EMEA Base Oil Price Report

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The European, Middle Eastern and African base oil markets are awaiting direction but may not get clarity until after many global players settle back in from industry events.

With crude oil plunging at the end of last week, the future is still very uncertain for associated markets including base oils. Dated deliveries of Brent crude fell below $30 per barrel last week, but recovered to $32.30 per bbl. West Texas Intermediate crude shows a crack of some $3 per bbl, at $29.10 per bbl. ICE LS Gas Oil is $303 per metric ton – a marginal increase over last week, perhaps due to the crude mini rally and colder weather affecting northern Europe.

Europe

European API Group I FOB numbers are maintained, with light solvent neutrals still $410/t-$445/t and heavier SN500 and SN600 at $475/t-$510/t. Bright stock has shown possibilities of moving upwards despite protests from some regarding the differential between this grade and SN500. But due to healthy demand, sellers have been inclined to try for additional $10/t-$20/t margins, extending the offer range to $810/t-$845/t.

FOB levels above refer to large parcels of Group I base oils for export, offered and supplied ex mainstream suppliers within Europe.

Local or domestic prices continue to be stable for February delivery, with most buyers content to wait and watch. There has been a resurgence of demand with a number of large blenders establishing inventories for spring and summer seasons. Sellers have been quick to offer attractive prices to spot buyers also looking to top up stocks with material which may or may not be at a low point. Some suggested that many blenders in Europe were realizing that the time for buying outside contract has arrived and that Group I supplies from resellers and distributors working on behalf of Russian exporters and mainland European producers were in the frame.

Group I base oils for domestic and local sales are 45/t-60/t higher than export levels.

Group II prices within Europe appear to be holding up despite round after round of source discounting which may have sown the seeds of pricing doubt into the minds of many buyers. Demand has taken over and most importers are responding to growing volumes of Group II base oils being imported and utilized in Europe. Fears that the markets could become oversupplied are rescinding, with uptake on these products gaining ground and even competing on an overall pricing basis against Group I supplies.

Light vis grades are offered at $520/t-$535/t with the remainder of the pack between $445/t and $485/t. The higher viscosity grades are $510/t-$550/t. Prices refer to ex-tank prices in Antwerp-Rotterdam-Amsterdam.

Group III suppliers appear to be trying hard to maintain market share and brand loyalty with incentives of price discounting to certain grades in certain areas. But not all prices appear to be under pressure, with some buyers stating that they are not able to procure all the requirements they need, even in what otherwise appears to be a market filled with available material. This anomalous situation is not clear: with new production and imports being steadily maintained, the only explanation may be that during turnarounds, material may be allocated on a volume basis, and with most producers running maintenance and repair programs in coming months, there may be temporary interruptions to specific supplies.

Prices reflect pressure on current levels, and suggestions that a range for the two main grades, 4 centiStoke and 6 cSt viscosities, is now 835/t-860/t ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

There have been a number of Russian export cargoes identified out of the Baltic in addition to Polish material moving down to Antwerp-Rotterdam-Amsterdam, bringing some 20,000 tons of Group I material into northwestern Europe. Some of these have formed the basis of monthly contract cargoes, with others responding to spot demand from buyers in Benelux and French markets on a regular basis.

Prices in respect of Baltic exports for Russian grades SN150 and SN500 are $390/t-$420/t, with one offer moving SN150 levels higher and two others at $5/t lower. SN500 is offered $10/t higher than the last spread, at $435/t-$455/t. Suppliers have commented that prices were too low and refinery ex gate numbers were pushing FOB levels higher.

SN900 supply in large parcels has been mentioned by many buyers, but by few suppliers. Offered prices have moved upwards, perhaps signaling the low availability of this grade, increasing demand, and also an indistinct correlation between prices for this grade and those pertaining to bright stock, which appear to be firming. Offers are $555/t-$570/t FOB with sellers content to let buyers respond with bids, which may push levels higher.

Turkish buyers of Group I base oils have listed a couple of imports from Greece and Italy. Coupled with the announcement that a new distributor has been appointed by a U.S. major to handle future Turkish Group II business, Turkish buyers purchasing may be moving from traditional Group I Russian exports to Group II and Group III imports.

Turkish blenders have commented that they are ready to embrace the new generation of lubricants which will be produced locally instead of being imported. Turkish production could change markedly as a result.

Some say that there will still be room for Uzbek and Russian Group I imports into this market, since not all finished lubricant production will revolve around Group II and Group III base stocks, but comments also suggested that Turkey could become the new hub for finished lubricants, serving markets in the Levant and beyond in years to come.

Regarding prices for Mediterranean-imported material into ports such as Gebze and Derince in Turkey, levels are $435/t-$485/t in respect of SN150 and SN500, with smaller quantities of imported bright stock at around $895/t CIF.

Middle East Gulf

The parcel of 3,000 tons ex Hamriyah in United Arab Emirates, delivered into Aqaba in Jordan, appears to have been confirmed by shipping reports, and with this unusual cargo movement, there may be other options for Iranian exports filtering out of Middle East Gulf.

In addition to cargoes of Iranian exports moving out of BIK to Pakistan and India, base oils are also being imported into Iran from India.

Theres also news of extensive avails of SN500 from Iranian exporters being available for March and April into U.A.E. and India. Prices are exceptionally competitive, with SN500 still at $425/t basis FOB.

Other exported material from Iran includes around 5,000 tons of rubber process oil being moved to India and Korea. This valuable export appears to be making a comeback after being missing during sanctions.

There are rumored reports of Iraqi base oils available, albeit on a small scale, for export to neighboring states – although it is not confirmed where this material has been produced. Some countered that this may be Iranian or Turkmen material being resold by traders.

Middle East Gulf receivers have confirmed that they will take two parcels of Group II grades during March, with one hinting that prices had stopped falling. One parcel will be discharged into the U.A.E., whilst the other remains to be confirmed, but is possibly destined for Qatar.

Prices contained in recent offers have been very keen, with Far East producers discounting again during February to give offers on an CIF basis at $465/t-$470/t for light vis 150N, with the heavier 500N material at $530/t-$550/t. The latter, in particular, must be judged to be extremely competitive against information on shipping and FOB prices, these levels being expounded by local receivers in U.A.E.

Africa

Mediterranean markets in North Africa have once again seen material moving from Spanish and Italian ports into areas which were once served by Moroccan refiners. Quantities are also being imported into Mohammedia for Moroccan receivers with Egyptian buyers importing another parcel of three grades of Group I material during the second half of February. Prices are estimated to be $475/t-$490/t for SN150, with SN500 at $510/t-$525/t and bright stock at $890/t-$925/t all basis CFR or CIF depending on port.

Nigeria reportedly has a shortage of U.S. dollars, preventing local banks accessing funds from central banking to be able open letters of credit for purchases of base oils and other imported petroleum products. Since Nigeria operates under a system of exchange controls, letters of credit are mandatory for licensing and purchase of imports. The expectation that Nigeria was to set sail on a buying spree of European and Baltic cargoes may not happen, with some sources implying that governmental help will be necessary now.

Reasons for this lack of funding have been various, but the favorite is that with lower funds from crude sales, the national government does not have sufficient funding to allow the flow of funds to local banking.

Sources have said that there may now be a hiatus for petroleum imports, which could spell disaster to a country which is ultimately dependent on oil revenues for imported products.

Current reports have given indications of prices for material on the water or arriving into Nigerian ports shortly at $465/t-$518/t in respect of SN150 and SN500/600, and bright stock at $876/t. SN900 is being offered higher this week, at $618/t-$645/t basis CFR Apapa, Lagos.

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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