotterdam and Amsterdam. Sources have cited this as evidence of equilibrium in supply and demand. Market share is still all important to refiners in this sector, with new production units being commissioned during the next few months. A global glut already exists, and shipments from the Far East and Middle East may increase as demand in those regions is not keeping up with capacity.

Baltic and Black Seas

Baltic supplies of Russian and Belarusian exports have rallied, with more 3,000- to 5,000-ton cargoes of SN 150 and SN 500 moving into the ports of Antwerp, Rotterdam and Amsterdam. Its not clear yet if Western Europe now needs these imports on an ongoing basis since the closing of local plants; it may be that these grades are lower in price and appeal to a certain sector of the Group I market. Large deep-sea Russian and Belarusian export parcels that have been allocated to West Africa have not been dispatched yet due the financial constraints in Nigeria, but if these shipments do start to move, this region will become exceptionally busy.

Offers for export grades have risen by another $10/t-$20/t this week, with further increases being quoted almost daily. FOB levels for Russian SN 150 and SN 500 grades are now $445/t-$460/t and $475/t-$490/t respectively. SN 900 prices are also under review with new offers being updated to Nigerian buyers who are losing out on lower prices because they cannot move to open letters of credit. New levels for SN 900 are being heard at around $645/t basis FCA for large bulk parcels. Smaller avails of this grade are being loaded into flexi-tanks at around $685/t FCA.

Black Sea trade is positively humming with buyers hustling to beat price increases. Turkish buyers are particularly keen to lay hands on Russian export grades, but are also looking at Uzbek availabilities. Prices for Group l grades being loaded from STS facilities at Kavkaz, Russia, then delivered into Gebze, are $525/t-$540/t for SN 500, with SN 150 $495/t-$510/t, depending on cargo and parcel size.

Group I parcels sourced from Mediterranean locations have undergone similar changes and are now assessed between $525/t-$575/t for solvent neutrals and $960/t-$975/t for bright stock, all basis CIF Turkish ports.

Middle East Gulf

In Middle East Gulf markets, Iranian producers continue to offer cargoes for export during May, including a number of parcels available ex Bandar Imam Khomeini and Bandar Abbas during this period. Prices moved upwards again this week, with FOB levels at $465/t-$475/t, an increase of around $10 pmt. With arbitrage open for exports from Iran to move to Far East, and with a tightening supply scene in that region for Group I base oils, more offers are expected to be made for delivered cargoes on a CIF basis directly from Iranian exporters.

Group l supplies into Gulf receivers ex Saudi Arabia continue with parcels loading ex Red Sea ports Yanbu and Jeddah. Prices for these cargoes are assessed at $565/t-$585/t for Group l solvent neutrals and perhaps around $970/t-$995/t for bright stock, basis CIF.

Prices for Group II products for receivers around the gulf increased this week across the board. Offers for May deliveries rose $20/t-$30/t on both lighter vis grades and heavier oils. Receivers are discussing offers from the U.S and the Far East. Traders say a preference may be given for the U.S. supplies although lead times are stacked against them. Prices are reported at $535/t CIF/CFR for two light vis grades and $612/t for heavy oils.

Major finished lubricant approvals are not attached to these offers, which may lower prices. Far East offers to Middle East Gulf buyers are few at this time, perhaps because availability in the former region is tightening.

Africa

In Morocco, Tunisia and Egypt, spot and contract prices for Group l base oils delivered out of mainland Europe have climbed this week and are now estimated at $530/t-$580/t for solvent neutral grades and $985/t-$995/t for bright stock.

West African trade into Ghana, Cote d’ Ivoire, Guinea and Senegal appears to continue unabated, but with the lack of larger cargoes going into the Nigerian market at this time, the shipping opportunities are limited to smaller bulk parcels. Nigeria appears to still have problems, and few if any large parcels of base oil have arrived into this market, which must by now be going extremely short. Sellers in mainland Europe and the Baltic are awaiting news from receivers about issuance of letters of credit, but with almost three months passing since these problems evolved, supplies cannot be assembled in tank awaiting loading or FOB sales. Sources along the Baltic Sea say some 35,000 tons of base oils have been fixed but are presently awaiting confirmation of banking instruments being put into place.

Offers for Group l products were said to be $20 higher this week than reported two weeks ago, with one Baltic offer for a shipment of SN 500 and SN 900.at $595/t and $758/t, respectively. No offers could be confirmed for bright stock from mainland suppliers, but this grade is now estimated to land into Apapa, Nigeria, at $1020/t, CFR/CIF.

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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