EMEA Base Oil Price Report

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Even with participants back at their desks, the European, Middle Eastern and African base oil scene is sluggish with few major transactions reported.

Dated deliveries of Brent crude retracted around $2 per barrel to $47.35 per bbl. West Texas Intermediate crude moved in tandem to $44.90 per bbl. ICE LS Gas Oil stands at $410 per metric ton in September front month settlement, down some $25/t. Opinions vary as to what will come out of the OPEC meeting, but most pundits are pessimistic.

Europe

API Group I base oil prices mostly remain at existing levels. Producers and suppliers are anxious to try to keep levels up amid drivers indicating a slight slowing down within Europe into the fourth quarter. FOB levels for light solvent neutrals are $480/t-$500/t with the heavier neutrals SN500/600 still at $565/t-$585/t. Bright stock appears to be the only anomaly – trimmed by $5/t-$10/t to $890/t-$910/t. Suppliers say this dip is due to demand lacking at higher price levels, where some finished lubricant manufacturers are experimenting with heavier neutrals and high-vis naphthenics as substitutes.

Prices above pertain to cargo-sized parcels of Group I base oils supplied or offered on an FOB basis ex mainland Europe.

Local prices around Europe have been revised slightly. Some grades showing strength, such as the heavier neutrals, have been tweaked upwards by 5/t-15/t, whereas lighter grades have been adjusted downwards, but not significantly. Some buyers are calling for much lower prices in response to a market where avails are sufficient and supply is almost equivalent to demand.

Buyers target prices during the last few days of August do not appear to have materialized in September offers, and this may have caused some resilience. Discounts of 25-40/t have just not emerged, and sellers and distributors have said they see levels basically remaining flat unless something major affects crude and feedstock values.

With a slightly weaker set of numbers being applied to both export and domestic prices, local prices are 75/t-110/t higher.

Group II prices around Europe are confusing this week, with U.S. importers pushing levels higher and Far East sources moving levels lower. This anomaly is defended by both sets of sellers, with U.S. majors intent on maximizing returns on what they describe as increasing production costs and a relatively tight market, where others see a more fluid situation and danger of oversupply creeping into some areas of the European, Middle Eastern and African markets.

Light vis grades now reflect a range between $585/t and $630/t, with the heavier grades 500N and 600N moving to $725/t-$785/t, in euro equivalent. The 50/t-120/t premium will apply to any material being redelivered to satellite storage locations, or for products sold on a delivered basis.

Mounting oversupply of Group III grades has prices being eroded at an alarming rate in some cases. Where large buyers are purchasing cargoes of Group III base stocks, unsolicited competitive offers are being circulated, causing incumbent suppliers to continuously revise prices. New producers have established marketing enterprises within Europe and these new parties are trying to capture as much market share as possible using the only tool available: price.

Demand is not increasing fast enough to compensate for the rush of new Group III production hitting the market. Without this uptake, more and more material with very similar specifications will abound. Prices for material sold on an ex-tank or truck delivered basis ex Antwerp-Rotterdam-Amsterdam are revised further with levels falling to 775/t-795/t for 4 centiStoke and 6 cSt grades and to around 765/t for 8 cSt grades.

Baltic and Black Sea

FOB prices in the Baltic for Russian and Belarussian Group I exports appear to be more or less stable with only one or two minor downward adjustments in a couple of large deals into West Africa. A number of smaller cargoes have been reported moving in the now established pattern of Baltic to Antwerp-Rotterdam-Amsterdam and the United Kingdom. Quantities for this trade have risen over the past few months following the closures of Group I production in northwestern Europe and it is estimated that around 50,000 tons of these grades now move into the domestic supply chain in northwestern Europe and the United Kingdom. Some quantities of these grades have always been used in local markets, but the rise in shipments is obviously taking up some of the void created when production ceased.

Prices are therefore left unchanged, with FOB levels for SN150 at $475/t-$495/t and SN500 at $545/t-$565/t, although one or two sellers have reported numbers $20/t-$25/t higher. SN900 remains around $665/t basis FCA with smaller quantities of SN1200 at $710/t-$725/t FCA, mainly loading into flexies for West Africa.

