EMEA Base Oil Price Report

Share

European, Middle Eastern and African base oil markets are stable, with sellers maintaining offers perhaps without fully assessing OPECs decision to extend crude oil production cuts into 2018.

OPEC approved the cuts in the effort to maintain crude oil prices, or possibly lift them toward $60 per barrel or beyond. Unfortunately, with engagement from United States shale producers, the opposite occurred: levels have fallen by more than 4 percent following the meeting.

Dated deliveries of Brent crude retreated to around $51.75 per barrel over the weekend, with West Texas Intermediate crude falling back to $49.50 per bbl. LS Gas Oil moved downwards to $460 per metric ton, perhaps alluding to lower feedstock prices.

Base oil producers may have been startled by these moves, considering many believed prices would have had an opening to move ahead. Thus the reaction had been to batten down the hatches and maintain offered levels to prospective buyers, who in turn are looking to seize the opportunity to counter with serious bidding.

Europe

API Group I base oil prices are maintained, with light solvent neutrals at $640/t-$685/t. However, these grades remain tight with a number of buyers within Europe expressing frustrations at not being able to cover requirements. Also tight, SN500/600 is maintained at $730/t-$780/t.

With a number of enquiries for West Africa, Middle East Gulf and the west coast of India, bright stock is still in demand, although levels mostly remain at $795/t-$820/t.

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

European base oil markets are relatively stable but there are nagging doubts as to whether there are enough avails to cover seasonal demand. With the summer production peak possibly coming to an end, many blenders are sighing with relief that they have been able to cover basic requirements.

Sellers were tempted to hike prices from June 1, but many consider that this is no longer an option due to crude and feedstock levels receding. Most buyers in European markets are convinced that with availability becoming less of an issue going into the third quarter, prices may even start to weaken, with the result that many are not looking to restock inventories, but would rather play wait-and-see into June.

Differentials between local ex-tank prices and spot export levels is maintained, with local selling numbers 55/t-95/t higher than exports.

Group II markets report adequate, but not excessive, quantities. One source described the market as being in almost perfect balance, with importers in Europe being able to place all the availabilities from sources in U.S. and Far East into storage. With sources having absorbed raw material cost increments and passing them on to buyers, buyers dont think prices will go up again in the short term. Demand remains strong, with more blenders looking to start using these grades for some finished lube requirements. Some operations are making the transition in stages by using Group II light vis grades as replacements for unavailable, or tight Group I light neutrals, suggesting that they may make the move to heavier grades down the line.

As with Group I prices, levels are basically maintained, although some of the higher-spec, original equipment manufacturer-approved grades have moved slightly upwards. Lighter vis grades 100N and 200N are $625/t-$655/t for example, with 500N and 600N remaining at $825/t-$865/t CIF Antwerp-Rotterdam-Amsterdam. FCA prices are assessed at 725/t-765/t in respect of the light grades, with heavier grades between 855/t and 890/t.

European Group III markets appear stable, although its unclear what will happen from June 1. Until then, levels are maintained, with 4 centiStoke material at $810/t-$840/t, and euro sales at 740/t-770/t. Six cSt remains at $840/t-$865/t (770/t-795/t). Price for both grades are on the basis of FCA northwestern Europe. Fully approved material ex FCA Antwerp-Rotterdam-Amsterdam is 810/t-845/t for 4 centiStoke and 6 cSt grades with 8 cSt material, where available, at 790/t.

Baltic and Black Sea

Baltic trade is subdued, with many distributors and resellers awaiting June before receiving replenishment stocks at new prices. The feeling is that with the crude effects, prices may stabilize, mimicking the European mainstream markets. SN150 remains tight, although smaller quantities are available for bulk and flexi shipment on a prompt basis from Baltic sellers.

There are a number of enquiries from Nigerian buyers, both direct and through recognized traders, for large parcels to be loaded during June. One such enquiry is related to around 18,000 tons of mixed grades loading out of three, or perhaps even four Baltic ports. Traders said they consider these quantities to be at the upper limits of possible cargoes moving out of the Baltic due to the complex shipping and logistical arrangements necessary.

SN150 levels are still $595/t-$625/t, and SN500 is at $675/t-$700/t. SN900 is $795/t-$820/t, but there are no clear indications as to where prices will go in June, with some indicating that with less availabilities from Russia, levels may be pressured to rise, but competition from mainstream European production may temper these bullish statements.

