EMEA Base Oil Price Report

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API Group I trade has eased back into routine as participants remain wary of large parcel transactions in and out of Europe due to uncertainty in crude and feedstock markets.

After a 10-month low last week, crude prices made a rapid comeback, with dated deliveries of Brent crude at $49.70 per barrel for September front month settlement, and West Texas Intermediate crude up by some $3.20 per barrel to $47.20/bbl for August front month. ICE LS Gas Oil is around $452 per metric ton, up more than $30/t from last week.

While United States crude production fell for the first time in some months, triggering the latest rises, observers forecast that crude may retreat during the holiday period this week. Most brokers are bearish, suggesting that there are more negatives than positives, with many foreseeing prices around $45/bbl for some time.

The crude upswings may not manifest in base oil markets. However, pressure to reduce prices has eroded, with most sellers confidently repeating original offers.

Group I FOB prices are maintained, with light solvent neutrals at $650/t-$675/t and SN500/600 at $750/t-$785/t. Bright stock also remains steady at $825/t-$880/t.

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

Europe

Throughout Europe and Scandinavia, it appears that only a few players were affected by July 1price changes. Most prices have been left unchanged, with many blenders cutting back on lifted quantities, perhaps in preparation for the vacation season in August. Prices may remain stable until September.

The differential between local ex tank prices and export remains 80/t-120/t.

Suppliers are already gearing up for the introduction of the first large source of Group II within Europe as major new production in Rotterdam, the Netherlands, is reportedly on schedule to start in the fourth quarter of 2018. Producers are importing material of the same specs to line up customers to take output from the new facility. This supply hub is also anticipated to become the source for all of this majors Group II customers in Africa.

As they were in June, prices seem mostly static so far in July. There have been fewer source increases applied over the past few weeks, due mainly to falling raw material costs and lower feedstock numbers. Levels remain $625/t-$655/t for light vis grades. Cuts of 500 neutral are around $825/t and fully approved 600N goes for upwards of $865/t, both CIF Antwerp-Rotterdam-Amsterdam. FCA selling prices are 725/t-765/t in respect of the light grades, with higher vis grades between 855/t and 890/t.

Group III levels remain unaltered, but some suppliers, or at least their distributors, are trying to push prices higher, from the bottom of the market where they were when these grades were being introduced last year. There is indication that some prices may have risen from July 1, but it is too early to gauge by how much and who is involved.

Sources in the Middle East Gulf have suggested that the Pearl project restart will not be affected by the current spat between Gulf Cooperation Council and Qatar.

Prices for the 4 centiStoke and 6 cSt grades are unchanged until further information about possible July 1 increases comes to light. It is also contended that July and August will be relatively quiet in terms of supply of Group III grades, and real activity may not happen until September. Pitches remain at $810/t-$840/t, with local sales in euros at 740/t-770/t for 4 centiStoke grades. Six cSt grades are $840/t-$865/t (770/t-795/t), FCA northwestern Europe. Fully approved material FCA Antwerp-Rotterdam-Amsterdam is 810/t-845/t for 4 centiStoke and 6 cSt grades with 8 cSt material at 790/t-800/t.

Baltic and Black Seas

Enquires for Baltic-sourced base oils are still developing, but only one so far has been confirmed. A vessel fixed clean to lift around 9,000 tons of mixed Russian export grades for Apapa, Nigeria, joining the other sizeable parcels out of the Baltic over the last month. Two other smaller cargoes have been commissioned for both the west and east coasts of the United Kingdom, and this week sees another couple of vessels being fixed for parcels to move into Antwerp-Rotterdam-Amsterdam.

FOB prices now appear to have flattened. Demand remains positive in the Baltic, even against the backdrop of a seasonal lull. FOB levels for SN150 are once again $585/t-$620/t with SN500 offered at $685/t-$735/t. SN900 in large quantities is $755/t-$785/t. Other grades, such as bright stock 150, is $825/t-$860/t, but with lower specifications than mainstream material produced in Europe and the United States.

Reports from Turkey and the Black Sea reinforce rumors that prices have risen from Russian distributors and exporters. It was deemed that levels for Russian Group I grades were lagging behind mainstream European levels and Baltic selling prices. Suggestions are that prices have moved up by $25/t-$40/t, primarily in respect of SN500. Azov barrels of SN150 and SN500 are now being offered at around $645 and $760/t delivered CIF to Gebze, Turkey.

