EMEA Base Oil Price Report

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Theres been demand for a number of base oil transactions in June even with prices rising in response to crude hikes. Yet many note that trade will likely slow down until the end of August and prices appear to be plateauing.

Crude levels are seesawing around the $50 per barrel mark, with dated deliveries of Brent crude at $50.55 per bbl. West Texas Intermediate crude has closed the crack at around $49.80 per barrel. ICE L.S. Gas Oil is virtually flat at $449 per metric ton in July front month settlement.

Europe

API Group I base oils within Europe have remained flat this week with light solvent neutrals still $525/t-$540/t FOB. While in demand, heavier neutrals remain steady at $620/t-$645/t. The low points of these spreads may have risen slightly, but not significantly, if so. Some buyers said sellers are concerned about stocks building over the summer period and as such are not pushing for higher numbers. With a number of export cargoes organized for June loading, most deep-sea demand appears to have been covered, with traders and resellers pleased to be back in a vibrant market.

Bright stock also remains unchanged at $985/t-$995/t, with fewer buyers looking for supplies of this grade presently, due to large quantities loading during June.

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

Domestic sales prices for Group I grades have been relatively unaffected by the large quantities programed to load out of mainland Europe during June. Most buyers are sufficiently covered for all requirements on a short-term basis and supply appears to be constant with few spikes and troughs. The price differential between local selling levels and exports is maintained at 80/t-95/t.

Group II imports have seen another huge cargo arriving from the U.S. Gulf Coast, with some 40,000 tons of base oils aboard, earmarked for either the United Kingdom or Mediterranean discharge.

Work on a new cracker that will provide feedstock for ExxonMobils 1 million ton new Group II production in Rotterdam started this week. The exact schedule for the new production has not yet been made public but sources anticipated that material will be flowing by fourth quarter 2017.

Group II prices are still moving upwards, although both buyers and sellers have indicated that there could be a measure of stability appearing if crude and feedstock levels are maintained. Increases are not so prolific this week, however, with the lighter viscosity grades moving around 5/t higher. U.S. dollar equivalent prices for these grades are $620/t-$640/t with the heavier vis grades 500N and 600N moving to $740/t-$795/t. A 50/t-120/t premium may be added for material redelivered to secondary storage or sold on a delivered basis.

European Group III trade appears to be unaffected by new production in the Middle East Gulf, with levels maintained at 885/t-895/t in respect of 4 centiStoke and 6 cSt grades, and 8 cSt material at 845/t on basis of sales ex-tank Antwerp-Rotterdam-Amsterdam. These prices refer to small, truck-delivered volumes – not major purchases by major buyers.

Group III parcels are reportedly moving out of Spain into the west coast of France and Antwerp-Rotterdam-Amsterdam. Levels are in line with medium-sized buyers tariffs, and are not presumed to be as high as levels for truck and ex-rack trade in Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic exports have been boosted by the fixture of at least one large cargo of 12,000 tons loading out of three ports. This cargo, which was planned some time ago, was put on hold until the Nigerian financial situation sorted itself out. This would appear to have happened, at least to an extent, since there are further enquiries for large parcels to load out of the Baltic during July. FOB prices for all grades appear to have settled down and are maintained around last weeks levels.

Some small adjustments may have taken place at the lowest ends of the spreads, but levels indicate that increments have been smaller than in previous weeks. SN150 offers are between $490/t and $520/t FOB with SN500 now $620/t-$635/t. SN900 continues to be offered at $695/t-$720/t and SN1200 around $775/t, both basis FCA.

A parcel of around 4,500 tons is being loaded out of two Baltic ports for receivers in Aqaba, Jordan. Material from the United Arab Emirates had previously found its way into this market, and perhaps this option from the Baltic carries more attractive economics.

Russian-sourced Black Sea exports seemed to be waning last week, but reportedly, a couple of large parcels have loaded STS out of Kavkaz, Russia. One parcel of some 3,500 tons is destined for Israeli buyers, with another larger cargo of presumably heavier grades loading for U.A.E. and Singapore.

Only one notable cargo has been identified coming out of Antwerp-Rotterdam-Amsterdam to Gebze, Turkey, although it is believed this cargo will not be Group I, but possibly Group II going into satellite storage in Turkey. Another parcel has loaded out of northwestern Europe and the U.K. for discharge into Gebze and Egypt. Group I neutrals from Mediterranean sources such as Greece, Italy and Spain are maintained in line with other European FOB levels at $565/t-$665/t landed CIF into Turkish ports, along with bright stock from Italy and Spain indicated at around $1045/t.

