EMEA Base Oil Price Report

Share

Buyers and sellers of API Group I base oils in Europe are out of sync at the moment, with sellers sticking steadfastly to their offer prices, but buyers more interested in information on the market than seriously negotiating transactions.

Similarly, buyers who are looking to take material during August are countering almost every offer with bids that are much lower than sellers can accommodate at this stage.

This impasse, along with seasonal downturns, has caused the markets to falter with very few real firm pieces of business being transacted.

Crude is playing its part in this scene with prices having fallen, then making a slight recovery this week. Dated deliveries of Brent crude trades at around $2 per barrel higher than last week’s level, at around $45 per bbl, whilst West Texas Intermediate crude breached the $40 per bbl mark last week then reverted back to around $42.75 per bbl. ICE LS Gas Oil has also moved back up to around $384 per metric ton, around $20 higher than last week’s low.

This indefinite seesawing for crude and other petroleum products is causing confusion in the market, with neither sellers not buyers able to assess where crude and raw material costs are heading in the longer term.

Europe

FOB prices are generally maintained this week. Unless crude and feedstock values increase significantly, though, it seems inevitable that counters from buyers will start to exert downward pricing pressure. Light solvent neutrals remain in the range of $495/t-$510/t, while SN500 and SN600 are $585/t-$610/t. Bright stock may be the only grade that dipped this week, perhaps because of buyers becoming increasingly critical of the large delta between the prices for this grade and those for SN500. Bright stock is now offered for $955/t-$980/t.

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

Local prices for European Group I likewise remain in the same ranges as last week, and there appears little reason at the moment to expect movement. Sellers even ignored a slight increase in crude and feedstock prices, saying they are looking at a longer term trend rather than day-by-day or week-to-week snapshots. The differential in prices between local levels and lower export numbers is remains between 80/t 110/t.

The Group II sector of the market is also quiet, with normal activity much reduced due to holidays. Sales of Group II grades are expected to flourish for the rest of this year. Many lube blenders are expected to take the leap from Group I to Group II formulations as new generations of automotive and industrial lubricants come to market. This will be encouraging news for new base oil production facilities scheduled to come on-stream in 2017. Parcels with 35,000 tons to 40,000 tons of Group II sailing from U.S. Gulf Coast to mainland Europe and the United Kingdom offer evidence of efforts to push Group II into this market.

No alterations to Group II prices were heard this week. Light grades are remain in the range of $630/t-$645/t, while heavier cuts are $735/t-$780/t. As usual, a premium of 50/t-120/t applies to material redelivered to satellite storage locations and to products sold on a delivered basis.

As in other regions, Group III suppliers in Europe have announced that prices will be actively reviewed after the end of August. The oversupply situation is becoming untenable, with global capacity exceeding demand by some 25 percent. This statistic has been quoted by one major producer concerned about the immediate future for production cycles and product placement.

Downward pressure on Group III prices seems to be mounting – more so for sales transacted on a CIF delivered basis to major users of these grades than for local supplies ex tank in Antwerp-Rotterdam-Amsterdam. The important point in discussing Group III prices is to make the difference between local smaller truck deliveries and major purchases on CIF basis, where prices are substantially lower.

Baltic and Black Sea

This column last week mentioned a cargo that was loading out of the Baltic and northwestern Europe for West Africa. Now another large parcel of Russian export grades has been sold, so details are under negotiation for two cargoes that would load during the second half of August and which will add to the tally of material going deep-sea from the Baltic. Smaller parcels continue to load for Antwerp-Rotterdam-Amsterdam out of Liepaja and Riga, Latvia, and Kaliningrad, Russia. These parcels of 3,000 tons to 5,000 tons of mostly SN150 and SN500 have replaced some of the volume lost to Group I plant closures in northwestern Europe earlier this year.

FOB prices for primary Group I grades supplied out of the Baltic Sea remain largely unaltered. SN150 is lodged at $480/t-$500/t, with SN500 down a bit to $555/t-$570/t and SN900 around $690/t-$705/t, basis FCA. SN120 oils were heard to be $740/t-$755/t FOB.

A large parcel of Russian stocks is reportedly being loaded on an STS basis at Kavkaz, Russia, bound for both the United Arab Emirates and Singapore. This parcel is expected to be comprised of SN500 and SN900, although there are rumors that a quantity of Uzbek SN120 was also loaded. Other reports indicated that smaller parcels have also been loading out of Kavkaz for delivery to Gebze or Aliaga, Turkey. Prices for Turkish barrels are expected to be around $510/t-$520/t for the small quantity of SN150, with the mainstay grade, SN500, landing at around $600/t.

No Mediterranean-sourced cargoes are figuring this week, perhaps due to the lull during the holiday period in Greece and Italy. Supplies from alternative sources are expected to be offered CIF at around $625/t for SN500 and SN600 and $545/t for SN150. Small parcels of Italian bright stock may also be shipped, priced around $985/t basis CIF.

Middle East Gulf

Red Sea activity is more muted this week after the raft of reported cargoes currently loading out of the Saudi Arabian ports of Yanbu and Jeddah. There are no further reports about Sudanese buyers who reportedly issued a tender seeking around 5,000 tons of Group I.

Busy activity in the Middle East Gulf has now slowed, with no reports of loadings in southern Iran. There are a number of smaller shipping enquiries for parcels to be loaded during the second half August going into U.A.E. ports both for local use and re-shipment to areas such as East Africa.

Iranian prices were unchanged with few trades reported so far. One piece of news is that the four Iranian refiners may be looking to post offer prices on the INSCX exchange, gaining access at the same time to live international prices that these sellers will be able to use as guides. Prices for the main grade out of Iran, SN500, are $585/t, basis FOB southern Iranian ports. SN150 is quoted around $570/t FOB.

The large volumes being imported to the U.A.E. from the Black Sea may prove that the arbitrage is open for material to move from sources in Europe and even the U.S. It is worth mentioning that Iran does not produce heavy solvent neutrals, such as SN900 and SN1200, so foreign suppliers dont need an arbitrage window to pitch into this market.

Group II news is missing altogether this week, although small parcels continue to be distributed from U.A.E. storage points to other parts of the Middle East Gulf. These parcels can be delivered by truck or small coastal tankers, amounting to hundreds rather than thousands of tons. In the absence of new information, prices are unchanged: light grades at $600/t-$625/t and 500N and 600N at $765/t-$790/t, CIF.

Africa

North African trading activity is thin this week, with only one confirmed movement, from Livorno, Italy, into an Egyptian port. Moroccan receivers are seeking Group I from their appointed suppliers and will take another 4,000- to 5,000-ton cargo of Group I oils during the first half of September. Prices on a CIF delivered basis for North African receivers are said to be around $540/t for SN150 and $620/t for SN500, CIF delivered basis. Bright stock will be landing at around $1,015/t, some $10/t less than previously assessed, due to lower FOB numbers.

Many Nigerian buyers are currently in Europe due to the nations foreign currency shortages and desires to maintain shipments from the Baltic Sea, Europe and the U.S. With two cargoes loading this week and next, Nigerian imports this month should approach normal levels. Apparently most of the hiccups regarding the access to foreign currency, and subsequent issuance of letters of credit from local banks, have been solved.

SN150 is being quoted at $548/t, with SN500 at $623/t. Bright stock ex mainland Europe or U.S. is priced at $1027/t CFR Lagos with quantities of SN900 at around $765/t-$780/t in bulk and SN1200 at $800/t-$820/t, both loading ex Baltic.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other