EMEA Base Oil Price Report

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European, Middle Eastern and African base oil prices continue to rise against a background of positive demand and tight availability, especially for API Group I oils that have been affected by maintenance turnarounds.

Seller offers emerging this week carry prices as much as $40 to $50 per metric ton above levels reported last week, apparently in response to demand. However, these offers are subject to heavy countering that is having some impact. For the moment, values on balance are rising, but with most significant turnarounds now completed or nearly completed, availabilities may improve. With destinations and arbitrages limited at this time, the positions of buyers may be looking up.

The downward slide of feedstock costs may have lost momentum this week as crude oil prices jumped about $4 per barrel from last week. Dated deliveries of Brent crude went for $54.20 per barrel late yesterday for May front month settlement, while West Texas Intermediate climbed back to $51.05/bbl, still for April front month. On the products side, ICE LS Gas Oil in London rose back to $479 per metric ton, some $20/t higher than last week.

Europe

Group I prices in Europe were subject to large gains this week if offered levels are accepted by buyers. Many offers are being issued at levels $30/t-$50/t higher than last reported, but buyer counters are only $10/t-$20/t higher than last week. Negotiations in many cases are still underway with sellers determined to remain firm.

Prices for light solvent neutrals rose to $665/t-$695/t as availability is still tight. SN500, also described as tight, is pitched at $725/t-$755/t, while bright stock rose to $840/t-$875/t.

The higher ends of the spreads refer to offered prices from some sellers, whilst the lower ends represent negotiated buying levels that some purchasers claim to have achieved. It could take a few weeks, though, for the scene to take on clarity. The prices above refer to large parcels of Group I base oils supplied or offered FOB ex-mainland European supply points.

Trade within Europe saw some prices escalating from April 1, and some sellers who expressed reservations about hikes last week have now embraced them. Values in mainland Europe climbed 25/t-40/t, whilst sellers in the United Kingdom reported markups of 20-25/t. Many buyers had been fence-sitting but started the buying process after crude and feedstock levels began rising. Even prices for Russian exports jumped in ex-tank sales in Antwerp-Rotterdam-Amsterdam and the U.K.

The differential between domestic prices and export prices is still fluctuating, but generally is 55/t-85/t.

Group II availability remains relatively constant without obvious shortages or allocations in Europe, Sellers, however, are not rushing to win new business, being content to service and supply current clients. Prices are firm at $710/t-$735/t for light-viscosity grades and $820/t-$845/t for 500N and 600N, CIF. European FCA or ex-tank prices are now around 710/t-730/t for lighter grades and have risen to 855/t-880/t for heavies.

Many expected Group III prices in Europe to move upwards on April 1, but they have not despite rumors that availability from one of the main suppliers may be tightening. Large European buyers depend on big suppliers, and changes in supply chains may loom for Group III oils with full slates of original equipment approvals.

European prices in euros are unchanged from last week: $780/t-$800/t (720/t-740/t) for 4 centiStoke oils and $800/t-$840/t for 6 cSt material, FCA Northwestern Europe. Products with full OEM approvals supplied FCA Antwerp-Rotterdam-Amsterdam remain 785/t-815/t for the two main grades and 755/t for 8 cSt.

Baltic and Black Seas

Baltic activity appears to be muted this week, with few main movements of material being reported to the market. Prices rose, though, for material being purchased on an ex-gate basis from Russian refineries for export. With the completion of one major turnaround and another almost complete, availabilities of exports may improve over the next few weeks, allowing cargoes to be delivered into Antwerp-Rotterdam-Amsterdam and either the east or west coast of the U.K.

Large shipments to West Africa are still curtailed, and the lack of this trade could have a major effect on Baltic trading in the future. There is one prompt cargo to load out of Riga, Latvia, for receivers in Oran, Algeria, where Group I oils of slightly lower specification can be used by local blenders.

Levels for material available this week, and for bulk supplies for the second half of April and early May rose $570/t-$590/t for SN150 and $675/t-$695/t for SN500, with SN900 in bulk quoted at $755/t-$775/t, all FOB.

