EMEA Base Oil Price Report

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After a brief flutter of activity last week, base oil markets quieted across much of Europe, the Middle East and Africa, except for West Africa, which has seen a flurry of buying.

Buyers and sellers are watching for signals about the direction of crude oil and feedstock prices since those should provide clues of where base oil prices will head.

Crude stood virtually still the past week, with dated deliveries of Brent crude posting late yesterday at $52.25 per barrel in London for October front month trade. West Texas Intermediate dipped to $49.25/bbl still for September front month settlement. LS Gas Oil, a marker for petroleum products, was quoted on the London ICE market at $481 per metric ton for August front month settlement, $10 lower than last week.

Europe

European prices for API Group I base oils are maintained this week due to many players being on vacation, a situation that will probably continue until early September, when Europeans return from holiday. Export markets are quiet except for inquiries from Nigeria. Light solvent neutrals are pegged between $660/t and $685/t, with no indications of tightness. Heavier products such as solvent neutral500 and SN600 are still $735/t-$755/t. Bright stocks are steady with offers for European mainstream versions at $825/t-$880/t, but some buyers calling for markdowns as they try to close deals for large parcels that would go to West Africa.

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

Prices for local Group l sales are also unchanged and the differential between local ex-tank or FCA prices and export values is maintained at 85/t-130/t.

Group II prices were also unchanged throughout Europe, even after announcements of hikes in the United States by one major importer to Europe. In fact, pressure appears to be mounting for suppliers to consider price cuts due to declines for Group l oils in recent months. Group I values eroded slowly and steadily during that period, and Group IIs may come under similar pressure during this slow season.

Light-vis Group II are $625/t-$655/t, while 500 neutral and 600N are $825/t-$865/t, basis CIF Amsterdam-Rotterdam-Antwerp. FCA prices ex-main European main supply hubs are still assessed at 725/t-765/t for light grades and 855/t-890/t for heavies.

Europes Group III segment is reportedly stable again, but a dark cloud is growing over suppliers as a return to over-supply seems inevitable after the resumption of output from Shell and Qatar Petroleums giant Pearl plant in Ras Laffan, Qatar. At least some producers are hoping that Group III oils will be so attractive in price terms that current users will increase offtake and soak up the surplus.

Prices for 4 centiStoke and 6 cst grades are $795/t-$825/t and 690/t-717/t for local sales, basis FCA Northwestern Europe. Oils with full slates of finished lube approvals are 790/t-825/t for 4 cSt and 6 cSt grades and 765/t-785/t for 8 cSt, all FCA Amsterdam-Rotterdam-Antwerp. Major buyers taking large bulk cargoes may be discounted by some $60/t-$75/t.

Baltic and Black Seas

Activity in the Baltic includes a number of Nigerian deals being closed and some others in the pipeline nearing confirmation. The two inquiries for Russian exports from Riga, Latvia, and St. Petersburg into the U.S. Gulf Coast appear to have been ditched. Prices are left unchanged this week after a number of tweaks reported last week. SN150 is at $625/t-$645/t and SN500 at $685/t-$725/t. SN900 is now $795/t-$825/t and bright stock $860/t-$890/t. Bright stock is generally available only in small quantities unless pre-ordered from one of the supplying refineries, but one supplier in the southern Baltic has larger quantities and participated in a 12,000-ton cargo that was loaded at two ports and that is now moving to Nigeria.

Sources report a number of cargoes of Group l, II and III oils arriving into Turkish ports from suppliers in Northwestern Europe and the Mediterranean. Parcels from Azov, Russia, are also being sold into Gebze and Izmit, Turkey, and barrels have been loaded on an STS basis out of Kavkaz, Russia. Prices for Russian exports of SN500 are assessed at around $755/t, basis CIF, depending on parcel size and freight costs. Cargoes of Group l grades loading ex-Med sources are being priced around $685/t-$720/t for SN150 and $775/t-$795/t for SN500 into Turkish receivers. Bright stock offers from Mediterranean sources are heard at $865/t-$885/t, CIF Turkish ports.

Red Sea reports suggest that the Jordanian inquiry for Aqaba, Jordan, has been covered but from where is only a guess at this point. Offers were made from Greek suppliers and also perhaps from Red Sea sources. A cargo of 12,000 to 13,000 tons of multiple grades has been identified loading out of Yanbu and Jeddah, Saudi Arabia, for contracted receivers in Fujairah and Sharjah, United Arab Emirates, and Oman.

