EMEA Base Oil Price Report

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Base oil markets throughout Europe, the Middle East and Africa are mainly stable this week, with only a few oddball pricing events for specific offers of certain grades or products.

In sporadic instances lack of availability lead to higher offered prices, but generally values were flat, with sellers trying to maintain current levels while buyers – particularly in spot trades – nibbled away with counter bids.

Crude and feedstock fundamentals are on a rollercoaster after an OPEC agreement appeared to shore up previously agreed-to crude production cutbacks, at least through the first half of next year. Dated deliveries of Brent crude climbed to around $52 per barrel before weakening yesterday, perhaps because of the spat between Qatar and neighboring countries.

Brent closed yesterday at $49.95/bbl for August front month settlement, while West Texas Intermediate crude settled at $48/bbl still for July settlement. Petroleum product indications from LS Gas Oil in ICE London trading stand at $432 per metric ton, some $20/t lower than last week.

Europe

European Group I base oil prices remain unchanged without any new major developments to push prices one way or another. Suppliers and buyers have commented that a stable market, irrespective of where prices actually lie, is preferable to one where prices move continually – a situation that makes it difficult to justify prices.

Light solvent neutrals remain in a range between $640/t and $685/t, with one or two unconfirmed suggestions that deals closer to $600/t have been done sales in excess of 1,000 tons. SN500 and SN600 remain at $730/t-$780/t as availabilities ease. Bright stock is perhaps a little weaker this week — $785/t-$815/t – with the inquiries tailing off.

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

Prices for sales within Europe are also stable this week and are generally set for the rest of June. Some buyers have expressed interest in long-term contractual supplies of Group I oils and are checking various potential sources, including energy majors, national oil companies and Russian exports shipped out of the Baltic Sea.

Some buyers in Europe are also talking up the possibility of price cuts come August or September, when demand typically wanes, but the vacillation of feedstock values casts uncertainty on such hopes.

Differentials between local ex-tank prices and spot export levels remain unaltered this week at 55/t-95/t.

Group II supply in Europe remains relatively tight with sellers able to sell all availabilities to buyers who are keen to take extra quantities. The market can be described as almost balanced to perhaps slightly tight, and this augurs well for ExxonMobil and the Group II plant it is scheduled to open in Rotterdam next year.

Light-viscosity Group II oils are assessed between $625/t-$655/t, while 500N and 600N are $825/t-$865/t, CIF Antwerp-Rotterdam-Amsterdam. FCA prices are assessed at 725/t-765/t for light grades and 855/t-890/t for heavies, taking account of handling, storage and marketing admin costs.

Group III markets throughout Europe have almost returned to the old days when few factors hatched to affect prices, which remained stable for months on end. That changed several months ago – first when new capacity caused a glut that pushed prices down, then by a disruption at the giant Pearl plant in Qatar, which erased the surplus and helped raise prices. Pearl is resuming production, so supply seems to be easing again, and prices have stayed flat the past few weeks.

Prices for 4 centiStoke oils are $810/t-$840/t (740/t-770/t), while 6 cSt remains $840/t-$865/t (770/t-795/t), both on and FCA basis Northwestern Europe. Group III oils with full slates of approvals are 810/t-845/t for 4 cSt and 6 cSt grades with 8 cSt material, where available, at around 790/t, all FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Reports from the Baltic describe two large parcels, each around 12,000 tons of various Group I grades, loaded from multiple ports during the last week of May and destined for West Africa. More shipments of similar size are rumored to be available for loading at the end of June.

Short sea cargoes to Western Europe and the United Kingdom remain a major feature of Russian exports from Baltic sources, with some 10,000 tons per week traveling this route. The majority of these sales are contracted or semi-contracted volumes moving to the usual receivers in Antwerp-Rotterdam-Amsterdam and the U.K., where they are broken down and sold ex-storage to local blending operations throughout the region.

Prices have not moved much since last week, although there is some evidence that the large parcels for West Africa may have been negotiated at values below those reported previously. The spreads reported here are thus widened and are now assessed at $570/t-$625/t for SN150 and $635/t-$700/t for SN500. SN900 is $715/t-$785/t, the upper prices pertaining to FCA levels for small parcels loaded in flexitanks. Availabilities appear to have improved, especially for SN150, which was very short for a few months.

