EMEA Base Oil Price Report

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European, Middle Eastern and African base oil prices are continuing to firm across all grades, and while API Group II levels are perhaps moving the most aggressively, some would say that Group I grades initiated the latest drive.

Some players are angling that prices have risen enough to reflect recent crude oil increases. Yet as crude and feedstock levels continue to rise, arguments are not if base oil prices will continue to be pressured to increase, but by how much and how quickly – with some current increases at $5 per metric ton and others around $50/t.

Dated deliveries of Brent crude oil breached the $50 per barrel mark and appear to have settled, while West Texas Intermediate crude has also climbed to new highs at $51.50 per bbl. ICE L.S. Gas Oil has rallied to around $458/t in June front month settlement. Some pundits claim the market will move up $60-$65 per bbl later this year, whilst more pessimistic players have levels falling back to below $30 per bbl due to oversupply and aggressive selling.

Europe

European Group I base oils have moved upwards again, perhaps reflecting the static market experienced last week. Light solvent neutrals have lifted by around $5/t, to $515/t-$530/t FOB. Heavier neutrals are more in demand and subsequently have increased to $605/t-$635/t. European premium bright stock is offered at $975/t-$990/t, although some smaller quantities of lower-spec Russian exports have been indicated at around $810/t FOB Antwerp-Rotterdam-Amsterdam.

Prices above are in respect of large, cargo-sized parcels of Group I supplied or offered on an FOB basis ex mainland Europe.

Local or domestic sales of Group I base oils rose 20/t-45/t last week on an ex-tank or delivered basis. Many blenders, however, say they will purchase the last lots of material prior to the holiday recess. This planned slowdown in activity may not affect availabilities of Group I base oils throughout Europe.

The price differential between local selling levels and Group I exports is still 80/t-95/t.

Even more Group II increases were announced this week from major U.S.- and Far East-based importers into Europe. Selling levels in Europe are moving upwards reflecting refinery increments, so those who say that there will be delays in applying these new levels appear to have been confounded. Increases appear to be staged, however, with distributors and resellers applying frequent small increments rather than hitting buyers with larger source movements that could dramatically alter the cost structure for finished lubricants in one massive movement.

Prices for lighter viscosity grades 70 neutral through 220N are reportedly 10/t-20/t higher at U.S. $610/t-$625/t, with the heavier vis grades 500N and 600N moving ahead to $725/t-$785/t. A 50/t-120/t premium may be added to the prices defined for Group II grades if material is redelivered to secondary storage or sold on a delivered basis.

Group III players appear to be coming to terms with the blatant fact that the market is oversupplied. There have been reports of a few small adjustments to some grades at the lower-offtake end of the market, but any real signs of price rises to large contract buyers are missing.

Producers, importers and other resellers are keen to cover increasing production costs, but are also committed to not losing market share to new production. Although the European scene has been cushioned to some extent with new domestic production substituting for previously imported material, the balance has almost been maintained. This is not the case in areas such as the Middle East Gulf, where avails are starting to outstrip demand on a massive scale.

European prices are therefore maintained at 885/t-895/t for 4 centiStoke and 6 cSt grades, with 8 cSt material around 845/t for sales ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

The Baltic is reportedly moving its regular parcels of Group I grades into Antwerp-Rotterdam-Amsterdam and the United Kingdom. West Africa trade is still dull and has not moved out of the impasse situation where receivers and their banks are still unable to access foreign currency to open letters of credit for normal trade into Nigeria. Some cargoes ex Baltic have been moved to Nigeria, but how they were arranged has not been divulged.

FOB sales of solvent neutral 150 levels remain as per last reported, but depending on destination, these levels vary between $485/t and $510/t. For example, material moving to Antwerp-Rotterdam-Amsterdam will not be so heavily discounted as material moving out of Europe. SN500, on the other hand, is in demand and is now $605/t-$625/t. SN900 is offered in bulk at $685/t-$720/t basis FOB, but is $20/t-$25/t higher for quantities loading in flexies. This heavy grade continues to be in demand, with smaller quantities of a lower-spec bright stock 150 grade at $820/t-$845/t FOB.

