EMEA Base Oil Price Report

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European, Middle Eastern and African base oil markets are relatively stable this week, with only a few glitches and hitches. Some sources described Group II availability in Europe as adequate but not abundant, while Group I supply in these regions seems to be easing despite a number of large shipments.

The hot topic this week was the failure of crude oil prices to rally in the wake of Qatar being ostracized by several neighboring nations. OPEC members counted on crude climbing after their Vienna agreement to maintain production cutbacks through the first half of 2018.

Dated deliveries of Brent crude posted yesterday at $48.65 per barrel for August front month settlement, down around $1.50 from last week, while West Texas Intermediate retreated to around $46.35/bbl for July settlement. LS Gas Oil posted at $430 per metric ton in late Tuesday trade in London, exactly the same as last week.

Europe

Responding to improved availability, API Group I base oil prices within Europe eased off at the high ends of their spreads. The lows remain unchanged this week, suggesting a market that is not drifting but re-aligning to account for wider availabilities.

Light solvent neutrals were priced between $640/t and $675/t, some $10/t lower on the high end, with some buyers bidding much lower numbers that so far have been fended off by suppliers. SN500 and SN600 underwent a similar adjustment to $730/t-$770/t. Bright stock is also showing flexibility, perhaps a little weaker across the board at $775/t-$800/t, but with higher offers pitched sporadically. At the same time there are rumors of bright stock available for around $750/t, but this may be for lower spec material loading in smaller quantities out of the lower Baltic Sea.

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

Domestic European markets were reported stable this week, not surprising since many sellers and buyers have agreements setting values for the entire month. The past week saw approximately 20,000 tons of Russian exports coming out of the Baltic, nearly half going to the east coast of the United Kingdom and the remainder discharged into Antwerp-Rotterdam-Amsterdam.

Prices appear to have some downward pressure due to greater availability and the likelihood of lower demand over the summer recess. Lower crude and feedstock costs would reinforce the potential for Group I prices to erode.

Differentials between local ex-tank prices and spot exports widened to 70/t-110/t because of the dip in export offers.

Group II prices around Europe remain buoyant, and while product cannot be considered short, all the considerable quantities being imported are being sought after by blenders keen to expand their use of Group II. Sellers are trying to seed the market by increasing import quantities.

Some sources suggested that the summer lull may cause downward pricing pressure for Group II oils, too, since Group I oils have weakened and raw material costs dropped. Prices are unchanged this week, with light-viscosity grades assessed $625/t-$655/t and 500 neutral and 600N at $825/t-$865/t, basis CIF Antwerp-Rotterdam-Amsterdam. FCA selling prices are therefore around 725/t-765/t for light grades and 855/t-890/t for heavier grades, taking account of handling, storage and marketing distribution costs.

Group III prices remain stable throughout Europe this week with the news that Middle East Gulf produced imports will be maintained around current volume levels, coupled with the news that the Pearl plant in Qatar has initiated start-up and that production may start to become apparent during July. This welcome re-introduction of GTL Group III+ grades will take pressure off the market.

It is still difficult to say how the resumption of production at the Pearl gas-to-liquids plant in Qatar will affect Group III markets. But additional Group III capacity is expected to come on stream later this year, and that could help make supply long again, at least in the short term

Group III prices are flat again this week, with 4 centiStoke material at $810/t-$840/t (740/t-770/t) and 6 cSt at $840/t-$865/t (770/t-795/t), basis FCA northwestern Europe. Fully approved material, FCA Antwerp-Rotterdam-Amsterdam, is 810/t-845/t for 4 cSt and 6 cSt grades and 790/t for 8 cSt.

Baltic and Black Seas

Apart from the smaller cargoes already mentioned going into Antwerp-Rotterdam-Amsterdam and the east coast of the U.K., there have been no further reports of mega cargoes in the 12,000 ton range exiting the Baltic for West Africa. There are rumors of negotiations taking place to lift at least one more large parcel from Baltic sources, but this may not happen until late June or even early July.

Prices are slightly lower this week, but with few firm offers reported, its likely that Baltic numbers will simply follow the general European drift. SN150 is now $560/t-$620/t with the higher end of this range pertaining to higher spec Belarus material. SN500 is $625/t-$675/t and SN900 $698/t-$775/t, the upper end relating to FCA levels for small volumes loaded in flexitanks.