Black Sea reports claim further imports from Greece, Italy and Spain finding their way into the Turkish market, with some buyers claiming these sources seem more reliable than Russian exports from Azov. Parcels are identified going into Izmir and Gebze, Turkey, with contract barrels moving into Derince. According to Turkish sources, prices for June deliveries have come off slightly, perhaps indicating that more avails are forthcoming following a number of Mediterranean turnarounds.

Levels appear a little weaker, with SN150 and SN500/600 now $620/t-$645/t and $760/t-$780/t, respectively.

There are talks of another large parcel of Russian exports from Kavkaz to the Middle East Gulf or Singapore, but traders are being somewhat tight-lipped about possibilities considering rivals are looking at the same opportunities.

Red Sea reports indicate that the cargo for Aqaba, Jordan, has been covered, possibly from Saudi Arabia, although Swiss traders are adamant that this requirement remains open and that supply will eventually come from Mediterranean sources. Similarly, the Sudanese cargo also appears to have been fixed – probably to incumbent suppliers.

Middle East Gulf

Trading has slowed as many players fast during the Holy Month of Ramadan which began May 27. With staff observing religious practices, business can be tough for outsiders during this month. However, with a number of imports to discharge into United Arab Emirates ports in the next couple weeks, these operations will have to be expedited.

Although not on the same scale in quantity terms, Iranian exports to the west coast of India have reappeared, with two parcels of around 5,000 tons and 7,000 tons moving out of Bandar Bushehr and Bandar-e Emam Khomeyni (BIK) over the first few days of June. However, no further cargoes have been identified for the forthcoming Ramadan period, suggesting that exports may be curtailed during this time.

Prices in respect of Iranian barrels of SN500 are flat at $685/t-$695/t FOB.

Although slower than seen over the past few weeks and months, cargoes of Group III grades ex Al Ruwais are estimated to be $680/t-$710/t for the 4 centiStoke and 6 cSt grades, with Sitra-sourced material around $770/t, all on FOB basis. Eight cSt material on the same basis is estimated at $660/t-$675/t. These are indication prices appraised on a netback basis, using nominal freight rates and other overhead costs for cargoes being delivered into Europe, the west coast of India and the Far East.

Observers are awaiting news from the Bapco/Neste split, which will see only 45 percent of Sitra production being marketed by Neste, instead of the total production coming under their auspices, whilst presumably the balance will be sold in the various markets directly by Bapco or their appointed distributors around the globe. Since the original approvals are only in respect of Neste-branded products, Bapco may presumably have to apply for full OEM approvals for the same material in due course.

U.S.- and Far East-sourced Group II out of hub storage in the U.A.E. are being offered on an FCA basis at $795/t-$825/t in respect of the light vis grades, with 600N at $895/t-$925/t CIF. Offers of $725/t-$750/t were heard for the light vis grades, with heavier 500N around $865/t-$895/t.

Africa

Importers in the East and the South of the continent have issued enquiries for limited quantities of Group I grades to be imported in flexies to traders in Europe, India and the Middle East. The most favored grades are SN500 and bright stock, with current estimates on delivered prices in the range of $855/t in respect of quantities of SN500 and $920/t for lower-spec bright sock grades ex Baltic supply points.

Also noted are further imports of Group I, Group II and Group III grades in bulk going into South Africa via Durban. These are being loaded and sourced ex Europe, U.S., and the Middle East Gulf from majors facilities.

Trade is light into some Islamic countries in North Africa observing Ramadan. The summer holiday period is also starting in a number of locations where trade may not restart until September.

Many traders in Nigeria also respect Ramadan. However, there are cargoes arriving over the next few weeks for receivers in Nigeria, Cote dIvoire, Guinea and Ghana.

Two cargoes, one from the Baltic and the other from the U.K., will also arrive, and with news of further parcels being assembled from Baltic sources, this market may start to pick up over the next few months.

Prices are left unchanged, with estimated values for CIF/CFR at $735/t-$770/t in respect of SN150, with quantities of SN500/600 landing between $855/t and $880/t. Baltic-sourced SN900 is $895/t-$930/t and bright stock is $925/t-$955/t, all delivered Apapa port.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other