EMEA Base Oil Price Report

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Another week where stability seems to be the rule, with few changes to base oil price levels throughout the European, Middle Eastern and African regions.

There have been some tinkerings and adjustments, mainly due to buyers insistence while finalizing a deal, but these changes have been small and stayed within current ranges. The overall sentiment is stable to slightly weak, and the market is flat due to the seasonal break. However, there are hotspots where export deals are being considered and/or demand appears to be steady.

Crude prices have vacillated in a narrow range, with a small weekend spike for dated deliveries of Brent crude. The crude almost broke through the $50 per barrel resistance level, but retreated on Monday to fall below $49. Dated deliveries of Brent crude are posting at $49.95/bbl for September front month, while West Texas Intermediate crude is sustaining the crack at $47.75/barrel. ICE gas oil, representing the products group, moved upwards during the last few days to around $463 per metric ton, some $18 over last weeks level.

Both buyers and sellers keep a close watch on crude and product prices since these factors ultimately affect feedstock and subsequently base oil numbers. However with a general improvement in availabilities for Group I grades and a similar pattern emerging for the rest of this year, the pressure may come for producers to trim prices. Players debate whether this could result in large sweeping changes, or a more gentle process of erosion across the board.

Europe

European FOB prices for API Group I grades are maintained as per last weeks report. Light solvent neutrals are ranging between $650/t-$675/t and are now more available than one to two months back, with some buyers commenting that they think prices for these light grades should be adjusted downwards in light of the availability factor. SN500/600 remains between $750/t-$775/t with bright stock being static and few new deals reported for this grade. Offer levels for European mainstream bright stock are between $825/t-$880/t, but with some prices reportedly being shown at $50/t-$60/t below the published range.

The prices above refer to large cargo-size parcels of Group I base oils supplied or offered FOB ex mainland European supply points.

Local sales of Group I base oil have slowed considerably out of traders and resellers tanked inventories around Europe. Scandinavia and the United Kingdom continue to show distribution of imported Russian barrels, but at a slower rate than a couple of months ago. Sellers report they are not expecting many large purchases of Group I grades until perhaps the end of August, after blend plant operators return from holiday.

The differential between local ex tank or FCA prices and spot export levels remains as last reported, between 80/t-120/t.

Group II prices have also appeared to have found a stable level at which both sellers and buyers are relatively content. Buyers are keeping a close watch on differentials between Group II and Group I prices, as well as on crude and feedstock values, ensuring that sellers do not abuse their position in the market.

Levels are maintained again this week, with light vis products ranging between $625/t-$655/t and 500N and 600N between $825/t-$865/t CIF Antwerp-Rotterdam-Amsterdam; the lower end pertaining to the 500N grades. The resultant FCA selling prices ex European supply hubs are assessed at 725/t-765/t on the light grades, with higher vis grades between 855/t-890/t.

Prices in the Group III camp appear to be stable this week, after a number of distributors trimmed both FCA and delivered prices at the smaller end of the market. Sales remain flat, with some sellers reporting their lowest offtakes for many months. Again this can be put down to the summer recess.

Market share appears to be the important factor at the moment, with some sellers anticipating changes in the Group III base oil scene after September upon resumption of output from Shell and Qatar Petroleums Pearl facility in Qatar. This significant capacity of more than 1 million tons has been absent since February, with other sources gladly taking up the slack. However, material which has been filling the void eventually will have to be marketed and sold elsewhere, amplifying the potential for a market awash with product. This scenario could bring severe pressure to bear on prices, with incumbent suppliers intent on retaining market share.

Price levels are maintained this week and 4 centiStoke and 6 cSt grades remain between $795/t-$825/t with local sales in euros pitched at 690/t-717/t. Prices refer to sales FCA northwestern Europe. Fully approved material FCA Antwerp-Rotterdam-Amsterdam is currently assessed between 790/t-825/t for 4 cSt and 6 cSt grades and 765/t-785/t for 8 cSt material. Levels for sales to major buyers in bulk cargoes can be discounted by as much as $60/t-$75/t below those quoted for the smaller end of the market.

Baltic and Black Seas

In the Baltic the base oil market appears stable with prices remaining flat. However this region could be described as one of the hotspots with a number of traders and Nigerian receivers looking to purchase large slugs of Russian Group I base oils out of this source. The contract and spot short sea trade cargoes which are discharging into Antwerp-Rotterdam-Amsterdam, U.K. and Scandinavia are still in evidence although perhaps not as prolific as before. Some Nigerian buyers and traders are finding it hard to assemble cargoes in the preferred splits and are having to load at two or even three ports to cover requirements.

FOB prices are unchanged with general availability rising. SN150 is more freely available for loading during August, but with positive demand through the summer period, sellers are unwilling to entertain buyers ideas for price reductions, and are sticking to their guns. FOB numbers for quantities of SN150 remain between $585/t-$620/t, with SN500 between $685/t-$725/t. SN900 in large quantities is offered between $755/t-$785/t, and bright stock grades with varying specifications between $825/t-$860/t.

