EMEA Base Oil Price Report

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API Group I base oil prices are showing a strong tendency to firm after many suppliers reported being unable to cover all inquiries. Some indicated availabilities may improve for April, but with the turnaround season in full swing, short supply may become the norm.

Many producers have moved prices upwards, even though crude oil and feedstock costs have fallen back.

Brent crude remained stable after falling last week to levels just above $50 per barrel. Dated deliveries for May front month settlement closed yesterday at $50.80/bbl, while West Texas Intermediate showed at $48.10/bbl to yield a slightly narrowed crack. ICE LS Gas Oil posted at $452 per metric ton, for front month April, roughly $5/t lower than last week.

Europe

There may have been expectations for European FOB Group I prices to rise again this week, but in fact there have been a few marginal changes, mainly to the lower ends of price spreads, and no large-scale increases reported.

Demand continues for available material, helping to maintain values in the face of decreasing raw material costs. Base oil prices usually lag feedstock movements, but the tightness of the base oil market may create friction for any decreases. Solvent neutral 100 and SN150 have moved upwards at the lower end of the spread by $5/t, now reflecting ranges of $635/t-$655/t, while SN500 rose $10/t to $695/t-$720/t.

Bright stocks saw some higher offered prices, but these received lower counters so that the range of transacted prices for this grade were unchanged this week at $775/t-$810/t. Market sources suggested that bright stock markups a couple of weeks ago succeeded only because of the disappearing delta between that grade and SN500.

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

Prices for Group I sales within Europe were unchanged this week, not surprising since most trades took place under contracts that are adjusted monthly. Russian exports continue to flow into Antwerp-Rotterdam-Amsterdam and both the east and west coasts of the United Kingdom to alleviate any signs of shortening supply.

Between 25,000 tons and 30,000 tons of material has been fixed to reach domestic markets from Baltic sources already this month, and with lower prices being attached to these grades – albeit sometimes for lower-spec oils – demand has stepped up. If supply constraints continue until the end of March, suppliers and resellers may try to increase prices, but there seems to be underlying sentiment that the retreat of crude has taken the heat out of the market.

The differential between domestic prices and export prices is maintained this week at 75/t-120/t.

The Group II market in Europe, which consists mostly of imports, appears free of shortages, and prices are stable to firm – firming more than other regions. Again the decline in crude and feedstock costs have relieved potential upward pressure on base oils. Maintenance turnarounds will tend to keep this segment tight, but sources supplies are being covered and that demand should remain relatively flat, perhaps until after summer.

For large cargoes of Group II arriving into Europe, light-viscosity grades are $690/t-$710/t, while 600 neutral is $810/t-$825/t, basis CIF. These will yield FCA prices in Northwestern European of 695/t-720/t for light-vis grades and 830/t-865/t for 600N.

In a similar vein, Group III prices also appear flat this week, though some claim that the next round of imported cargoes could face upward pressure. Local production within Europe often gets overlooked, but with capacity in the region rising, dependence on imports may lessen.

The continuing halt to production at Shell and Qatar Petroleums joint venture plant in Ras Laffan, Qatar, is maintaining a degree of tightness in the global Group III market, but most demands are being met, thanks in part to new sources. Four centiStoke oils remain at $755/t-$780/t (720/t-740/t) and 6 cSt at $765/t-$790/t, FCA Northwestern Europe. FCA prices from Antwerp-Rotterdam-Amsterdam for grades with full slates of OEM approvals are 785/t-815/t for the two main grades and around 755/t for 8 cSt. These grades could face gradual upward pressure in coming months as demand continues to increase.

Baltic and Black Seas

Baltic trade into mainland Europe and the U.K. appears brisk and is providing an outlet for suppliers that have seen a slowdown in large sales to West Africa. There are still a few inquiries for large cargoes for Nigeria, but fewer than previously. Some sellers in the Baltic claim supplies are tight but surprisingly are not seeking higher prices. Any shortages are probably temporary and perhaps due to a turnaround at a plant in Omsk, Russia, which is programmed to resume running at the end of March. On the other hand, at least one supplier appears to have large volumes available and is trying to sell directly to end-users rather than traders.

In some cases prices are higher than those identified last week, but at least one supplier admitted selling below these levels for bulk cargoes into the U.K. SN150 is now offered and assessed at $570/t-$590/t and SN500 $655/t-$685/t, both FOB. SN900 is now offered at $708/t FOB, or $687/t for smaller quantities on an FCA basis.

