EMEA Base Oil Price Report


The eyes of the oil industry are fixed on Vienna, where OPEC representatives meet today to try to reach an accord capping crude oil production quotas in hopes of taming a global over-supply that has tamped down oil prices. Base oils are doubtlessly far from the minds of those meeting, but base oil suppliers hope that stronger crude would allow them to raise their own prices.

Prospects for an agreement are buoyed by an informal concession by Russia, the largest crude supplier outside OPEC, to limit its production, along with reports of lower inventories in the United States. But OPECs two largest producers, Saudi Arabia and Iran, have yet to find common ground, and as Iraq is siding with Iran, a meaningful agreement is difficult to imagine.

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Algerias oil minister has warned that without an agreement to limit production, crude levels could fall to around $35/bbl. Such an outcome seems realistic enough that base oil buyers and sellers are waiting to see what comes of the meeting.

Prices for dated deliveries of Brent crude front month topped $48 per barrel early this week when chances for an agreement seemed to improve. Yesterday they settled around $46.50 per barrel. West Texas Intermediate crude sold at $45.40/bbl, maintaining a standard crack against dated Brent, and ICE LS Gas Oil showed at $424 per metric ton, moving in parallel with crude.

Crude costs may be an important factor in base oil prices, but so are supply and demand for base oils, with can differ between regions. Markets in Europe, the Middle East and Africa often see different conditions for various types of base oils, and these can cause significant differences in prices.

For example, Russian exports of API Group I solvent neutral 150 have gone exceptionally tight due to lack of this grade flowing from refineries, and prices in the Baltic have climbed sharply. The situation is now impinging on mainland European prices for this grade, which was reasonably snug after losing a lot of production in Northwestern Europe over the last year.

European Group I FOB prices remain unaltered this week except for SN150. Even with relatively low demand for light-viscosity neutrals, suppliers are struggling to cover gaps appearing in the market. Prices for SN100 and SN150 rose to $495 per ton-$525/t, while SN500 and SN600 remain at $565/t-$585/t. Bright stock is also unchanged at $805/t-$840/t, although two separate reports described large parcels of bright stock with viscosity index of 95 loading at Mediterranean ports for around $775/t.

The prices above refer to large parcels of Group I base oils supplied or offered on an FOB basis ex-mainland European supply points.

Prices for trades within Europe stayed level this week, though a number of suppliers and buyers said changes could come at the end of the month. There have been few reports of discounting for stock clearance sales during December, due to snug availability. Most blenders have enough stocks to last through January, while a few are running down inventories still hoping for December sales. Prices for local sales remained 70/t-95/t higher than exports, on par with last week.

Supplies of Group II base oils are rising faster than many sellers predicted, perhaps aided by some blenders opting to switch to light Group II grades in light of reduced availability corresponding Group Is.

In light of no reported price movements, CIF prices for fully approved material are maintained, with light grades between $555/t-$585/t and 500 neutral and 600N at $725/t-$785/t. Ex-tank prices are also held steady at around $25/t higher.

Oddly there were no reports this week of further erosion to Group III prices, and markets were described as stable. Prices for 4 centiStoke and 6 cSt grades are therefore maintained around $680/t, or 615/t, FCA northwestern Europe. Smaller volumes are of fully approved material are assessed at 705/t-735/t for the 4 cSt and 6 cSt grades and 670/t for 8 cSt material, FCA Antwerp-Rotterdam-Amsterdam. CIF levels are $25/t-$50/t lower.

Baltic and Black Seas

Baltic activity is lean, with only a few combination cargoes moving down to Antwerp-Rotterdam-Amsterdam, and since SN150 is short, deliveries of SN500 have been affected so that blenders buying from Antwerp-Rotterdam-Amsterdam on an ex-tank or FCA basis are looking for both grades. Buyers insist that mainland prices for SN150 are still low, if rising, but investigation shows availabilities few and far between. No large West Africa parcels have been concluded out of the Baltic although there are a number of enquiries for smaller deliveries in flexitanks.

FOB/FCA prices for Russian exports, calculated on a netback basis for SN150, SN500 and SN900, are $485/t-$520/t, $525/t-$545/t and $595/t-$620/t, respectively.