Black Sea reports describe another large with 11,000 tons of Group I base oils being loaded on an STS basis out of Kavkaz, Russia, for discharge into Antwerp-Rotterdam-Amsterdam. This is the second such movement of this size in a few months. This rather unusual trade is perhaps bridging supplies of SN900 into Antwerp-Rotterdam-Amsterdam for shipment to West Africa. These cargoes are in addition to the other Russian export parcels often loaded out of the Black Sea for United Arab Emirates and Singapore.

The usual contracted supplies are moving from Greece to Izmit and Derince, Turkey, European shipments of Group II and Group III are reportedly making their way into the country, too. Prices for Group I oils ex-Greece are down slightly this week to $610/t-$635/t and $750/t-$770/t, respectively, for light and heavy grades.

Middle East Gulf

The Holy Month of Ramadan is almost halfway done, and many sources were unavailable this week, so reporting from Middle East Gulf and other affected locations affected is rather limited.

A couple of smaller cargoes of re-exported Iranian SN500 were making their way from the United Arab Emirates into Pakistan and the West Coast of India. There were also numerous fixtures being considered for Group III grades out of Sitra, Bahrain, and Al Ruwais, U.A.E. Three or four cargoes totaling close to 20,000 tons was being considered for shipments from the U.A.E. to India and the Far East, indicating this trade may have expanded during the month.

Prices for cargoes of Group III grades ex Al Ruwais are re-appraised this week at $665/t-$690/t for 4 cSt and 6 cSt grades loading FOB Al Ruwais. Neste barrels from Sitra are assessed at $785/t FOB for the same two grades, thanks to a larger number of finished lubricant approvals from OEMs and major additive companies. Eight cSt oils are assessed at $745/t-$760/t, FOB. These prices are 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 no reports of premium Iranian SN500 material being loaded for export, but barrels will reportedly be available after the Eid holiday. Prices have not yet been indicated, but it seems likely that they will track other markets and may initially come out slightly lower than last reported, with FOB levels around $660/t. A small quantity of bright stock – around 2,000 tons was imported to Iran from Indonesia.

Group II activity appears flat with neither Far East producers nor U.S. exporters active in the market now. Prices are therefore left unchanged, though one U.A.E. source suggested supplies may be tightening. Offers for grades stored in the U.A.E. are still being pitched at $795/t-$825/t on an FCA basis for light neutrals with 600N indicated between $905/t-$940/t, CIF.

Africa

Mediterranean trade into North Africa appears to be thriving with reports of cargo inquiries from Israel, Syria, Egypt, Morocco and Algeria all on the table looking for shipments to arrive in late June or early July. A large cargo being considered for import into Syria would be the first European-sourced parcel for some time into this market. It is believed that the market has relied on base oils from sources such as Russia, Iran and Uzbekistan during the civil strife there.

Israel appears to have prompt demand for around 7,000 to 8,000 tons of Group I, perhaps due to problems with local production at its lone base oil plant.

West Africa trade has picked up again after two large cargoes were loaded out of the Baltic a couple weeks ago. These parcels carry around 25,000 tons total and will arrive into Lagos and Port Harcourt, Nigeria, in late June or early July. Reports say financial restrictions have at least eased, allowing a few traders to consider selling large parcels of Group I material into Nigeria. One such cargo has been fixed out of the East Coast of the U.S. with 12,000 tons of Group I grades on board, the largest part said to be bright stock and the rest consisting of SN600 and SN165. A 4,000 to 5,000 ton cargo of Group I has been loaded out of the U.K., with heavier grades again forming the largest part.

Receivers in various locations in Cote d’Ivoire, Guinea and Ghana are in the process of discharging quantities from one vessel that carried partial cargoes for all three groups of buyers.

Prices for base oils landing into Nigeria are assessed based on the Baltic material loaded in the two large cargoes and the parcels from the U.S. East Coast, which loaded during first week of June, calculated using FOB rates paid for the supplies out of the Baltic, known freight rates and unconfirmed CIF/CFR prices upon landing in Nigeria. Small quantities of SN150/165 are assessed at $680/t-$695/t, Russian SN500 at $745/t-$765/t and U.S.-sourced SN600 at around $780/t. SN900 is assessed between $810/t-$840/t with lower quality bright stock at $890/t-$920/t, all delivered Apapa and Port Harcourt ports. Premium bright stock from the U.K. source is considered to be priced higher – $940/t-$965/t – due its quality and higher freight rates.

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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