Further large cargoes ex Kavkaz, Russia, are being considered for both for Antwerp-Rotterdam-Amsterdam, Middle East Gulf and Far East. Cargoes between 8,000 and 15,000 tons could be an option depending on availabilities and suitable vessels.

Mediterranean sources have confirmed further contracted shipments being planned for Derince, Turkey, but in the meantime, bridging supplies are being made from Aliaga to maintain inventories. Without change, Greek material on a CIF basis is $645/t-$675/t for SN150 and $765/t-$785/t for SN600.

Middle East Gulf

The Eid holidays have reduced activity in the Red Sea and Middle East Gulf, with the former only reporting routine shipping enquiries from Yanbu and/or Jeddah for supplies to the Far East and the west coast of India. Also, vacation season for many expats living in the Middle East has started, with many leaving until after the end of August.

Large slugs of Group III are being assessed for loading out of Sitra, Bahrain, and Al Ruwais, United Arab Emirates for the Far East, India, Europe and U.S. However, in addition to local availabilities of these grades, at least two medium to large parcels of Group III have arrived from Far East and U.S. sources. These grades will be competing with material produced in Bahrain, Abu Dhabi, and in the not so distant future, from Qatar – although most of the production from the Pearl installation traditionally goes to partnership affiliates.

Group III prices continue to be logged and refined but not disclosed. Al Ruwais grades have apparently been awarded further approvals from some undetermined original equipment manufacturer or additive manufacturer, and as a result, loaded numbers are $680/t-$695/t FOB in respect of the 4 centiStoke and 6 cSt grades.

Sitra levels may be divided between the approved, branded Neste grades and the Bapco material which is understood to not carry the same approvals. Prices ex Sitra for the Neste barrels are estimated at around $775/t for the 4 centiStoke and 6 cSt material, whilst the Bapco barrels will be priced similarly or perhaps just below those coming out of Al Ruwais.

Sitra 8 cSt material is estimated at $735/t-$750/t FOB. These are netback levels calculated using average or nominal freight rates and other overhead costs for cargoes being delivered into Europe, U.S., the west coast of India, and Far East, and these costs are associated with all types of sales: direct to third parties, to majors, and also to appointed distributors.

In addition to the Group III supplies, Iranian SN500+ continues to load for the west coast of India along with smaller parcels destined for the U.A.E., which will either be used in local blending or sent onwards to receivers in eastern and southern Africa. This trade will mainly be carried out in flexies, although some supplies are still made in light steel barrels.

U.A.E. sources indicate that typical FOB prices for SN500 are $695/t-$720/t, with little change. Black Sea-sourced SN150, SN500 and SN900 could possibly be landed into U.A.E. at around $685/t, $755/t and $820/t respectively.

Group II supplies from the majors continue to figure more highly in Middle East Gulf markets, and with Saudi Arabia Group II grades coming within a few months, the region is bracing itself for more transition from Group I to these grades. With Far Eastern and U.S. marketers expressing a tight market locally in respect of Group II base oils, the ingress from Yanbu may be greeted with some relief by buyers in the Middle East Gulf regions.

Group II grades being offered locally out of storage in U.A.E. on an FCA basis remain at $795/t-$825/t in respect of the light vis grades, with 500N/600N between $905/t and $940/t CIF.

Africa

Enquiries from Morocco and Tunisia still appear to be uncovered, with receivers perhaps delaying acceptance of inventory until after summer.

With all vessels loaded and the few enquiries still to be covered from the Baltic and U.S., the Nigerian market could have around 100,000 tons of base oils coming between mid-June and late August. These quantities will tighten avails of Group I base oils throughout the Baltic and perhaps the U.S. markets.

Prices are steadily increasing for material delivered into Nigeria and other West Africa locations, since FOB numbers have been rising over the last few weeks and months. Although these are not pronounced increments, they will ultimately affect prices.

CIF/CFR delivered prices for prompt loaded material will now be discharged between $743/t and $758/t for the small amounts of SN150 and SN165, with SN500/600 between $858/t and $873/t. SN900 is estimated at $920/t-$940/t, with lesser-quality bright stock at $995/t-$1025/t, depending on loaded quantity and source. Bright stock ex mainstream Europe or the U.S. is around $1040/t.

Cargoes negotiated during July and August are assumed to be $10/t-$25/t higher for each grade including bright stock, which previously had been assumed to remain flat.

All prices for Nigeria 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.

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