EMEA Base Oil Price Report

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Returning after the Easter break, base oil markets in Europe, the Middle East and Africa once again plunged into uncertainty about the direction of pricing. On one hand, availabilities remain tight across the board, though it is mostly just spot requirements of API Group I oils that are going uncovered. On the other side, crude oil prices are weakening, giving ammunition to buyers who are calling the market down.

This is the background to this week’s pricing moves, where in many cases sellers have repeated offers for spot and contract supplies rather than trying to hike them higher. Buyers are reticent to accept offers, and in some cases are responding with extremely large counters in bids to pull prices back.

Members of the Gulf Cooperation Council recently made a shaky resolution to maintain cuts in crude production, and there is much uncertainty as to whether OPEC will extend its cutbacks through the second half of this year. It comes as no surprise then that crude and feedstock values crumbled this week, with dated deliveries of Brent crude retreating to $51.95 per barrel in late trading yesterday for June front month settlement. West Texas Intermediate crude fell below $49 but closed at $49.45/bbl, also for June settlement. ICE LS Gas Oil has dipped to around $463.50 per metric ton, still for May front month.

Europe

Prices for Group I exports are maintained this week but only on the premise that offers remain as reported previously, since final prices are yet to be established for both contract and spot sales. The tight supply situation may be just starting to ease, but that may not turn the market around immediately. Many of the arbitrage routes from Europe remain closed either for lack of supply or because of pricing disparities.

API Group I neutrals are assessed in wider spreads than last week due to buying counters, but the highs remain in place across the board. Prices for light solvent neutrals are $645/t-$695/t, while SN500 is $725/t-$785/t. Bright stock values appear to have fallen some $20/t-$25/t after the holiday to $845/t-$890/t.

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

There are hopes among the buying community that local prices may start to fall after the turn of the month, when many parties review prices. Buyers are looking for markdowns due to easing supply and falling raw material costs, while traders and distributors holding stocks bought during the last four to six weeks are looking to at least cover their purchases. The next few days promise a lot of discussion and negotiation before prices are set for May.

The differential between local FCA or ex-tank prices and spot export levels remains as last week but could change in early May. Thus the delta is assessed between 65/t-120/t.

Group II supplies remain tight, but requirements are being met. Producers appear to done an exemplary job of covering contract customers during maintenance shutdowns. In contrast to some comments received last week, sellers confirmed that they are actively seeking new business and will be positioned to meet requirements throughout the second half of the year.

Prices are left unchanged, and pressure for May 1 hikes seems diminished, although some sellers said markups in their source markets have yet to percolate to Europe. Light-viscosity grades are $715/t-$740/t, while 500 neutral and 600N are $825/t-$845/t, CIF Antwerp-Rotterdam-Amsterdam. FCA prices are assessed around 710/t-730/t for light grades and 855/t-880/t for heavies.

European prices for Group III are firming as sellers claiming they are still making up ground lost when these grades were in surplus. The market shows evidence of hardening further as the giant Pearl gas-to-liquids plant in Qatar may not return to normal output until the third quarter.

There seems to be consensus that Group III demand received a large boost during period when plentiful availability caused very keen prices. Having established these beachheads, producers may now be in position to capitalize on them and keep their market shares against other base oil groups.

Prices for 4 centiStoke oils rose in terms of dollars to $805/t-$835/t, with euro prices (735/t-765/t) remaining steady due to exchange rate fluctuation. Prices for 6 cSt oils is $835/t-$860/t, FCA Northwestern Europe. Products with full ranges of OEM approvals supplied ex-FCA Antwerp-Rotterdam-Amsterdam are now 800/t-835/t for 4 cSt and 6 cSt grades, with 8 cSt oils 780/t

Baltic and Black Seas

Baltic Sea trade made a vibrant return this week, with a large number of inquiries being placed into this region from traders and receivers in West Africa, the Middle East and even India. These inquiries were in addition to the normal contracted and spot short-sea trades into Antwerp-Rotterdam-Amsterdam and the United Kingdom. Availability appears to have improved as a couple traders and resellers sent signals that they are read to consider large export parcels and may offer keen prices. A couple of large cargoes for Nigeria are under discussion along with a growing number of reasonably large quantities being shipped to destinations in flexitanks.

