EMEA Base Oil Price Report

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European base oil prices have risen sharply, perhaps as a result of crude spikes during the past few days, turnarounds at API Group I refineries in Europe and a slight uptick in demand.

Dated deliveries of Brent crude levels hit $51 per barrel during the week, but are back down to around $49.60 per bbl, with West Texas Intermediate crude at $48.30 per barrel. ICE L.S. Gas Oil has also declined some $10 per metric ton to around $443/t. The weakening crude levels are taken as a sign that ample crude stocks are available despite problems in Nigeria and Libya, with all major producers continuing their plan to hold market share against new and renewed supply.

Europe

Group I base oils in Europe have moved swiftly upward, reflecting the gains made to crude and feedstocks during the last month. Even with lower demand, light solvent neutrals have risen by around $10/t to $525/t-$540/t FOB. Heavier neutrals such as solvent neutral 500 are in demand and have increased to $620/t-$645/t. A number of arbitrage opportunities are open, primarily due to the competitive lower levels.

Bright stock levels heightened to $985/t-$995/t, but smaller quantities of lower-spec Russian material have been offered at around $825/t FOB Antwerp-Rotterdam-Amsterdam.

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

Local Group I base oils followed export markets by rising 10/t-20/t, and sellers are obviously keen not to miss the boat when pricing these grades just before summer recess. Buyers have responded by cutting back on requirements, citing that they have plentiful stocks to last through summer. The differential between local selling levels and exports is still 80/t-95/t due to upward movements in both sectors.

Group II increases abound across the globe, with further upward adjustments being levied on Group II grades by major U.S. producers who are active in Europes expanding Group II market. The upward curve in Group I prices has also encouraged Group II sellers to pitch higher numbers, maintaining an acceptable differential reflecting higher quality and specs.

Group II grades carrying international approvals for finished lubricants can demand higher levels, which appears set to continue as long as general oil markets continue rallying. Sellers have said they perceive that pressure to rise Group II prices, particularly for higher viscosity grades, will continue due to raw material costs and demand.

Lighter vis grades this week rose 10/t-25/t to the equivalence of $615/t-$635/t, with heavier-vis 500 neutral and 600N moving to $735/t-$790/t. A 50/t-120/t premium may be added to material redelivered to secondary storage or sold on a delivered basis.

Group III trade was thin, with few new prices or news. The quiet perhaps reflects the oversupply situation constantly in the minds of sellers trying to hold market share. The market appears to remain flat with buyers also apparently content to sit tight and only negotiate prices where absolutely necessary.

As new production in the Middle East Gulf is of an almost standard quality, pricing is the most essential tool for making sales, which could herald the start of bitter price competition between that region and adjacent markets such as India and Pakistan.

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

Baltic and Black Sea

Russian and Belarussian exports from Baltic ports continue to dominate Group I material into Antwerp-Rotterdam-Amsterdam. Cargoes for Nigeria are being negotiated and also one large parcel is due to load before July for discharge into Apapa. This 14,000-ton cargo is being loaded out of two or maybe three Baltic ports due to avails of various grades and also draft restrictions at some loadports. Other smaller lots are being investigated in flexies for the same destination.

SN150 FOB prices have risen to $495/t-$525/t. SN500 continues to be in demand, along with SN900 and SN1200, at $615/t-$630/t and $685/t-$720/t FOB, respectively. SN1200 in relatively small quantities is around $775 FCA. Smaller quantities of lower-spec bright stock 150 is indicated at $820/t-$845/t FOB.

Black Sea Russian exports appear to have dwindled to almost nothing, with few reports of any material being shipped in the normal manner from Kavkaz, Russia, to Gebze, Turkey. Its possible that Turkish importers prefer slightly higher-quality material from Mediterranean sources rather than slightly inferior Russian grades. Or, since the days of fuel dilution are now curbed, blenders may prefer competitively-priced Mediterranean-sourced base oils.