One notable fixture from the Black Sea was originally reported as high as 25,000 tons but has been scaled back to 8,000 tons, making the cargo more workable for the West Coast of India. The parcel is assumed to include either two or three Russian export grades – SN500, SN900 and perhaps a small quantity of SN150 – all to load STS Kavkaz, Russia. Prices have been considerably below Baltic levels and are here reckoned around $620/t for SN500, and $685/t for SN900, all FOB.

Traffic from Greece into Turkish ports such as Gebze, Turkey, Derince and Izmit continues, and although these movements are not Black Sea strictly speaking, they affect trade into Turkey, acting a substitute for Russian grades that appear to have been shunned by Turkish blenders. Group I parcels of around 3,000 tons are expected to land CIF into Turkish ports at $720/t-$735/t and $755/t-$780/t, respectively, for SN150 and SN600.

Group III shipments continue from Spain into Turkey where formulators appear to favor Group I-Group III blends for new formulations, rather than Group II, which has yet to gain a major foothold.

Middle East Gulf

Red Sea reports describe more large parcels moving out of Yanbual Bahr and Jeddah, Saudi Arabia, for contracted receivers in Oman and the United Arab Emirates. No new information has been received about the inquiry for Aqaba, Jordan, and interested traders have allocated this requirement to the back burner for now.

There still seems to be a lack of large parcels of Iranian Group I base oils, predominantly SN500, which were a feature in this region during the latter part of 2016. Whether the material is going into alternative markets is not disclosed, but alternative supplies of Group I are reaching the Indian market from the United States, and of course the Black Sea. These parcels are deemed to be more competitively priced while offering comparable quality, even compared to premium SN500 from Sepahan Oil.

Prices for small quantities of SN500 available ex Bandar-e Emam Khomeyni or Bandar Bushehr are unchanged this week at $750/t-$770/t FOB, which at this stage would render these supplies uncompetitive for trade into Indias West Coast. These stocks are moving into the U.A.E. for local ex-tank sales and re-export in flexitanks to receivers in East and South Africa.

Group II prices have risen in Middle East Gulf regions and are set to rise again as supplies appear to have tightened and some inquiries not being covered or receiving offers. This perhaps reflects the situations for supply sources in the Far East and the U.S. Where possible, some finished lubricant producers are opting to formulate with blends of Group I and III stocks rather than Group II. Some blenders maintained, though, that they are keeping an open mind about Group II and may reconsider after the plant in Yanbu begins making that grade.

Prices contained in limited offers from U.S. sources for delivery later this month and into May are up – to $725/t-$765/t for light-viscosity grades and $895/t-$930/t for 600N, CIF. Reshipments of smaller parcels elsewhere in the region will carry premiums of $45/t-$90/t depending on quantity and distance from storage in the U.A.E.

Africa

Another Northwestern European cargo has been fixed into Durban for arrival around the end of April, and after this 4,000 tons cargo other parcels are being arranged for May shipment. Importers in Durban also continue to take delivery in flexies of Baltic-sourced Russian oils. Delivered prices for SN500 are now $685/t-$700/t, CIF Durban, but with FCA prices having moved since these shipments were agreed, offers are now closer to $755/t-$770/t. Once again offers of re-refined SN150 ex-Northwestern Europe are being heard in South Africa at $595/t, also delivered in flexies.

West Africa supplies of Group I base oils are brisk, with a further round of inquiries from receivers and traders in Guinea, Ivory Coast and Senegal. Ghana state tender supply into Tema is arranged out of Livorno, with a smaller than normal cargo being nominated, but it may be extended to cover requirements in other parts of West Africa.

With prices rising in Europe, Nigerias appetite for more Group I cargoes appears to have declined as receivers say the new prices would wipe out their profits in the domestic finished lube market. Baltic offers have been made for two large cargoes to move to Lagos, but with one receiver looking to take a large slug of bright stock it is considered that this requirement may be covered from Mediterranean or U.S. sources.

Offered prices heard this week for Group I material into Nigeria include $693/t for a small quantity of SN150, $825/t for SN500 and $885/t for SN900, basis CIF/CFR Apapa port. Bright stock in a separate offer of a 5,000 tons parcel is assessed to land at $950/t-$975/t.

Re-refined SN150 supplied in flexies is heard in the market at $595/t, CIF Lagos container terminal.

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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