EMEA Base Oil Price Report

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European, Middle Eastern and African base oil markets are slowly responding to the downward drifts in crude and feedstock values. Not helped by the seasonal lull in demand, prices are softer, but not rock bottom.

Buyers sitting on beaches around Europe are keeping a close eye on what might happen after their return from vacation, and with a continuing downward drift on crude and feedstock levels, they are in no rush to start procuring new stocks just yet. Sellers, on the other hand, are opting to respond to counters on a controlled scale, giving small discounts to prevent a landslide at the end of this month should conditions continue.

Dated deliveries of Brent crude fell some $3 per barrel to below $42 per bbl. West Texas Intermediate crude has also softened to below $40 per bbl. Forecasts suggest that dated Brent will fall below $40 per bbl should current oversupply continue. ICE LS Gas Oil sank by $30 per metric ton to around $357/t.

Base oil price moves have been muted by the holiday period in Europe and the Middle East, with buying activity noticeably lower than the norm. Cargoes booked some time back, however, continue to load during August, and there are reportedly a few possible new deals in response to a large number of shipping enquiries for the second half of this month.

With weakening European levels for API Group I grades, a number of arbitrage opportunities are appearing for parcels to be moved to deep-sea locations in the Middle East Gulf, India and the Far East. These are in addition to regular cargoes loading out of Baltic and U.S. ports going to West Africa.

Europe

Group I FOB prices have moved downwards, mainly at high ends of the ranges. Light solvent neutrals prices have softened to $495/t-$510/t. Heavier neutrals SN500 and SN600 have also succumbed to counters of $585/t-$610/t, along with bright stock now being offered in large quantities at $970/t-$995/t. Prices are seen to be reacting to the widespread availabilities of all Group I grades, coupled with retracting fundamentals.

These prices pertain to large, cargo-sized parcels of Group I base oils supplied or offered on an FOB basis ex mainland Europe.

Local prices for Group I grades within Europe have been revised lower from August 1, given the gradual attrition to prices over the last month. Sellers have recognized that the market is moving downwards and do not want to be faced with large discounts at the beginning of September. Should crude and feedstock levels reverse, sellers and producers said it would be simple to revert to higher numbers, if the market can substantiate those levels in around four weeks from now.

Routine business continues, but is much depleted due to the holiday period. The differential in prices between domestic levels and lower export numbers is maintained at 80/t-110/t, taking account of the same relative downward movements to both sets of prices.

Group II reports further large cargoes ex U.S. Gulf Coast loading for discharge into Antwerp-Rotterdam-Amsterdam and United Kingdom terminals. When adding all participants in this sector, monthly imports may be around 100,000 tons per month.

Prices are reacting to the Group I pressures and have come under review from August 1. The extent of changes isnt clear, considering buyers were only informed last week. Suggestions are that light neutrals have steadied, whilst higher-priced heavier viscosity grades may have slipped by $10/t-$20/t. Light grades 70 neutral through 220N are $630/t-$645/t, with heavier grades now $735/t-$780/t. Premiums of 50/t-120/t may be added in respect of material being redelivered to satellite storage locations, and for products sold on a delivered basis.

Group III markets are reportedly finally starting to respond to the oversupply affecting these grades, with prices moving downwards on a CIF basis, and also for ex-tank and truck delivered quantities within Europe. Traditionally stable-priced 4 centiStoke and 6 cSt cuts are in some cases spiraling downwards by $30/t-$50/t. Local supplies ex tank in Antwerp-Rotterdam-Amsterdam are now 845/t-860/t, but many say that suppliers will make further revisions to preserve market share. The 8 cSt grades have also fallen to around 815/t.

Once again, it is important to draw the differential between smaller truck deliveries including ex rack supplies, and major purchases on CIF basis going to large buyers, where prices are substantially lower.

Baltic and Black Sea

Baltic sales reflect a number of various parcels of Russian export base oils being assembled for the U.K. and also for Nigerian receivers. One cargo of 10,000 tons is already loaded while another is being negotiated. Prices have started to weaken, with buyers holding back on making final decisions on some cargoes due to the potential downward movements which may occur on FOB prices.

One interesting development is that there are a number of intra-Baltic movements of base oils, with this presumably being the most efficient and low-cost option for assembling large cargoes to be loaded out of one port, rather than a larger vessel calling at two or even three ports en route.

Prices reflect market conditions being applied throughout mainland Europe, with sellers quick to point out that, for once, they have not been leading the market downward. FOB levels in respect of SN150 grades are $480/t-$500/t, with SN500 at $570/t-$585/t. Counters are sometimes $25/t-$40/t lower. SN900 is under review this week, with prices expected at $690/t-$705/t basis FCA. Small availabilities of SN1200 for blending are $745/t-$765/t FOB.