Even the large quantities of SN900 shipped from Kavkaz, Russia, to the United Arab Emirates are not available, with some suggesting that material is being diverted to Baltic ports where higher prices and more options for sale are available. Group I neutrals from Mediterranean sources such as Greece, Italy and Spain are $565/t-$665/t landed CIF into Turkish ports, with bright stock from Italy and Spain around $1045/t.

Ramadan is fully underway in Muslim countries where markets are reportedly very quiet. Some players said business will not properly pick up in these regions until after Sept. 1, since with Ramadan lasting through until 6th July, many players will be leaving the region for the summer when temperatures reach their highest.

Iranian exports have declined due to the Holy Month, with only small occasional quantities of SN500 being exported out of the southern ports. Prices, however, have moved upwards for future cargoes and indications for a parcel of around 6,000 tons loading in the second half of July have been heard at around $545/t basis FOB Bandar-e Emam Khomeyni (BIK).

Levels for offers into Chinese ports for end-of-July arrival are being pitched around $620/t CIF China ports, a large increase from last offers in May. Premium SN500 grade is available in limited quantities for July loading at around $655/t delivered CIF/CFR.

Saudi Arabian cargoes have basically been suspended during Ramadan. Group I cargoes from Europe and the U.S. are being assessed by receivers in the United Arab Emirates, but feedback is that the European material is not competitive, with FOB levels having moved forwards rapidly over the last couple of weeks.

Group II base oils are almost removed from the Middle East Gulf markets, with receivers saying this week that they may not purchase further large quantities of Group II grades until September at the earliest. Distributors are still engaged in delivering smaller parcels by truck and tote from central storage in U.A.E. to buyers in and around the Middle East Gulf. This moratorium on Group II business almost sums up the attitude to these base oils with reliance firmly being placed on Group I with additional use of Group III grades to move to higher-spec finished lubes.

Prices for bulk parcels of Group II grades offered into the region from the U.S. or Far East are assessed at $625/t-$660/t for the lighter grades with the heavier 500N and 600N at $770/t-$795/t basis CIF/CFR. Levels in respect of local sales from distributors or resellers are $40/t-$60/t higher.

Africa

North African imports report a number of medium or small cargoes moving from Italy and Greece into Morocco, Tunisia and Egypt. Prices for these Group I grades are revised upwards to $595/t-$685/t in respect of the range of solvent neutrals, coupled with bright stock from Italy at $1060/t-$1085/t CIF. Spanish traders have offered material into Morocco which has been declined due to contracted supplies being arranged from alternative sources in the Mediterranean.

South Africa base oil trade has been slight, with few new imports other than flexies of SN500 from U.A.E. Baltic-sourced grades such as SN500 and SN900 are being offered in flexies into Durban at $745/t and $810/t, respectively.

Some players suggested that Nigerias neighboring states are purchasing base oils and either having the material delivered into Nigerian ports or alternatively supplying into Nigeria on a cross-border basis by truck. Attempts to verify these rumors have so far been unsuccessful. Buyers contacted in Ghana declared that no product was going between Ghana and Nigeria and that talks of supplies of base oils and other petroleum products from Benin and Cameroon were false.

Problems of foreign currency access continue, with some buyers stating that they may have to pull out of the business until the government declares emergency measures to allow the import of base oils to proceed.

Nigerian enquiries have almost disappeared, with sellers in mainland Europe and the Baltic declining to make offers in response to enquiries which will likely never be fulfilled, as confidence in Nigerian receivers continuously diminishes.

The one potential bulk cargo being worked for June loading ex Baltic ports for Nigeria discharge is in addition to the higher-spec Ghana supplies which are arranged from an Italian source on a regular basis, but now without any top-off quantities for Nigeria.

Notional delivered prices contained in the few remaining offers continue to rise. Levels in respect of smaller bulk and flexi supplies are now offered at $645/t for SN150 and $775/t for SN500. Mainstream bright stock remains $1075/t-$1095/t with lower quality BS150 at around $955/t. SN900 is offered at $825/t. All prices are CIF or 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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