Middle East Gulf

Markets around the Middle East Gulf are relatively quiet, with many of the usual players missing for the rest of this month. No further news has been gleaned regarding the possibility of moving material out from Basra, Iraq, although sources in the UAE have identified a possible receiver for such a cargo. Being the first reported bulk loading of base oils out of Iraq for some time, this has aroused interest from Iranian suppliers who have denied that such movements can be taking place. Further clarification is being sought and will be reported in next week’s column.

The parcels of Iranian base oils reported moving from Bandar-e Emam Khomeyni and Bandar Bushehr, Iran, into Sharjah and Indias West Coast all appear to be fixed into Hamriyah, UAE, with no new loadings reported for Pakistan or India. UAE sources have suggested that prices are as previously reported: around $660/t for premium SN500 and $630/t for SN150, on an FOB basis. Some other sources suggested that premium SN500 is being priced lower – around $625/t – to compete with imports from the U.S. Gulf Coast.

Group III cargoes continue to load out of Al Ruwais, UAE, for Northwestern Europe and for Mumbai anchorage. These follow the fixture of a 30,000-ton cargo loaded out of the Pearl installation for export into the U.S. Gulf. Parcels of Group III are also loading from Sitra, Bahrain, for distribution in the West Coast of India, Europe and the Far East.

Prices are thought to be coming under pressure from receivers, although this may only affect delivered prices, while FOB values may be unchanged. This would mean of course that margins are being squeezed, but the truth is difficult to discern. FOB prices are therefore estimated at $645/t-$660/t for 4 cSt and 6 cSt oils loading out of Al Ruwais. FOB levels for output from Sitra are assessed at around $755/t for those same grades and $710/t-$725/t for 8 cSt. The Bahrainian oils are being sold under branded conditions carrying full finished lube approvals. Approvals for UAE Group III material are being developed.

The above estimates are based on a netback basis using nominal freight and general handling and marketing costs for bulk cargoes being delivered to large buyers in Europe, the U.S., Indias West Coast and the Far East. Prices would be much higher for smaller receivers buying on an ex-tank or FCA basis.

Middle East Gulf markets are eagerly awaiting the first availabilities of Group II material to be coming out of Luberefs refinery in Yanbual Bahr, Saudi Arabia, as an upgrade there nears completion. The availability of these grades from a local source will greatly change the regional marketplace, as a number of blenders say they will move at least some formulations from Group I base stocks, particularly engine oils.

Group II imports from Far East and U.S sources continues to be offered locally out of hub storage in the UAE on an FCA basis. Prices are reported as stable – around $795/t-$825/t for light grades and $895/t-$925/t for heavies, basis CIF.

Africa

South African shipping agents confirmed that another parcel of around 10,000 tons of various grades, sourced ex-Amsterdam-Rotterdam-Antwerp and the U.K., is scheduled to reach Durban during September. Reports indicate record production of finished lubricants within the region, with fewer imports of branded lubes.

Mediterranean trade into North African receivers is notable this week, featuring material going into Libya and Morocco from Southern European ports.

With around 50,000 tons of confirmed, firmly fixed cargoes of Group I base oils being loaded out of the Baltic and U.S. Gulf for Nigeria, this market is absorbing a great deal of Group l availability, although there are talks for some international major blenders in Nigeria to take quantities of Group II and Group III. Eventually this will become a regular practice, but with price being a major driver in this market, quality becomes secondary, at least for the majority of lubricants being blended in Nigeria.

One parcel of 8,000 to 10,000 tons is now loading out of the Baltic, while two confirmed fixtures have been nominated out of U.S. Gulf ports, and another is under consideration for loading from there or Amsterdam-Rotterdam-Antwerp. The other option is to load a 15,000-ton cargo of Group l from the U.S. East Coast for three receivers in Apapa, Nigeria.

Prices are left unchanged this week: $770/t-$785/t for SN150 and $858/t-$865/t for SN500/600. SN900 from Russia remains at $945/t-$965/t. Bright stock ex-mainstream European or U.S. locations is assessed at $1070/t. All prices for Nigeria are for base oils delivered CIF/CFR Apapa, Lagos.

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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