With prices being realigned, there are opportunities for cargoes to move to unusual destinations. One 6,000-ton parcel is loading out of a southern Baltic port bound for Gebze, Turkey, whilst another 6,000 tons is being loaded ex Riga, Latvia, for the west coast of India. There may be more unusual cargoes witnessed over the next few weeks if prices move accordingly and the arbitrages are open.

Black Sea markets report a number of vagaries, such as cargoes going into Turkish ports ex Baltic, and an enquiry for around 11,000 tons of Russian export base oils to be loaded out of Kavkaz, Russia, on behalf of receivers in the United Arab Emirates. Black Sea loading is assumed to be a large quantity of high vis SN900 or SN1200, since other Group I grades – SN150 and SN500 – would be available at lower delivered prices ex Iranian sellers.

More traditional Black Sea trade appears to be missing, with many receivers on holiday this month. One buyer said that with the coup attempt aftermath largely calming down, normal business will resume at the end of August, with a number of Mediterranean supplies being evaluated in addition to Russian cargoes of SN500 and SN150, priced at $597/t-$615/t and $510/t, respectively, and SN900, priced around $710/t. Supplies of Group I ex Mediterranean sources are expected to be around $620/t for the SN500/600, and $545/t for SN150.

Middle East Gulf

Red Sea reports include large quantities of Group I grades being shipped ex Saudi Arabian ports of Yanbu and Jeddah in early August. A total of around 20,000 tons are destined for northern Middle East Gulf, U.A.E., west coast of India and the Far East. Sudanese receivers are also in the market looking for supplies of Group I products into Port Sudan. There is also the possibility of Group II base oils being imported through a Red Sea port, perhaps in advance of production commencing from Yanbu.

Middle East Gulf markets are surprisingly busy for this time of year, with base oils being imported by receivers in the U.A.E. and Kuwait, whilst Group III and Iranian Group I is flowing out as exports. This complex picture is established now that the region is recognized as a major producer and exporter of Group III material with cargoes from Bahrain and Al Ruwais being noted in shipping circles and also by receivers in Europe, the U.S., and the west coast of India (in the case of Bahrain supplies) and by buyers in India and U.A.E. for availabilities being shipped ex Al Ruwais.

Iranian prices appear to have come under a little pressure, with reported levels lowering to around $585/t basis FOB southern Iranian ports in the case of SN500. SN150 is also quoted, although not in such large quantities, at around $570/t FOB.

Group II trade remains thin in Middle East Gulf areas, with few reported sales to major blending operations, although a couple of traders in the U.A.E. are trying to establish direct links with producers to represent these imports in the future. Some said that Group II will be promoted throughout the region when production commences in Yanbu.

Prices this week, in light of decreases to FOB levels, for cargoes offered into Middle East Gulf ex Far East and U.S. suppliers, are heard at $600/t-$625/t for the range of light vis grades and $765/t-$775/t CIF for heavier 500N and sometimes 600N.

Africa

Some Group I grades are being imported into Morocco from Iberian Atlantic sources, in addition to similar contract barrels loading out of Italy and Spain for the same destination. Receivers in Tunisia are looking for offers for September arrival for a cargo of around 3,000 tons of three Group I grades. Prices on CIF delivered basis into these markets are estimated around $540/t in respect of quantities of SN150, with SN500 a little lower as a result of lower FOB values, at around $620/t, with smaller quantities of bright stock at $1,025/t.

A number of cargoes have been delivered into Nigerian ports with more material fixed and some still to be finally negotiated due to the hiatus in what may be lower pricing. One cargo of around 10,000 tons has been fixed two port loading out of Baltic and northwestern Europe with another cargo of 15,000 tons fixed out of the U.S. Gulf Coast for the alternative port Onne in Nigeria. Cote dIvoire and Ghana appear to share one cargo which will comprise of the contract barrels for Tema and another 3,000-4,000 tons of material for discharge into Abidjan.

Two cargoes out of the U.S. Gulf Coast, for a total of 20,000 tons of Group I grades, will arrive into Lagos around the end of August, with prices reportedly comparable to material loading out of Baltic. These FOB levels must have been heavily discounted to make these parcels work into Lagos.

Receivers volunteered indications of SN150 delivered at around $565/t; SN500 around $645/t; bright stock pitched at $1,035/t CFR Lagos; quantities of SN900 ex Baltic at $775/t-$795/t in bulk; and SN1200 at $825/t-$840/t.

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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