There have been a few movements within Turkey from Aliaga into Gebze and Derince, in addition to the normal contract barrels being imported from Greece into Gemlik and Derince. In addition, a large parcel finished loading in Kavkaz, Russia, for delivery to the United Arab Emirates and Singapore. Sources also report that Group II and Group III cargoes have been arriving into the Turkish market, sending signals that this is not just a market reliant on Russian export barrels from Azov. Prices for Group I supplies ex-Greece remain unaltered this week, with SN150 and SN500/600 assessed at around $6200/t-$645/t and $760/t-$780/t, respectively.

Middle East Gulf

Red Sea activity reports indicate that the cargo for Sudan may have been covered by incumbent suppliers, who are now in the shipping market for prompt vessels to deliver the 5,000-6,000 ton parcel to Sudanese receivers. There are also a number of varied inquiries for cargoes to move to the Far East, North Africa and even Antwerp-Rotterdam-Amsterdam from Yanbu or Jeddah, Saudi Arabia. This flurry of activity is in addition to the normal contract supplies traveling into Oman and United Arab Emirates ports.

Ramadan is underway, and activity in Middle East Gulf is subdued from the norm. The Holy Month will continue until the last week in June, and will then be followed by the Eid holidays. Nevertheless, many trades are still being considered, mainly moving out of Middle East Gulf from Sitra, Bahrain, and Al Ruwais, U.A.E., for example, and also there are signs of Iranian barrels once again making their way across to the West Coast of India. Exports of Group III material have loaded for Europe in addition to Mumbai anchorage. These cargoes look to be followed up by repeat loadings during June, taking up to 8,000 tons of material to Le Havre, France, and possibly around 6,000 tons into Mumbai.

Cargoes of Group III grades ex-Al Ruwais are assessed at $675/t-$700/t for the 4 cSt and 6 cSt grades, while the same grades from Neste’s Sitra plant are priced around $765/t, all on the basis of FOB. Eight cSt oil is assessed at $665/t-$680/t. These are estimates calculated on a netback basis using nominal freight rates and other overhead costs for cargoes being delivered into Europe and the West Coast of India.

There are still no clear indications from Bahrain as to how the marketing split between Bapco and Neste will pan out. Bapco have appointed a distributor to cover its deliveries of Group III base oils in the United States, but so far no news has been heard of other distributors or agents covering other regions.

Premium Iranian SN500 material has been exported from Bandar Bushehr to India with FOB values expected to be around $675/t for competitive landing into the West Coast. Further availabilities are being pushed for June loading, and the market may see a rekindling of exports from this source. At the same time, a 2,000 ton shipment of bright stock has been fixed for import into Iran from Indonesia or Thailand.

There are no reports this week of Group II imports to the Middle East Gulf, and there is little activity on this front. Group II material is still being offered out of storage in the U.A.E. on an FCA basis at around $795/t-$825/t for light-vis grades, with 600N indicated between $905/t-$940/t CIF.

Africa

Reports from South Africa describe another large cargo loading out of Antwerp-Rotterdam-Amsterdam and the United Kingdom for discharge into Durban. This is to be followed by another parcel of around the same quantity, some 12,000 tons in each case, the second loading perhaps to take place during second half of June.

North African Mediterranean trade is reporting material moving into Morocco and Tunisia, coming out of Spain and Italy. There are also suggestions of a cargo ex-Sicily moving to Alexandria, Egypt, probably servicing bright stock requirements of EGPC.

Nigerian receivers and traders have reported the two Baltic loadings that will arrive into Lagos and Port Harcourt during the second half of June. These parcels appear to have got around the financial problems that continue to surround activities in Nigeria. Problems persist opening local letters of credit, which can then be confirmed by prime European banks, affording traders the ability to collect funds from transactions through normal banking channels rather than roundabout procedures that can involve months of waiting for payments to arrive.

Elsewhere In West Africa, cargoes are about to go into Ivory Coast, Guinea and Ghana, where Group I grades will be supplied to local blending operations and traders who sell the material from shore storage or on a delivered basis. The Ghana supply is for Tema, where the national company has its blending plant.

Prices into Nigeria are estimated to be lower than previously noted. This is based on the FOB rates paid for supplies out of the Baltic and the freight rates substantially less than for smaller cargoes. Values for CIF/CFR delivered base stocks are now calculated at $685/t-$710/t for smaller quantities of SN150, with Russian export SN500 landing at $755/t-$775/t. SN900 is re-assessed at $825/t-$850/t, with lower quality and specified bright stock at $890/t-$920/t, all delivered Apapa and Port Harcourt ports.

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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