EMEA Base Oil Price Report

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Base oil trade has been relatively quiet the past week as sellers and buyers took stock of developments from recent months. Sellers are reviewing prices in light of falling raw material costs but continue to note that healthy demand is taking up almost all availabilities throughout Europe, the Middle East and Africa. Buyers express confidence that that base oil prices have risen far enough and that any new adjustments will be downward.

Some producers, particularly of API Group II and Group III oils, have only just completed their most recent round of hikes, attributed to higher feedstock and operating costs.

Crude and feedstock values weakened the past week, with dated deliveries of Brent crude trading late Tuesday at $48.85 per barrel, down more than a dollar from last week. West Texas Intermediate crude also dropped – to $45.85/bbl. LS gas oil, a gauge of petroleum products, dropped to $433 per metric ton.

Against this backdrop, Group I prices appear to be standing firm, with sellers still indicating higher prices in offers. The market, however, tempered by buyers calling for reductions, and overall markets were described as stable. Prices are largely unchanged this week as sellers and buyers seemed to declare a truce, at least until a direction becomes clearer.

Europe

Prices for Group I light-viscosity solvent neutrals remains between $625/t and $690/t, while SN500 and SN600 are $720/t/t-$775/t. Bright stock may have seen a small decrease again this week, to $795/t-$840/t, as sellers admitted they would prefer to see greater interest in purchases of large parcels of this grade.

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

Local markets throughout the European mainland have been giving off mixed messages the past week, with some locations indicating higher prices for ex-tank and delivered quantities of Group I while other areas have seen values stabilize. In a couple cases, prices in the Benelux area fell. Some price revisions and reviews begun May 1 have been put on hold by sellers trying to maintain market share.

Sales from Antwerp-Rotterdam-Amsterdam are reported as brisk, with resellers keen to order replenishment cargoes from Baltic traders and other suppliers from mainland Europe. Reports from the United Kingdom reports are mixed, with some buyers confirming markdowns this week. More and more buyers are reverting to spot purchasing, explaining that they expect prices may start to fall any time now and that they wish to avoid high inventories at this time.

The differential between local FCA or ex-tank prices and spot export levels is assessed between 65/t-120/t.

Group II sources for European imports may have completed the current series of hikes since lower crude and feedstock prices mean raw material costs will start dropping. Sellers may find themselves in the envious situation of being ahead of the market, able to sell at higher prices than market conditions would allow them to install. Group II sellers will surely resist lowering prices for as long as possible, saying they are only restoring margins of some months ago. With demand remaining firm and availabilities of these grades finely balanced, sellers may be able to enjoy a period of very acceptable netbacks and excellent contributions.

Prices are maintained this week at $715/t-$740/t for 100 neutral and 200N and $825/t-$845/t for 500N and 600N, CIF Antwerp-Rotterdam-Amsterdam. FCA prices are 710/t-730/t for light grades and 855/t-880/t for heavies.

European Group III grades are described as stable to firm, with some sellers raising prices in attempts to reach acceptable levels. Some are focusing particularly on FCA sales, which primarily affect smaller buyers. No further news has been heard regarding the resumption of production at the Pearl gas-to-liquids plant in Qatar, which is probably good news.

European prices in dollars moved ahead slightly, with 4 centiStoke oils now at $810/t-$840/t (740/t-770/t) and 6 cSt at $840/t-$865/t, FCA northwestern Europe. Group III oils with full slates of approvals from original equipment manufacturers, ex-FCA Antwerp-Rotterdam-Amsterdam, are assessed at 810/t-845/t for 4 centiStoke and 6 cSt grades and 790/t for 8 cSt.

Baltic and Black Seas

With one cargo for the U.K.s east coast and two others bound for Antwerp-Rotterdam-Amsterdam, Russian exports out of the Baltic are still a focal point for material originating from that region. Prices remain attractive for both traders and receivers in northwestern Europe, with availability loosening for SN150 and SN500. SN900 is also available both in bulk and in smaller quantities for distribution in flexi-tanks. Nigerian receivers are looking for 3,000 tons each of SN150 and SN500, and other parties are looking to lift large parcels with two cargo lots of 15,000 tons each.

FOB prices were unchanged this week as relatively tight availability gave sellers cover to be bullish despite the drops in crude and feedstock costs. SN150 is $575/t-$610/t and SN500 around $655/t-$695/t. SN900 on an FCA basis is slightly higher at $780/t-$795/t.

The large STS parcel reported last week to be loading out of Kavkaz, Russia, appears to have been split into two parcels – one of 4,500 tons going into Sharjah, United Arab Emirates and another loading some 12,000 tons for Singapore. More large parcels are apparently being discussed for these locations and also for the West Coast of India and China. Prices for the grades loaded in these large cargoes are not published but to compete with Iranian SN500 in the Middle East Gulf, the FOB levels based on a netback basis would come out around $565/t for SN500 and around $625/t for SN900. These are deemed exceptionally attractive prices.

Middle East Gulf

Middle East Gulf base oil trade remains brisk, with more large cargoes of Group III being moved from Sitra, Bahrain, and Al Ruwais, U.A.E., to the West Coast of India and the Far East. Ramadan will be starting at the end of May, and the early onset of the Holy Month will slow trade during June and perhaps until beginning of September. The impact on overall trade within the region is yet to be seen, but it is anticipated that there will be a general lull during this period.

Exports of Iranian SN500 have resumed, though on a smaller scale than in the past. Local cargoes are being organized for supply into Sharjah and Hamriyah, U.A.E., but the purchase by local U.A.E. buyers of a parcel coming out of the Black Sea may reduce demand for Iranian SN500 out of Bandar-e Emam Khomeyni, Bandar Bushehr and Bandar Abbas. Prices for premium SN500 ex-Bandar-e Emam Khomeyni are assessed at around $665/t-$680/t, FOB.

FOB prices for Group III grades ex-Middle East Gulf are estimated around $680/t-$710/t for 4 cSt and 6 cSt, $660/t-$675/t for 8 cSt. These estimates are appraised on a netback basis using nominal freight and margin costs for cargoes delivered to Europe, the West Coast of India and the Far East.

There are still inquiries for Group II and Group III in flexies to be imported into Iran, and traders responsible for undertaking this supply are hoping for offers this week.

Group II imports arriving into U.A.E. storage are offered at $695/t-$725/t for light grades and $895/t-$925/t for SN500/SN600, basis CIF.

Africa

Cross-Mediterranean Group I supplies into receivers in Egypt, Algeria, Tunisia and Morocco are still very much in the spotlight, having stepped in to fill the supply gap left after the Samir refinery at Mohammedia, Morocco, closed. There are also a couple of inquiries for Baltic material in bulk and flexies to be delivered into various sites in North Africa.

Only one new cargo has been fixed firm for arrival into Nigeria: a shipment of 5,000 to 6,000 tons of Group I loading out of the U.K. and Spains Mediterranean coast. The other inquiries for Baltic supply will take a couple more weeks, since issuance of a letter of credit is only assured some twelve days after a project finance initiative is submitted to the local bank. Other parts of West Africa are quiet, with smaller cargoes now on the water for arrival into Guinea, Ivory Coast and Ghana during the second half of May.

Offered prices for Russian and Polish Group I exports being loaded out of the Baltics are reportedly priced around $725/t for SN150, $798/t for SN500 and $892/t for SN900. Bright stock ex-Baltic is now assessed at $895/t, all CIF/CFR Apapa port, Lagos, Nigeria.

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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