EMEA Base Oil Price Report

Share

Base oil markets in Europe, the Middle East and Africa would likely be stable and might be set to remain that way were it not for growing concerns around crude oil and feedstock prices.

Crude fell sharply during the first part of this week, defying mainstream expectations about OPECs agreement to curb crude output, a strategy joined by Russia and other large non-OPEC producers. The campaign is obviously not having the desired effect, as crude prices have fallen steadily lately. The rift between Qatar and some of its neighboring nations is also damaging the plan.

Dated deliveries of Brent crude traded at $45.95 per barrel in late Tuesday markets for August front month settlement, while West Texas Intermediate fell to $43.50/bbl, also for August front month. LS Gas Oil, representing refined petroleum products, dipped to $415 per metric ton, some $13/t lower than posted last week.

With crude down around $3/bbl from last week, some base oil buyers are calling for prices to be reviewed and lowered, despite tight supply in some areas. Perhaps it is too soon to gauge the effects of crude movements against base oil availability, but raw material costs usually hold sway sooner rather than later.

Europe

European prices remain unaltered this week, partly because sellers and buyers are floundering, unsure whether prices will rise or fall and by how much. Light solvent neutrals are in a range between $640/t and $675/t, while SN500 and SN600 are priced $730/t-$770/t. Having started to weaken over the past few weeks, bright stock is coming under even more downward pressure. Sources report offers of $770/t-$790/t, narrowing the gap between this grade and heavy neutrals to perhaps the lowest differential witnessed for some time. It must be added that offers from some suppliers are still priced above $800/t, although these are believed to be for smaller parcels being loaded alongside larger slugs of heavy neutrals.

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

Local markets throughout Europe also remain stable with buyers eager to discuss adjustments before July 1. Sellers are avoiding such conversations and are using the upcoming holiday period to dodge Group I markdowns. Availabilities appear to have improved considerably from two months ago when some Group I grades were in short supply. The differential between local ex-tank prices and spot export values is unchanged at 70/t-110/t.

Two large Group II cargoes loaded out of the United States Gulf of Mexico Coast the past week for discharge into ports in northwestern Europe. These total some 80,000 tons and will bolster the availability of these grades throughout Northern Europe, likely going to contract sales, which are continually growing.

Here, too, calls for markdowns are spreading, but so far prices are unchanged from last week: $625/t-$655/t for light-viscosity grades between 100 neutral and 220N, and $825/t-$865/t for 500N and 600N, basis CIF Antwerp-Rotterdam-Amsterdam. FCA prices are around 725/t-765/t for light grades and 855/t-890/t for heavy neutrals.

Group III prices are also unchanged at $810/t-$840/t (740/t-770/t) for 4 centiStoke oils and $840/t-$865/t (770/t-795/t) for 6 cSt, all on the basis of FCA Northwestern Europe. Group III grades with full ranges of finished lubricant approvals remain priced at 810/t-845/t for 4 cSt and 6 cSt grades and 790/t-800/t for 8 cSt, where available.

Cargoes are being fixed for loading out of European and Middle East Gulf sources for distribution into European markets. Some players predict this segment will return to surplus as the Pearl gas-to-liquids plant in Qatar returns to normal production levels and as new capacity is launched later this year. Others contend that demand has grown enough to soak up whatever new barrels become available.

Baltic and Black Seas

A 10,000 ton cargo reported under negotiation last week has been fixed for shipment from the Baltic to Nigeria. It was to be loaded around the end of June or early July but was brought forward because of shipping availability and the possibility that receivers in Lagos would run out of stock. A smaller parcel, combined with material loading in Northwestern Europe, has been sold into Algeria. There are plans for more cargoes to move into the United Kingdom and Antwerp-Rotterdam-Amsterdam, but firm fixtures have not been disclosed.

Prices here are also unchanged at $560/t-$620/t for SN150, $625/t-$675/t for SN500 and $698/t-$775/t for SN900.

Reports from the Black Sea say a 12,000 ton cargo has been loaded on an STS basis ex-Kavkaz, Russia, for discharge into Rotterdam, on the heels of two similar recent shipments.

