EMEA Base Oil Price Report

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As players in European, Middle Eastern and African markets trickle back to their desks, prices are described as softer, with some grades weakening considerably under buyer pressure.

With dated deliveries of Brent crude moving through the $50 per barrel barrier last week, some pundits predicted more climbs. The picture has been muddied, however, by West Texas Intermediate crude dipping to $48 per barrel and Brent to $49.95 per bbl in October front month settlement. ICE LS Gas Oil moved up to $440 per metric ton for September settlement.

Europe

API Group I FOB levels dipped, perhaps due to increased post-vacation activity. Offers for light solvent neutrals are $480/t-$500/t, with SN500 and SN600 weakening to $565/t-$585/t. Bright stock has come under pressure, with some sellers offering one-off specials of $910/t-$925/t. Other producers continue offering sizeable parcels at $935/t-$950/t.

With more players back, the local markets have started to reawaken, with buyers looking for sizeable spot and contract quantities. Next week should see a full resumption of activity, but even now, there appears to be considerable interest for Group I and Group II. With Group I export levels starting to soften, domestic numbers may follow suit. Some buyers are suggesting that levels be lowered by 30/t-50/t, but sellers are offering smaller token discounts to appease buyers through the end of August.

The differential in prices between local levels and export, taking account of the slightly weaker export levels, is 85/t-125/t, though this will possibly reverse in September.

Group II business appears to be picking up, with prices relatively buoyant. There is considerable demand for Group II grades within Europe, particularly for the lighter vis material, which in some cases has replaced Group I light solvent neutrals. With higher quality and specs, the differentials are not so great, therefore these advantages can offset slightly higher numbers. The same is not the case with higher vis grades which are substantially, and indeed justifiably, more expensive than Group I material.

Prices are maintained, although buyers have intimated that they expect readjustments from Sept. 1. Levels for the range of light vis grades remain $630/t-$645/t, with heavier 500N and 600N at $735/t-$780/t or euro equivalent. The normal premium of 50/t-120/t can be applied in respect of material being redelivered to satellite storage locations and for products sold on a delivered basis.

Fears of Group III oversupply are growing. Given that buyers have more choices, competition is rampant and only becoming more intense. Prices are coming under pressure, with some concerned that they will not break even on feedstock costs if the situation continues. Market share is surprisingly difficult to gain in this market, with buyers remaining loyal to incumbent suppliers who in turn are expected to adjust prices should the need arise.

Various Group III submarkets are reacting independently to new offers and suppliers. Prices quoted in this report are in respect of supplies sold on an ex-tank or truck delivered basis ex Antwerp-Rotterdam-Amsterdam at 810/t-825/t in respect of the 4 centiStoke and 6 cSt grades and around 805/t for 8 cSt grades.

Baltic and Black Sea

Baltic sources report a couple of cargoes of Russian export grades heading to Antwerp-Rotterdam-Amsterdam and the east coast of the United Kingdom, but no loadings for West Africa. There is, however, a large enquiry for 12,000-14,000 tons to be loaded ex Baltic and northwestern Europe on a prompt basis.

The Egyptian enquiry for Baltic-sourced material seems to have disappeared, but there is another call for material into Oran, Algeria. Apparently, there are a number of North African receivers looking at taking Russian export grades from the Baltic on the basis that with a large-enough cargo, the freight could be attractive. Traders are moving to identify suitable buyers who could take part-cargoes of a large shipment, as is the case in markets such as India.

FOB prices in the Baltic are coming under the same directional pressure as the grades within mainland Europe, with SN150, SN500, and SN900 levels at $475/t-$495/t, $545/t-$565/t, and $675/t, respectively, with SN900 offered on an FCA basis. Smaller quantities of SN1200 are offered at $725/t-$740/t basis FCA.

Black Sea reports show Turkish buyers looking to take a number of cargoes from Mediterranean sources such as Greece, with parcels of around 5,000 tons each made up of two grades. Mediterranean cargoes made up of SN150 and SN600 will land into Marmara ports at around $525/t and $610/t, respectively. Buyers reportedly may prefer to take Mediterranean Group I material, which is slightly higher in spec and can be used in a greater number of applications.

