EMEA Base Oil Price Report

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Tight supply is calling the tune as base oil prices in Europe the Middle East and Africa were reported stable to firm this week after a slight recovery by crude oil.

Crude is still down since the last adjustment in base oil values, but that is being offset by snugness for most grades. Availability is lacking for spot purchases and even for some contract business, leading some suppliers to implement volume restrictions.

Dated deliveries of Brent crude climbed back above $50 per barrel this week, posting at $51.30/bbl in late trading yesterday in London. Meanwhile West Texas Intermediate appeared entrenched at $48.35/bbl so that the crack between the benchmarks widened to around $3. Both prices are now for May front month settlement. ICE LS Gas Oil is recorded at $458 per metric ton, still for April front month, some $5/t higher than last week.

Europe

In Europe it was unclear whether the snug balance for Group I oils was due to high demand or limited availability – probably a combination of both. In any case, prices were at least maintained and in some cases firmed at the lower ends of spreads. Light solvent neutrals were selling for $640/t-$655/t, unchanged on the upper end but $5/t-$10/t higher at the low. SN500 underwent a similar adjustment to $705/t-$720/t, while bright stock prices were unchanged at $775/t-$810/t.

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

There were reports that availability of some Group I grades may be loosening since a number of maintenance turnarounds have been completed. This could create downward pricing pressure, as might the fact that traditional destinations for European exports, such as West Africa, the Middle East Gulf and the West Coast of India, are being covered from other sources such as the East and Gulf coasts of the United States. The only remaining significant spot exports are cross-Mediterranean trades into Egypt, Libya and Morocco.

Values for local sales within Europe were unchanged, but prices for contract business are typically revisited at the end of each month or quarter. At the beginning of March, sellers and buyers shared sentiment that domestic prices would continue to rise through the start of the summer, but now views differ. Availability continues to improve for Russian export barrels flowing from the Baltic Sea into Antwerp-Rotterdam-Amsterdam and the United Kingdoms east coast due to lower demand from deep-sea destinations such as West Africa.

The current differential between domestic prices and export prices is maintained for now at 75/t-120/t.

The volume of Group II imports into Europe continues to grow. The market is being prepared for the quantum change that will come with the opening in 2018 of ExxonMobils Group II plant in Rotterdam, the regions first large producer of Group II grades. It should be noted that smaller quantities are already produced in Poland and Spain.

Prices for light-viscosity grades remain at $690/t-$710/t, while 500 neutral and 600N is $810/t-$825/t, basis CIF. European FCA levels are now 695/t-720/t for lighter grades and 840/t-875/t for heavies.

Group III prices are often set on a monthly basis, and many expect increases at the end of this week as producers in Europe and the Middle East sense opportunity for markups. European prices in euros were unchanged this week, but prices in dollars adjusted to account for the euros rise in relation to the dollar. Four centiStoke oils are now priced at $780/t-$800/t (still 720/t-740/t), and 6 cSt grades at $800/t-$840/t, FCA Northwestern Europe. Prices for Group III oils with full slates of original equipment manufacturer approvals available from Antwerp-Rotterdam-Amsterdam are unchanged at 785/t-815/t for the two main grades and 755/t for 8 cSt, FCA.

Baltic and Black Seas

A flurry of cargoes left the Baltic during the second half of March to discharge into Antwerp-Rotterdam-Amsterdam and the U.K., but shipments appear to have cooled this week, perhaps because buyers expect prices to slip going into April. Availability of Russian exports could certainly loosen after a couple of major turnarounds, especially since there appears to be limited inquiries for large cargoes.

Prices appear to have dipped slightly as sellers indicate willingness to consider serious counters to offers currently on the table. SN150 is being offered at $545/t-$565/t and SN500 at $635/t-$655/t, both FOB. Prices for SN900 rose this week, perhaps because a number of parties are looking to take large quantities, and is being offered at $720/t-$730/t. All these grades are also being offered on a delivered basis CIF, in flexitanks to nominated port at equivalent FCA prices which are around $60/t higher than those above to cover extra costs and handling.

The large parcel previously reported ex-Kavkaz, Russia, has been scaled back to a more manageable size of around 8,000 tons and has been offered to the usual receivers on the West Coast of India and the Middle East Gulf, with shipping dates around the end of March. It is expected that this parcel will go to Indian receivers since Iranian availabilities for similar grades still cost more to deliver into Mumbai. SN500 and SN900 loading out of Kavkaz, Russia, is indicated to load at around $645/t and $695/t, respectively, basis STS.