In the Black Sea region, there have been few new cargoes, perhaps after the flurry of activity in late August. One rather oddball parcel seen last week has been confirmed as loading ex Kavkaz, Russia, for Antwerp-Rotterdam-Amsterdam. A few parcels are being negotiated from Spanish and Greek sources. Offers on CIF base from Gebze, Turkey, are around $525 and $620/t for SN150 and SN600, respectively, slightly up from last week.

Russian exports into Turkey are quiet with no reported deals done for September – only one enquiry for a 2,000-ton parcel of SN900 ex Kavkaz, Russia, into the United Arab Emirates, although the size may make the freight difficult to work. Russian SN500 is indicated at $570/t-$585/t basis CIF Gebze, Turkey.

Some of the more fanciful enquiries for material from the Black Sea to U.S. and Far East appear to have been discarded for the moment.

A number of new requirements for cargoes loading for the Far East, India and the Middle East Gulf, were reported. The volume of Saudi Arabian-sourced material appears to be growing with the arbitrage open to the Far East, for example. Jordanian importers have issued enquiries for material to be delivered into Aqaba, but regional sellers have not yet confirmed any offers.

Middle East Gulf

Group I imports from Saudi Arabia, U.S. and Europe have all been featured this week, whilst Group III exports continue from Bahrain and Abu Dhabi, U.A.E. New production at Al Ruwais has seen Group III trade take off, with new distributors appointed in the U.S. and Europe, and, presumably, the Far East and India.

Iranian Group I base stocks are not so prevalent this week with refiners currently sending quantities into storage in southern Iranian ports for onward movement to U.A.E., India and Far East. Prices do not appear to have altered. SN500 Empowered is still offered at $605/t FOB for September, although quantities have not been clarified. Most of these products are already committed to receivers out of the immediate regions and now form a raft of contract business. Lesser-spec grades are available at around $555/t, with SN150 available in smaller quantities at around $545/t FOB.

Prices for Group III grades from the Middle East Gulf have been the subject of debate again, and in assessing FOB numbers, some players have assumed freight costs, exchange rates when the material is resold in local currencies, and other marketing and overhead costs. Grades 4 cSt and 6 cSt are estimated to be loading at $760/t-$800/t, or up to 70 percent lower than some years ago.

Group II imports are still dull, although a number of blenders in the U.A.E. will likely use these grades more as demand grows for multi-grade motor oils. Some sources are moving to increase levels, while others are discounting slightly, particularly on the heavier grades. Prices are therefore restructured for some of the Group II grades with levels for light vis grades still $600/t-$625/t and those for heavier vis 500N and 600N at $750/t-$775/t CIF delivered in parcels larger than 3,000 tons.

Africa

South African receivers are buying considerable quantities of Group I grades in flexies through Durban and prices are $578/t for SN150 and $649/t for SN500. The lower-quality bright stock available ex some Russian refineries can be delivered at around $845/t CIF, although this grade is not being sold into South Africa at this time, but is on offer to buyers in Kenya along with the other Group I grades.

The next Ghana requirement of around 6,000 tons of three Group I grades is being delivered around the end of September after loading in Italy. Other large cargoes are fixed for Nigeria, with one Baltic parcel of up to 15,000 tons currently loading out of two or perhaps three Baltic ports, and another large parcel of around 10,000 tons loading out of the U.S. East Coast later this month.

Levels in respect of Baltic and U.S. base oils finding their way into Nigeria are assessed at $575/t in respect of quantities of SN150, SN500 at $620/t, and bright stock ex U.S. at around $935/t all basis CFR/CIF Apapa. Russian SN900 will land into Apapa at around $770/t CIF/CFR.

New offers for rerefined high viscosity-index SN150 are heard offered CIF Apapa in flexies at $495/t in respect of quantity of 100 tons (5 TEU containers).

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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