There are also rumors of two large parcels being worked out of the Black Sea – one for the U.S. Gulf Coast, and the other for the west coast of India. It is assumed that these cargoes of 12,000 tons and 7,000 tons would be loading ex Kavkaz, Russia, on a STS basis, but thats not been clarified. Offers for Russian SN500 priced between $575/t and $595/t basis CIF Marmara ports are issued to Turkish receivers, but no decisions have been made.

Turkeys market has not yet returned to normal after the coup attempt, and some suggest that it may be a while before it does.

Middle East Gulf

Reports from Red Sea sources have identified further large shipping enquiries from the Saudi Arabian ports of Yanbu and Jeddah to multiple receivers in the Middle East Gulf and Mumbai, India. There is also news of a smaller parcel being loaded out of Saudi Arabia for Singapore. Aqaba, Jordan-based sources have come into the market looking for further supplies either from the United Arab Emirates, which presumably would be Iranian-sourced, or from Baltic or Black Sea sources which would constitute Russian exports.

Trade into Syria and Lebanon is not generally reported outside the region, but there are suggestions that both Iranian and Uzbek barrels have been finding a way into Syrian blenders – though not through traditional receivers in Homs and Aleppo – as finished lubricants are still required in these areas.

Middle East Gulf trade appears to be building again after the summer recess, which this year included Ramadan and Eid holidays. Iranian sellers continue to push their exports although there are suggestions that a major turnaround at an unidentified refinery is about to take place. Prices relating to Iranian exports are coming under the same pressures seen in the Far East and Europe, but levels are being eroded slightly rather than undergoing large discounts. Offers are believed to be around $570/t basis FOB Bandar-e Emam Khomeyni (BIK) for SN500. SN150 is available in smaller quantities at around $575/t FOB.

The Russian Group I material ex Baltic identified last week as potentially moving into the U.A.E. has been reoffered to receivers in Sharjah. This offer is for either bulk quantities of SN900 or smaller quantities of both SN900 and SN1200 in flexies.

SN900 CFR United Arab Emirates in bulk is assessed at $765/t-$780/t.

Group II import remains quiet in Middle East Gulf regions, but sources said they expect a surge of activity once Yanbu production streams, with availability and lead time on delivery lessening. Offers still abound from Far East sources and U.S. refiners, but uptake for these grades has been minimal from players other than majors who are supplying in smaller quantities ex storage in the U.A.E.

Group II grades in bulk parcels are maintained at $600/t-$625/t for light vis material and $765/t-$790/t CIF for heavier 500N and 600N.

Quantities of Group III material continue to be the highlight of the export drive from the Middle East Gulf, with further cargoes loading out of Al Ruwais and Bahrain for the U.S., Europe and the west coast of India.

Africa

South African receivers are reportedly continuing to source Group I base stocks from various suppliers as alternatives to buying from local majors. Prices in offers this week for SN500 CIF Durban are pitched at $645/t ex Baltic suppliers. There also appears to be a growing interest in rerefined material, some of which is produced in the Middle East Gulf but is of poor quality, with low flash and high insolubles. Receivers are considering first-class, rerefined SN150 from Europe offered in flexies at around $585/t basis CIF Mombasa, Kenya, or Durban, South Africa.

Traders operating into West Africa have praised receivers waiting game regarding taking cargoes of base oils from Baltic and elsewhere due to prices moving lower. Receivers are said to be in a position to take further cargoes of imported base oils during the next couple of months, to replenish stocks which had been run down during the last few months due to the financial problems affecting this market. U.S. cargoes are on the high seas with large quantities of bright stock which will land into Apapa, Nigeria, during the next few days. Agents have confirmed prices of around $952/t for bright stock and around $628/t for SN700 and SN500.

Estimated prices in respect of Baltic and European loadings are: SN150 around $525/t, SN500 at $620/t, and bright stock ex mainland Europe at $998/t-$1025/t, all basis CFR Lagos, along with Russian SN900 at $755/t-$770/t and SN1200 at $795/t-$820/t, the latter grades loading ex Baltic.

The rerefined light solvent neutral mentioned last week has been reconfirmed with a viscosity index of 102, and is available in flexies delivered CIF Apapa at $495/t-$525/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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