Prices are flat this week, but they are under downward pressure due to falling crude and feedstock costs. This region has often been the trigger for movements in European Group I values, and it may fill that role again. Light solvent neutrals are prices at $585/t-$640/t FOB, and SN500 at $675/t-$720/t. SN900 remains indicated at $770/t-$790/t FCA.

There have been no further reports of large STS loadings at Kavkaz, Russia, although rumors are afoot that another parcel is being considered from Antwerp-Rotterdam-Amsterdam for next month. Smaller cargoes SN500 and SN150 are noted for Turkish receivers in Gebze, Turkey. Additionally, shipments from Greece are reportedly being fixed firm for May delivery to Derince. Prices for oils supplied ex-Mediterranean ports into Derince are assessed a little lower this week: $715/t-$730/t for SN150 and $775/t-$795/t for SN600.

Middle East Gulf

The Red Sea region is quiet this week after a delivery into Aqaba, Jordan, but further inquiries are rumored to be coming out of Sudan for around 5,000 to 6,000 tons of Group I to be delivered during the second half May.

Last week it was mistakenly reported that the new Luberef production of Group II base stocks from Yanbu, Saudi Arabia, would commence and be available during 2018. This production is on schedule to stream during the third quarter of this year.

Middle East Gulf reports are full of rumors around the resumption of production at the Pearl plant. Some sources in the United Arab Emirates suggest that full production will not be reached until late in the third quarter, but others say production will resume in a few weeks and that the facility will ramp up soon afterward.

There is also word that Adnoc is close to obtaining a full range of approvals for stocks produced at its plant in Al Ruwais, U.A.E., which would enhance those products.

U.A.E. traders say they are looking at a large number of local and export sales of Iranian Group I, mainly SN500, but prices appear to still be a major hurdle. Prices for premium SN500 ex Bandar-e Emam Khomeyni are $730/t-$745/t, FOB, down slightly from last week, but some sources say these levels still have some way to go to compete with alternative supplies going into the West Coast of India.

There are a number of inquiries for Group II and Group III grades to be imported into Iran, but many sources – such as those based in or sourcing from the U.S. – filling them may be difficult. If fulfilled, these orders would be imported in flexies, and some traders may interested to place Russian barrels into this market.

Offered prices for Group II imports into the Middle East Gulf are down this week at $725/t-$755/t for light-vis grades and $885/t-$910/t for SN500 or SN600, CIF. The decline may be due to sources trying to maintain market share in the face of Luberefs looming output.

Africa

East African receivers have confirmed small quantities of Group I arriving from a variety of sources from India to the Baltic. These shipments have become a regular feature of trade into these areas, with delivery in containers being a major advantage for a region where receivers like to avoid bulk storage costs. Another large bulk cargo is expected to reach Durban, South Africa from mainland Europe in May.

West African markets appear to have come alive after Easter as a number of receiver- and trader-based inquiries are circulating. Buyers in Nigeria have approached suppliers in the U.S., Northwestern Europe, the Baltic and the Mediterranean with requests totaling around 60,000 tons of Group I, and some sources said it may be difficult to meet the combined demands at this time.

In addition, new supplies for Guinea, Senegal, and Ivory Coast are being negotiated. These smaller quantities will be easier to cover and may take precedence over the larger, less available parcels for Nigeria.

Offers heard so far for Baltic-sourced material indicate prices of $685/t for quantities of SN150, $775/t for SN500 and $855/t for SN900. Bright stock ex-Baltic is now assessed lower at $945/t, all CIF/CFR Apapa, Nigeria. With further offers and indications to follow, the West Africa market may take time to shape over the next few weeks.

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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