Cross Black Sea movements have been few and far between with no traditional Turkish inquiries coming on the market for Russian availabilities ex-Kavkaz, Russia. One Turkish receiver said that it is easier and more straightforward to purchase from Mediterranean suppliers that can guarantee shipping dates and product quality, unlike traders operating out of the Sea of Azov. Turkish buyers are reportedly paying higher prices for these Mediterranean supplies.

The large parcel highlighted here last week ex-Kavkaz was offered to receivers in United Arab Emirates, the West Coast of India and Singapore, but it is not known whether it will load.

After rising during the previous period, Mediterranean prices for Group I base oils are unchanged this week, with SN150 at $665/t-$690/t and SN500/600 at $720/t-$745/t, CIF Turkish ports. In Gebze, Turkey, prices for Russian SN150 is now around $535/t and SN500 around $685/t, CIF.

Middle East Gulf

Middle East reports suggest that 25,000-30,000 tons of Group III grades will be loaded out of Al Ruwais, U.A.E., for destinations in Europe, the United States and the Far East. These volumes are in addition to the 25,000 tons already planned and sold out of this installation for the West Coast of India and Chinese ports.

Prices appear to have stabilized, perhaps on suggestions from receivers in the West Coast of India prices must remain competitive to ensure the continued flow of production from Al Ruwais. Competition could ramp further after a revamp of marketing operations for output from Bapcos plant in Sitra, Bahrain. Netback estimates peg 4 cSt and 6 cSt grades at $735/t-$760/t and 8 cSt material around $725/t, all FOB.

There is still a dearth of reports of Group I SN500 being exported from Iran, with only a couple shipping inquiries for material to be delivered ex-Bandar Bushehr into Sharjah, U.A.E., and a partial cargo to the West Coast of India. Some U.A.E. sources say Iranian base oils are being diverted to places such as Syria, but this could not be corroborated. Sepahan Oils premium SN500 grade is still reckoned to be priced at $750/t-$770/t, FOB, which in itself may rule out exports. Local prices in India and for imports from Saudi Arabia, the U.S. and oils sourced through the Black Sea could render Iranian material uncompetitive. Prices for Black Sea barrels have been re-assessed at $675/t for SN500 and $725/t for SN900, CIF Middle East Gulf ports.

There are also reports of large parcels of Group III grades being offered into Iran through Bandar-e Emam Khomeyni, which seems odd given the proximity of local suppliers on Sitra and Al Ruwais. There were exchanges and imported material going into Iran some years ago prior to Western sanctions being imposed, and such trade may resume with the lifting of sanctions.

Group II offers for material to be delivered to various receivers in Middle East Gulf have been floating around the market, but the tightening of supplies in the Far East have sources loathe to offer discounts into the Middle East. Other offers from one or perhaps two U.S. suppliers have also been made, and coincidentally all prices have been neatly around the same levels: $675/t-$695/t for light-vis grades and $860/t-$875/t for 500N. 600N is priced around $885/t-$910/t CIF. Deliveries of smaller parcels to additional ports within Middle East Gulf carry premiums of $45/t-$90/t depending on quantity and distance from storage in U.A.E.

Africa

A cargo of 11,000 tons of mixed grades from Northwestern Europe will discharge into Durban in South Africa in mid-April. Sellers from India, the U.A.E. and the Baltic have all been dealing with inquiries and requests from buyers in South Africa looking to import smaller volumes of Group I. There appears to be growth in this trade, perhaps due to a slowdown in Iranian exports channeled through traders in the U.A.E.

West African sources reported that in addition to the continuing contract business into Tema, Ghana, a parcel of around 4,000 tons of Group I from Livorno, Italy, has been dispatched for receivers in Conakry, Guinea, and Abidjan, Ivory Coast. No other current inquiries were reported, neither from Baltic, the U.S. or mainland Europe, although there are reports of an oil major sending a cargo from the U.K. to Lagos.

Nigerian prices are nebulous since last weeks loading in the Baltic was the only cargo reported. The major’s cargo referred to above may be transacted internally, although nominal FOB prices and freight must be necessarily documented, but these numbers cannot be taken as representative of selling prices into Apapa, Lagos.

Based on the Baltic shipment and available information about FOB prices and freight rates, values for Group I oils going into Nigeria are now assessed at $725/t-$795/t except for SN900, which is $865/t-$885/t, all CFR/CIF Apapa.

There are many inquiries for various types and grades of base oils to be delivered into Nigeria in flexitanks, but old problems resurface when these such business is approached. The funds in cash outside Nigeria are not available, and a letter of credit cannot be established or requires a long time. Many traders and suppliers have lost interest in such inquiries and have only cited prices as a guide to bona fide purchasers. These are confirmed at $755/t for quantities of SN150, $825/t for SN500 and $888/t for SN900, all basis CIF 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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