Prices in the Black Sea regions are mixed, with Russian FOB levels for SN500 apparently lower than reported last week. One Turkish receiver claimed to have taken some 3,000 tons of this grade at $465/t, delivered CIF Gebze, Turkey. Your columnist normally affords credence to most sources of information, but this quote seems out on a wire.

Turkish blenders are taking material from Mediterranean sources rather than from Kavkaz, Russia, where there are new reports of a large cargo being assembled either for the West Coast of India or for the Middle East Gulf. Prices for available Group I grades rose this week, to $515/t-$535/t for SN150 and $585/t-$615/t for SN500 and SN600. Bright stock is $835/t-$855/t, CIF. Russian SN500 for cross-Black Sea trade is available for $475/t-$490/t, CIF Gebze or Aliaga, Turkey.

Middle East Gulf

The Sudanese enquiry spotted last week is still in the market, although some traders discount it as flaky and contend that buyers in Sudan are not buying at this time. Saudi Arabian exports make up the other trade, in addition to an enquiry for Group I material to be delivered into Jordan, through Aqaba.

Parties in the United Arab Emirates have been accused of trying to smuggle large volumes of base oils into Pakistan aboard ships being transported there to be scrapped. One vessel exploded when 30,000 tons of illicit lubricants caught fire. All reputable traders and blenders in and around the U.A.E. have condemned this practice, although one source confirmed that this activity had been going on for some time.

Other Middle East Gulf activity appears centered around potential large Group I shipments from U.S. sources, although it is still early to get confirmation on landed prices. Its unclear how these parcels can compete with Iranian exports or Saudi Arabian imports. With another Black Sea movement primed for U.A.E. buyers, the economics of these operations becomes extremely vague.

Iranian cargoes are back, with parcels designated for December loading. Iranian FOB prices for higher spec SN500 are around $600/t, basis FOB Bandar-e Bushehr and Bandar-e Emam Khomeyni. FOB prices for small volumes of SN150 and SN650 are reckoned to be around $565/t and $525/t, respectfully. Re-exported SN500 ex-U.A.E. is back above $610/t and can be seen in offers at around $610 FCA, or $620 FOB.

Incoming Group I material is being delivered at $555/t for SN150, $625/t for SN500 and $855/t for bright stock.

Group III exports are surging from the new supplier in Abu Dhabi, U.A.E, while supplies from an older Bahrainian source with many product approvals are also very visible. FOB prices for 4 cSt and 6 cSt grades are below $600, with estimates at $565/t.

Sources say Group II trade continues expanding and that a number of U.A.E. blenders are actively looking to switch from Group I for multigrade automotive lubricants. Premium imports seem to be winning the day, with U.S. and Far East producers, all with fully approved grades, vying for business in this lucrative market. Prices remain keen – between $505/t-$525/t for light grades and 500N and 600N at $660/t-$675/t, CIF Middle East Gulf.


Cross-Mediterranean trade is relatively quiet this week, with only one movement going from the Baltic into Tunisia. Offered prices are assessed at $595/t for SN150 and $635/t for SN500, basis CIF. Bright stock is estimated to be delivered into North African ports at around $865/t, CIF.

South African traders and blenders have confirmed that Group II and Group III grades are making a big splash in that market, as majors have set up distribution channels using local companies. All of this material is imported.

Continuing foreign exchange shortages still dog the Nigerian market, the largest import destination in West Africa. Receivers are looking to set up external companies that can tap outside banks in hopes of skirting the problem. Group I supplies from the U.S. appear to be the flavor of the day, with offers containing prices that are tiered according to how deals are structured. Open credit and possibly long pay-back times incur higher prices, while receivers using third-party, outside companies are finding more competitive rates.

Primary bulk offers are assessed at around $595/t, CIF/CFR, for small quantities of SN150 in bulk, where possible to load. SN500 is being offered at $685/t-$720/t, with U.S. bright stock at $925/t-$965/t. Secondary tiered pricing is applied to Russian export SN150, SN500 and SN900 in flexies, which have been offered at $$765/t, $790/t and $920/t, CIF Apapa, Nigeria, respectively. These prices are for smaller quantities of available material.

Rerefined SN150 has also been offered in flexies for $545/t. This product is considered a viable alternative in some cases to the difficult-to-obtain Baltic SN150.

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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