Mediterranean prices for Group I base oils are unchanged from last week: $665/t-$690/t for SN150 and $720/t-$745/t for SN500/600, CIF Western Turkish ports. Russian SN150 is now around $535/t and Russian SN500 around $685/t, CIF delivered Gebze, Turkey.

Middle East Gulf

An strange inquiry was issued this week for an 8,000 ton parcel of SN500 to be loaded out of Bandar-e Emam Khomeyni for receivers in Izmit, Turkey. This appears to be counter to trade being carried out from Kavkaz, and further explanation is being sought.

Group III exports from the Middle East Gulf are once again in the news, specifically a large fixture of some 11,000 tons loaded out of Al Ruwais, United Arab Emirates, for discharge into the West Coast of India. This, along with another cargo of up to 18,000 tons coming out of Spain, boosts the already massive markets being created by new suppliers of these grades.

The shipment from Europe may be standing in for supply that normally comes from a South Korean refinery and may also include Group II grades. Group III prices have risen again as a result of the continuing shutdown of Shell and Qatar Petroleums joint venture plant in Ras Laffan, Qatar. Based on netback estimates, prices are assessed at $745/t-$775/t for 4 cSt and 6 cSt grades and $740/t for 8 cSt oils.

Iranian exports of Group I SN500 are still missing from the market, but as Iran returns from its New Year holidays, a couple cargoes are being tried, one to load for the West Coast of India and the other for Izmit. Prices for premium SN500 remain $750/t-$770/t FOB, although sources in the U.A.E. said they can purchase Iranian SN500 ex-tank Hamriyah, U.A.E., at around $675/t. There is concern that this could be rerefined or re-processed base stock that may be lower in specification.

Receivers in Sharjah and Jebel Ali, U.A.E., maybe supplementing their normal supply from Yanbual Bahr, Saudi Arabia, with a number of parcels from the Mediterranean.

Group II activity is muted this week with few reports of any offers being accepted by receivers in the Middle East Gulf. Some buyers contend that prices are too high and that they currently do not require Group II. When these products were closer in line with Group I pricing, a number of principal blending operators in Middle East Gulf turned to Group II, but now they are switching back to Group l. It has been suggested that this practice of switching between base oil types is problematic, but blenders in the Middle East Gulf appear to have found ways around the problems.

Offers from U.S. Group II sources are heard between $690/t-$720/t for light grades, $875/t-$895/t for 500N and $895/t-$920/t for 600N, CIF. Deliveries of smaller parcels to additional ports in the region will carry premiums of $45/t-$90/t depending on quantity and distance from storage in the U.A.E.

Red Sea trade has again included an inquiry from Aqaba in Jordan. This supply has been around for some time and may have been supplied locally by truck instead of a sea-going cargo, but according to sources this is a serious requirement and must be covered before mid-April. Traders are looking at supplying around 4,000 tons of Group I ex-Mediterranean.

Africa

South African shipping agents confirmed that regular cargoes will be arriving into Durban from European sources and that this supply train will continue at least through this year. There are also reports of importers in Durban seeking shipments of around 1,000 tons each of several Group I grades that could be delivered in flexies in containers.

Cross-Mediterranean trade has been at the forefront of Group I movements this week, with more than 25,000 tons of Group I finding its way from Europe into North African ports from Egypt to Morocco. This includes a Greek parcel of some 10,000 tons moving into Libya. With the traditional supplies from Mohammedia, Morocco, and Algeria no longer available and demand from Egypt once again healthy, this trade could be expanded to take up a great deal of the European Group I that might otherwise have been sold in the spot market to traditional outlets such as West Africa and Turkey.

Nigerian trade is slow, with few inquiries for major cargoes to go into Lagos. Other parts of West Africa appear to be taking up some but not all of the slack. Two cargoes are being worked for Nigeria – one out of the Baltic and another out of the U.S. – but buyers say that they are in no rush to commit due to ongoing banking problems and because they believe that prices will start to decline next month.

Offered prices for API Group I base oils going into Nigeria, based on mainland European or Baltic loading, are currently being touted around some of the receivers in Lagos, but few are taking them seriously. SN150 is offered at $695/t-$715/t, SN500 at $790/t-$810/t and SN900 at $875/t-$890/t, all basis CIF/CFR Apapa port, Lagos. Bright stock is also included in one offer at $943/t.

Flexi trades are quoted at $765/t for SN150, $835/t for SN500 and $895/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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