EMEA Base Oil Price Report

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European, Middle Eastern and African base oil markets are showing a surprising return to strength, particularly export demand for API Group I products, which has grown almost overnight. This surge has yet to be fully explained, since availability is certainly not a problem; demand simply seems to be outstripping supply, especially for heavier neutrals.

At the same time, crude and feedstock values continue to languish at low levels, with dated deliveries of Brent crude only marginally higher than last week at $ 46.55 per barrel. West Texas Intermediate crude also remains subdued at around $44.15/bbl, both of these quotes from late afternoon trading in London yesterday and both for August front month settlement.

This surprising continued weakness in crude is due in part to expanding production from states such as Libya and Nigeria, which while part of OPEC are excluded from agreed-upon cutbacks. In addition, oil stocks in the United States are at record levels, perhaps suggesting an abundance of crude still exists despite the OPEC and Russian agreement to curb and limit production at least until next the second quarter next year.

ICE LS Gas Oil representing petroleum products, also trades slightly higher than last reported at $421 per metric ton for July front month settlement, an increase of around $10/t.

Europe

Prices for Group I oils appeared to rally this week, some grades as much as $25/t-$40/t. Light solvent neutrals rose some $5/t-$10/t and are now in a range between $650/t and $675/t, basis FOB. SN500 and SN600 remain buyers favorites, rising some $20/t to $750/t-$785/t. Bright stock is unchanged at $825/t-$880/t, though some sellers complain that margins are poor.

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

Group I prices for sales within mainland Europe, the United Kingdom and Scandinavia were steady this week but pressure appears to have shifted from downward to upward as buyers and sellers discuss levels for July. Sellers are looking to move some prices higher, in line with export levels, but their ideas are countered by the fact that base oil demand is expected to stall the next couple months, which are a popular time for holidays among Europeans.

The gap between local ex-tank prices and exports widened the past week due to higher export values and is now 80/t-120/t.

Reports indicate that Group II markets are stable, with sellers keeping a close eye on Group I movements and gauging whether there is leeway for markups. At the same time, buyers say feedstock costs have fallen significantly the past couple months so that cuts are in order. For this week, therefore, prices are unchanged, with light-viscosity grades at $625/t-$655/t and 500N and 600N at $825/t-$865/t, all CIF Antwerp-Rotterdam-Amsterdam. FCA prices are around 725/t-765/t for light grades and 855/t-890/t for heavies.

Group III prices within the confines of the European markets are maintained this week, but some suppliers claim there is upward pressure for levels that will be set for July, particularly at the smaller end of the market for FCA sales. Others contend, though, that the market will go long now that the Pearl plant in Qatar is resuming production. Four centiStoke oils are pitched between $810/t-$840/t (740/t-770/t), while. 6 cSt grades are $840/t-$865/t (770/t-795/t), FCA northwestern Europe. Grades with full ranges of finished lubricant approvals sold FCA Antwerp-Rotterdam-Amsterdam remain 810/t-845/t for 4 cSt and 6 cSt and 790/t-800/t for 8 cSt.

Baltic and Black Seas

There are a number of prompt inquiries being circulated in the Baltic for large parcels of Russian, Belarusian, and Polish exports to go into Nigeria and other West Africa destinations. In addition to these large cargoes more routine smaller parcels are again underway into Antwerp-Rotterdam-Amsterdam and the east coast of the U.K.. A number of contract and spot cargoes are to be loaded during the first half July for these short-sea destinations, with some 20,000 tons already fixed for prompt loading.

Prices have risen, perhaps in response to the hikes in Western and Central Europe, but due to strong demand. FOB levels for SN150 are now assessed at $585/t-$620/t for Russian material. SN500 is being offered between $685/t-$735/t and large quantitites of SN900 at $755/t-$785/t. Other grades such as lower spec bright stock is heard at $825/t-$860/t, close to mainstream levels, perhaps because of the cost savings of single loadings on larger cargoes bound for West Africa.

Reports from the Black Sea indicate plans to load a number of large cargoes ex-Kavkaz, Russia, for Antwerp-Rotterdam-Amsterdam. This material is being bridged for onward transhipment along with other grades going into South American receivers. Parcels of 8,000 to 12,000 tons will be considered depending on availabilities of base stocks and suitable shipping.

