EMEA Base Oil Price Report

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Seasonal downturns have many European, Middle Eastern and African traders focused only on day-to-day business, with some buyers looking to take advantage of currently weak freight rates and some sellers recognizing an opportunity for increases.

Dated deliveries of Brent crude currently trades at around $48.30 per barrel, with West Texas Intermediate at $46.70 per bbl. This mini-slide in values has not affected other petroleum product markets, which report stable prices running through the end of August. ICE LS Gas Oil likewise maintains a level close to last weeks, at $422 per metric ton.

Europe

European API Group I prices reflect a relatively stable market at the moment. Some sellers said they are experiencing shortening of some grades, although this does not appear to be the case in the entire market. There is evidence of some large Group I imports arriving into Europe from the United States, obviously supporting refineries in northwestern Europe which have had, or are about to undergo major turnarounds. These alternative or buffer stocks may be insurance to be able to meet any demand surge which could occur after the August holiday period.

FOB levels for Group I light solvent neutrals remain $510/t-$525/t FOB. Heavy neutrals appear to be in higher demand, at least for the few export cargoes that have been arranged over the past 10 days, although prices do not appear to have moved judging from deals reported this week. SN500 and SN600 are $595/t-$625/t. Counters to higher offers appear to have paid off for many of the deals completed.

Bright stock has also shown late signs of demand this week, with a few buyers looking to complete large parcels for export destinations such as West Africa, the Middle East Gulf and India. Offers, however, do not show significantly higher prices, although some sellers in the Mediterranean have tried to push for increases of around $20/t, which are currently being countered. Offer are $998/t-$1020/t, but these levels may reduce in negotiations.

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

Domestic levels in respect of Group I base oils are static. Buyers said business is slowing down for the summer recess and that blending requirements will not return to normal until the end of August. They forecasted, however, that September and October will be busy due to an number of large tenders for finished lubes which have to be filled prior to the end of October. The price differential between local selling levels and export prices this week is pruned slightly due to slightly higher export levels, to 80/t-110/t.

Demand reportedly continues for Group II grades, which allows sellers to push as hard as possible for higher prices. At the same time, incumbent suppliers are very aware that new production set to come on-stream next year could greatly affect the market unless exceptional growth occurs between now and then. However, all players are believed to understand that the new production will not run at full steam from day one, but will primarily substitute for currently imported material, and thereafter may ramp up to around 1 million tons per year sometime in the future.

Prices continue to firm slightly, although some reports this week have levels as stable for the remainder of July. Prices in U.S. dollar equivalent for the light grades are $630/t-$645/t, with heavier vis grades between $750/t and $800/t. Premiums of 50/t-120/t may be added to these prices for product sold on a delivered basis.

Group III prices within Europe remain stable this week in light of increasing availabilities across the markets. Sellers are reported as looking to increase levels against feedstock increases which have affected the production of these grades across the board over the last three months. Many are encouraged to preserve market share and customer base. European levels for local supplies are maintained at 875/t-885/t in respect of 4 centiStoke and 6 cSt grades, with 8 cSt material at 840/t on basis of ex-tank sales from Antwerp-Rotterdam-Amsterdam. Prices refer to truck deliveries and ex rack supplies, with major purchases to large buyers substantially lower.

Baltic and Black Sea

Russian and Belarussian base oils exported out of Baltic ports continue to supply the raft of heavier neutrals required for export cargoes going into West Africa and other deep-sea locations. Two parcels were reportedly loaded during the first half of July for West Africa, with another three possible parcels or part-cargoes being worked for the end of July or early August loading. Other cargoes are loading for Antwerp-Rotterdam-Amsterdam and the United Kingdom, as usual.

Prices remain stable and are only slightly altered this week, with small increases at the lower end of the scales due to sellers refusing to sell at rock-bottom prices for almost all grades due to their feedstock prices. FOB levels for SN150 and SN500 are offered at $495/t-$520/t and $605/t-$615/t, respectively. SN900 is reportedly offered at around $705/t-$725/t basis FCA with quantities of SN1200, when available, at around $785/t.

Black Sea trade is reported as thin this week with only a handful of offers for smaller cargoes being heard. Buyers in Turkey would have been expected to come back to the market after the Ramadan period and the Eid holiday, but most appear to be staying away. Perhaps the timing of the Holy Month this year had an effect on markets such as Turkey and other Middle Eastern regions.

Offers for Russian cross-Black Sea trade on a delivered basis into Gebze, Turkey, are heard at around $545/t for quantities of SN150, with SN500 around $630/t CIF. Mediterranean-sourced material is assessed notionally at $555/t-$655/t CIF into western Turkish ports.

Middle East Gulf

Iranian exports from the Middle East Gulf figure highly this week with possibly the largest cargo seen to date loading out of Bandar Bushehr. The 12,500-ton parcel is loading for ports on the west coast of India. SN500 is offered at $600/t basis FOB southern Iranian ports. Other cargoes are being planned for traditional markets in India and Pakistan, but also for import into mainland China and Singapore, where demand continues for higher vis Group I material. Offers into Far East are $645/t-$660/t depending on freight rate and parcel size.

With U.S. Group I material loading out of the U.S. Gulf Coast and U.S. eastern coast for mainland Europe, it is feasible that large cargoes of similar material could be offered into Middle East Gulf receivers, since this arbitrage appears to be open. Alternative Baltic- and Black Sea-originating Russian grades also figure in the slate being offered into Middle East Gulf buyers, where Iranian sellers appear to prefer to target sales outside the region to original markets identified before sanctions were imposed.

Group II offers into the region from sellers in the Far East and the U.S. have moved upwards this week in respect of the higher vis grades, echoing moves made during the last part of June, with numbers now at $635/t-$665/t for light grades and $790/t-$805/t CIF for the heavier vis material.

The new Group III production and export sales campaign appears to be progressing with another large parcel of around 8,000 tons being loaded out of Al Ruwais, United Arab Emirates, for receivers at Mumbai, India, anchorage. Three receiving companies have so far been identified as taking this material, with a competitors distributor finding that the market has suddenly become more competitive, as was previously forecasted in this report. Price indications are being sought for this material on an FOB basis, and will be reported when confirmed.

Africa

Receivers in Nigeria report that business is coming back to some form of normality with access to foreign currency. Further large cargoes form a number of enquiries to sellers in the Baltic, mainland Europe, Mediterranean, and the U.S. One parcel of nearly 12,000 tons is loading out of the U.S. east coast and the U.S. Gulf Coast for discharge into Lagos, Nigeria, whilst another Baltic-sourced cargo of 6,000 tons is already on the high seas en route to the Apapa port there.

Prices in respect of cargoes arriving into Nigeria are varying, with timing critical on when the cargoes were negotiated and when they were eventually loaded. Current indications for cargoes arriving into Nigeria this week will not pertain to other material being loaded presently which will not discharge for perhaps another four to five weeks. Levels for material arriving now are assessed at around $595/t in respect of SN150, with SN500 at around $675/t. Bright stock, where loaded on a cargo, will be $1045/t-$1070/t CFR Lagos.

Prices are expected to escalate by $20/t-$30/t for material loading now, taking account of small price rises which will ultimately affect landed numbers. Small quantities of 3,000-5,000 tons in bulk and in flexies are indicated at $640/t for SN150 and $760/t for SN500, with SN900 at around $825/t 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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