Other Russian exports are continuing ex Black Sea ports, where Turkish buyers have confirmed a number of parcels of SN500 with smaller quantities of SN150 to be loaded out of Kavkaz, Russia, for discharge into Gebze, Turkey. However, material from Mediterranean sources such as Greece, Italy and Spain continues to be the mainstay of Turkish imports. Prices for Russian SN150 and SN500 are $535/t-$620/t ex Kavkaz, Russia, whilst Mediterranean SN500/600 is $645/t-$660/t landed CIF into Turkish ports.

Another enquiry has been issued for a large parcel of what is presumed to be SN900 to load STS ex Kavkaz, Russia, to be delivered either into the west coast of India or the United Arab Emirates. Further details are being sought.

Middle East Gulf

Middle East Gulf business reports the continuing saga of Iranian SN500 being exported out of southern Iranian ports. U.A.E. traders confirmed that levels for these Iranian grades have firmed again and material being sold during June is $525/t-$535/t basis FOB Bandar-e Emam Khomeyni (BIK). There appears to be increasing demand for this grade from the Far East, where a number of offers have been placed at around $575/t CIF China ports. These levels are considered $25/t-$30/t low, with realistic prices being $595/t-$610/t depending on parcel size. Offers for the premium SN500 grade are around $640/t delivered CIF/CFR.

Cargoes ex U.S. and Europe in respect of Group I grades are being evaluated and, indeed, one parcel of U.S. Group I base oils has been confirmed for discharge into the U.A.E. Russian offers for material in bulk ex Black Sea and also in flexies ex Baltic continue to form the basis of requests and enquiries from Middle East Gulf buyers.

With this regions continuing heavy reliance on Group I base oil grades, some reports received last week suggested that Group II may not reach the same prolific heights as in the West or the Far East. Regional blenders will use the grade perhaps more sparingly than elsewhere, but it will be needed in the overall scheme, as certain formulations require it.

Prices for Group II grades within the Middle East Gulf fall into two main categories. The first is for bulk parcels of Group II grades from the U.S. or Far East which would be received by relatively few buyers who were using these base oils for blending large quantities of finished lubricants. The second tier is for material brought into the region in bulk and then redistributed either ex rack or by truck or tote. For the former method, levels are assessed at $610/t-$645/t for the lighter grades and $755/t-$785/t for heavier 500N and 600N, basis CIF/CFR. Local sales from distributors or resellers are deemed $40/t-$60/t higher.

Cross-Mediterranean prices for Group I grades were revised upwards following mainland price rises for FOB sales, to $585/t-$670/t in respect of the range of solvent neutrals, with bright stock at $1045/t-$1070/t CIF. These trades are linked to material being delivered into mainland Europe, along with Group I supplies into Morocco, Tunisia, and Egypt from refineries in Spain, Italy and Greece.

Africa

Nigerian enquiries appear to have slowed this week, perhaps as a result of a lack of progress being made on the banking side of the business. Talking to receivers this week, many have either turned away or are mothballing imports and relying on other parts of their organizations to maintain a workforce with alternative businesses.

There are still a number of proposed cargoes being talked ex Baltic and Mediterranean, and even with the regular Ghana tender deliveries taking place, few top-off parcels for Apapa, Nigeria, are being fixed on vessels delivering into Tema, Ghana. Parcels of 9,000 tons and 14,000 tons are being planned ex Baltic, but even small enquiries for deliveries in flexies are encountering problems with funds. Any funds readily available outside Nigeria have been used up and are not easily replenished. Even major oil companies are unable to transfer funds between affiliates.

Delivered prices are rather notional, but levels contained in offers have continued to rise. Last weeks report quoted the price for SN900 on a delivered CFR/CIF basis at $695/t, which should have read $795/t – a level which has since been maintained.

Smaller bulk and flexi supplies are now offered at $620/t for SN150 and $755/t for SN500. Mainstream bright stock remains $1075/t-$1095/t, with lower-quality bright stock 150 at around $935/t. All prices are based on a delivered basis, either CIF or CFR depending on type of trade.

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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