Barrels sourced from European ports in the Mediterranean into Turkish receivers appear to have resumed with at least two parcels totaling around 10,000 tons of Group I grades loading for discharge into Derince and Aliaga. Suggestions of a lull in the Turkish base oil markets due to the holiday season have been denied by some blenders advising they have never been busier, perhaps due to some restructuring of the local market. Greek-sourced material appears to be in demand, with SN150 reported at $645/t-$675/t and co-loaded SN600 at $765/t-$785/t, basis CIF.

SN150 and SN500 are being offered from Azov, Russia, at around $625 and $725/t delivered CIF Gebze, Turkey,.

Middle East

With the end of Ramadan and commencement of the Eid holiday, Red Sea activity has been confined to inquiries for regular loadings of Group I material out of Yanbu’ al Bahr and Jeddah, Saudi Arabia, moving to Oman, the United Arab Emirates, India and the Far East.

Middle East markets, particularly in the Middle East Gulf, have been relatively active over the last month, but with many Muslim players on holiday this week for the end of Ramadan, reports were subdued. Planned loadings for all types of base oil show little sign of abatement, with movements from Sitra, Al Ruwais and southern Iran all featuring in what is now described as a major supply hub.

Iranian SN500 is loading out of Bandar Bushehr for the West Coast of India and smaller local cargoes for Hamriyah, U.A.E. Prices have not been disclosed yet, but indications from U.A.E. sources suggests premium SN500 is loading at $695/t-$720/t, basis FOB. Inquiries suggest an arb may have opened for Russian exports from Azov into the U.A.E., with SN150, SN500 and SN900 priced around $665/t, $720/t and $800/t respectively.

Exports of Group III are reported coming out of Bahrain and Abu Dhabi, U.A.E. Prices have been assessed for all sources and are now considered as follows. Four and 6 cSt oils from Al Ruwais, U.A.E., are expected to be between $665/t-$680/t, FOB. Prices for oils from Sitra may be split between material sold under the auspices of Neste and the 55 percent of output that will now be marketed directly by Bapco and its distributors. Because it has a full range of finished lubricant approvals, Neste barrels are estimated higher at $775/t for the 4 cSt and 6 cSt grades, while Bapco baarrels may be priced close to those coming out of Al Ruwais. Eight cSt material is estimated at $735/t-$750/t, FOB. These values are calculated on a netback basis, using nominal freight rates and other overhead costs for cargoes being delivered into Europe, the U.S. and the West Coast of India, and they cover all types of sales, for direct to third parties, to majors and also to distributors.

Group II continues to make steady inroads into Middle East Gulf markets, but with Far East producers looking after their domestic markets when supply is tight, and U.S. sources focused nearer to home, the number of offers is not especially high now. This may leave the stage clear for new production from Yanbu, which is due onstream later this year.

Prices are unchanged this week for imported Group II grades offered out of hub storage in the U.A.E. on an FCA basis: $795/t-$825/t for light-vis grades and $905/t-$940/t for 500N and 600N.

Africa

Cross-Mediterranean trade is quiet, but there have been a number of inquiries from receivers in Morocco, Tunisia, Algeria and Egypt, all for small to medium-sized cargoes of Group I base oil, although it is rumored that Moroccan sources are looking at the possibility of taking Group II grades, too. There has also been a large number of inquiries from West African receivers for large Group I cargoes to arrive during July and August, Sources being considered are U.S. Gulf and East coasts, Baltic and Mediterranean ports and Northwestern Europe, including the U.K..

Considering all the inquiries on the table, plus cargoes either loaded or about to load, some 80,000 tons of Group I base oils may find their way into this market, enough to tighten Group I supply in Europe and the U.S.

Prices are becoming more defined more each week. CIF/CFR values for parcels loading now will be between $738/t-$754/t for small quantities of SN150/165 and $855/t-$868/t for SN500/600. SN900 is estimated between $918/t-$940/t, with lower quality bright stock at $998/t-$1025/t. Bright stock from the U.S. or Western and Central Europe is assessed at $1045/t.

Prices for cargoes being negotiated now and loading during July are assessed $20/t-$40/t higher for all grades except bright stock. All prices are for base oils delivered CFR/ CIF to Apapa and Port Harcourt, 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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