Black Sea trade has reported another large Kavkaz, Russia, loading, but on this occasion the 15,000-ton cargo loading from Greece and Black Sea is destined for United Arab Emirates and Singapore, a repeat of an earlier parcel which followed the same route. Turkish buyers have confirmed a couple of cross-Black Sea movements for Russian barrels out of Azov into Gebze, Turkey, with SN500 priced around $745/t CIF. Northwestern European and also Mediterranean sourced Group I and Group II grades are evidenced moving into Turkish distributors and receivers, with the Group I SN150 at around $650/t-$665/t and SN500/600 around $735/t-$755/t. Where offered, bright stock is assessed out of west Mediterranean sources at around $855/t CIF delivered western Turkish ports. The Group II prices are not revealed.

Middle East Gulf

Red Sea and Middle East Gulf base oil business is still brisk with a confirmation that Middle East Gulf has now become a net exporter, although still very much reliant on imports of both Group I and Group II grades.

The Group I scene is dominated again this week by the Iranian export of a cargo of around 10,000 tons loaded out of Bandar Bushehr for discharge into ports in Pakistan and the west coast of India. FOB levels for the predominant SN500+ grade are expected to be around $660/t, with some smaller quantities of SN150 topping off this parcel at around $585/t.

Imports going into Sharjah in U.A.E. include the Group I material being shipped from Black Sea. How much of the total cargo is being discharged there has not been disclosed, but the grades are envisaged to be SN500 and SN900.

The Group III scene has seen cargoes out of Sitra and Al Ruwais being loaded for shipment into the west coast of India, Europe, U.S. and Far East. There have also been smaller local trades into U.A.E. from Bahrain, but the major news is the expected commencement of Pearl during August, and perhaps full production during September or October.

Prices in respect of Al Ruwais and Sitra supplies remain unchanged this week. FOB numbers are assessed between $645/t-$660/t on 4 cSt and 6 cSt material. These prices apply to supplies coming out of U.A.E. Prices for Bahrain barrels are assessed around $755/t for 4 cSt and 6 cSt material, and Sitra 8 cSt material FOB estimated at $710/t-$725/t. The latter (marketed by Neste) carries full OEM approvals under a branded product, hence the premium to non- or part-approved products. These prices are based on netbacks using nominal freight and general handling and marketing costs for cargoes being delivered into Europe, U.S., west coast of India and Far East. The FOB prices pertain to sales into majors and distributors; prices to individual smaller receivers can be up to $100/t higher.

Group II trade remains subdued but the region is preparing for the new production about to be available from Luberefs upgraded refinery in Yanbu in Saudi Arabia. The availability of Group II grades from this source is on schedule for October, and a number of enquiries from U.A.E. buyers already are circulating. Meanwhile Group II grades offered locally out of U.A.E. hub storage on an FCA or FOB basis remain stable, assessed around $795/t-$825/t for light vis grades and 500N/600N between $905/t-$940/t CIF.

Africa

East Africa and South Africa have both been active this week for cargoes moving into those regions. East Africa receivers have been buying quantities of Group I predominantly in flexies from suppliers in the Baltic, Middle East Gulf and India, with CIF prices for SN150 pitched around $725/t-$750/t, for SN500 at around $820/t-$845/t, and for variant specification bright stock between $945/t-$980/t.

Shipping agents also have confirmed another large cargo of material being shipped from U.K. and Antwerp-Rotterdam-Amsterdam for arrival into Durban sometime during late August or early September.

Mediterranean short sea trade cargoes from European and Black Sea ports into North Africa and East Mediterranean locations, such as Israel, continue to be a focal point for Group I supplies moving into areas once served from Morocco.

Enquiries bloomed after last weeks announcement of a large cargo moving to discharge into multiple ports along the West Africa bight. These locations will see the parcel arrive during August, although part of it may also be destined for Nigeria. The 8,000 tons of four grades loading out of the Baltic seem almost complete, say sources close to this piece of business, with loading being planned for first-half August. With multiple grades involved, the material first has to be ordered and moved to shore storage, now underway. Similarly, enquiries are ongoing for Group I parcels sourced ex the U.S. East and Gulf Coasts, with sellers looking to load during August but facing restrictions due to L/C delays.

Prices are maintained this week with no evidence for changes, with CIF/CFR prices for Group I material for prompt loading remaining between $743/t-$758/t for small amounts of SN150/165, with SN500/600 between $858/t-$873/t. SN900 is to be confirmed between $920/t-$940/t, with lower specification bright stock at $995/t-$1025/t. Bright stock ex mainstream European or U.S. is assessed around $1040/t.

All prices for Nigeria are for base oils delivered CIF/CFR Apapa 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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