Other reports suggest shipments from the Mediterranean into Turkeys west coast stuttered the past week, perhaps in deference to holidays, including Ramadan. Some Group I material is still finding its way into Derince, Turkey, mainly from Greek sources and priced as reported previously at $610/t-$635/t and $750/t-$770/t for SN150 and SN600, respectively, on a landed CIF basis.

Russian export parcels are being offered out of Azov into Turkish receivers, but although prices are keener than for Mediterranean-soured material, blenders in Turkey are opting for the higher-spec base oils from the Med. SN500 is being offered out of Azov at around $725/t delivered Gebze, Turkey.

Red Sea reports are few this week, and with Ramadan nearing its end, many players are gearing up for the Eid holiday which will follow the end of Ramadan late next week.

Middle East Gulf

With the Holy Month nearing its end, activity in the Middle East might be expected to resume, but extremely high temperatures and more holidays mean trading may remain slow. More buyers and sellers were at their desks this week, but many are seeking price information.

A couple medium-sized parcels of Iranian SN500 were loaded or are loading during second half June for shipment to the West Coast of India and Pakistan. These are loading out of Bandar Bushire with prices not yet to be confirmed but rumored to be around $660/t-$680/t, FOB. There are few reports of any imported Group I cargoes being fixed for June and July.

Exports of Group III continue to be reported coming out of Al Ruwais, United Arab Emirates and Sitra, Bahrain. A shipment of 10,000 tons the UAE was announced this week in addition to 20,000 tons loaded earlier this month for the West Coast of India and the Far East.

Updated information pegs prices for cargoes of Group III grades ex-Al Ruwais at $655/t-$670/t for 4 cSt and 6 cSt grades, basis FOB. Sitra prices may be assessed higher, around $775/t and $735/t-$750/t for 8 cSt, due to a wider range of approvals. These are estimates calculated on a netback basis, using nominal freight rates and other overhead costs for cargoes being delivered into Europe and India.

Group II markets around the Middle East Gulf are eagerly awaiting the launch of production at Luberefs plant in Yanbu al Bahr, Saudi Arabia. This will be seen as a major new source of Group II for the region and will immediately open opportunities to replace Group I-Group III blends. Some UAE blenders have said they will switch during the second half of this year.

Group II imports to the region are currently offered out of storage in the UAE on an FCA basis. Local prices are maintained this week at $795/t-$825/t for light-viscosity grades and $905/t-$940/t for 500/600N, basis CIF.

Africa

Mediterranean and North Africa trade is quiet this week, although one parcel from Southern Spain was reported moving into Alexandria, Egypt, possibly to cover the EGPC requirement for cargoes of bright stock. The Syrian inquiry remains open as traders look at vessels for shipping into a port with shore storage.

South African sources reported that another large cargo from Northwestern Europe and the U.K. is being considered on a prompt basis. This would arrive into Durban during early August to supplement stocks that are currently discharging from the same European sources.

Nigerian receivers announced the purchase of a parcel loaded out of the Baltic this week and expected to arrive in mid-July. This parcel is in addition to two other large cargoes loaded ex-Baltic at the end of May, and it means 50,000 to 55,000 tons of base oil will arrive in Nigeria, which desperately needs re-stocking. The tally includes cargoes from the U.S. East Coast and the U.K. These cargoes include SN150, SN165, SN500, SN600 and bright stock.

Prices for cargoes landing in Nigeria vary but can be broadly assessed based on the Baltic shipments and the U.S. parcel. CIF/CFR prices will now be between $668/t-$698/t for relatively small quantities of SN150/165, with Russian SN500 landing between $734/t-$767/t and U.S.-sourced SN600 at $782/t. SN900 is assessed at $785/t-$825/t, with lower quality bright stock at $890/t-$920/t. Bright stock from either the lower Baltic or the U.S. is considered to be around $885/t, while U.K.-sourced material is $940/t-$965/t, because of its smaller size. All prices are for base oils delivered CFR/ CIF Apapa and/or Port Harcourt.

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