Middle East Gulf

Many Middle East countries are experiencing varied effects on trade as Ramadan continues. Contrary to previously obtained information that base oil shipments from Saudi Arabia during Ramadan were significantly below normal levels, a spokesman from one operating company said exports continue at a business-as-usual basis, and that shipments during the holy month are running above the monthly average.

Reports are that Iranian exports are back in the market, although not at the peak quantities seen prior to June 6. Some 10,000 tons of SN500 has been sold to west coast Indian receivers at prices which are in line with those reported last week. Those levels are maintained for immediate future indications at around $545/t basis FOB Bandar-e Emam Khomeyni (BIK)/Bandar Bushear.

Iranian material is also moving to the west coast of India out of U.A.E. ports by exporters who had received it some time back at lower prices. Offers into Chinese ports and Singapore for late July and August arrival are being pitched at $620/t-$640/t CIF China ports, with other locations such as Australia being evaluated as potential markets for this material. The higher-spec SN500 grade is available for July loading at new indications of around $685/t delivered CIF/CFR Far East destinations.

Group II trade is reportedly thin, with Middle East Gulf buyers not rushing after offers made over the past few weeks. Local distributors business is still progressing with sales of smaller quantities of premium Group II grades into blending operations throughout the Middle East Gulf. U.S.- and Far East-sourced products are still $625/t-$660/t for the light vis grades with heavier 500N and 600N grades between $770/t and $795/t basis CIF/CFR. Local sales from distributors or resellers are estimated at $60/t-$75/t higher depending on final destination.

Group III sales information has been gleaned from the shipping market, where two cargoes totaling almost 17,000 tons have loaded out of Al Ruwais en route to the west coast of India. In addition, a large parcel of some 21,000 tons of what is considered to be Group II grades has sailed from Cartagena, Spain, to the west coast of India. This market has been served by production out of Bahrain and the Far East previously – further proof of how competitive the Group III markets may become in this region with an almost certain oversupply in a currently limited market.

Africa

A number of medium to small Group I cargoes are reportedly moving from Italy and Greece into Morocco, Tunisia and Egypt. Prices are maintained at $595/t-$685/t in respect of the range of solvent neutrals, with bright stock from Italy at $1060/t-$1085/t CIF.

East African receivers are looking forward to a 8,000- to 9,000-ton Group I parcel from the Mediterranean into Mombasa, Kenya. Storage for this quantity will be at a premium since parcels of this size are unusual for this market.

South Africa imports include a 4,000-ton cargo arriving ex U.S. Gulf Coast, which is presumed to consist of Group II grades for one of the major suppliers. SN500 and SN900 are offered delivered into Durban at higher levels than seen last week: $760/t and $835/t, respectively.

West African markets appear to have found some solutions to the financial impasse caused by lack of foreign currency. No fewer than five cargoes are either loaded or being prepared to load for arrival into West Africa, with four of these (totaling around 33,000 tons) destined for Apapa, Nigeria. A further 8,600 tons of Group I grades is loading ex northwestern Europe and Italy, which will encompass the supply to the Ghana tender. A large percentage of these arrivals will be loading ex major facilities in Mediterranean, Antwerp-Rotterdam-Amsterdam and the United Kingdom, although most of the business will be trader-controlled.

Further Nigerian enquiries are hitting the market with larger quantities in bulk along with many smaller enquiries for material loaded into flexies. Very heavy neutrals such as SN900 and SN1200 are the most favored grades from Baltic suppliers, along with SN500 and bright stock from European majors.

Delivered prices are no longer notional and have been confirmed in some offers: smaller bulk and flexi supplies are now offered at $625/t for SN150 and $745/t for SN500. Mainstream bright stock in bulk has been confirmed in one offer at $1058/t, with SN1200 in flexies at $895/t along with SN900 at $845/t, all prices CFR. Mainstream prices for quantities in bulk from major European suppliers and also ex Baltic are estimated at $610/t-$710/t in respect of the range of solvent neutrals SN150 to SN500, with bright stock at $1050/t-$1070/t CFR Lagos.

Correction:

Last weeks column incorrectly reported that marine shipments of base oil cargoes from Saudi Arabia had nearly ceased during Ramadan. Subsequent discussion with a spokesman from a Saudi Arabian producer indicated that exports during the holy month continue at rates above the monthly average.

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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