Europe

FOB prices for Group I base oils within Europe were unchanged this week. Contrary to many reports there are no signs of tightness for API Group I grades, and with export demand muted due to ingress from U.S. and other areas, supply and demand are reasonably well balanced.

Light solvent neutrals remain between $610 per metric ton and $625/t, but with few deals being made at the higher end of the scale. Sellers still claim that supply is tight, but with demand relatively weak, all inquiries appear to have been covered, and reports say some material is unsold. Prices for SN500 and SN600 are also almost static at $690/t-$710/t, slightly lower than last week. Bright stock prices, surprisingly, have weakened to $910/t-$935/t, perhaps due to disruptions to trade in Nigeria and keenly priced imports from U.S. taking volumes out of the European export market.

Prices above refer to large parcels of Group I base oils supplied or offered FOB ex-mainland European supply points. Traders and other large buyers of Group I cargoes have expressed doubts about higher prices holding up, with cracks appearing in the selling fraternity and special deals reported by some buyers.

While suppliers in local European markets are still trying to max out on prices, several buyers have adopted other ideas and, armed with information from the export market, are intent on keeping prices in line. The overall attitude appears to have changed markedly in the past week, from one of concern about further increases to one where buyers are rebuffing markups and are looking for revised levels.

Offered prices have not given ground but are coming under increasing scrutiny from buyers, particularly for material to be delivered after Feb. 1. With monthly pricing being the norm in local markets, blenders are anxious to achieve the best possible deal going, scenting a degree of weakness in sellers’ offers. Re-sellers maintain that they have had to purchase cargoes at higher rates to fill inventories, but buyers argue that re-sellers are replacing volumes ordered prior to the last round of increases.

The differential between domestic and export prices remains 55/t-105/t.

Prices for imported Group II oils appear to be above the bickering surrounding Group I. With no reports of markdowns in source markets, prices in Europe are unchanged, but some sellers warn that they have not passed on all of the increases from production sources.

Prices for fully approved light Group II grades being delivered in bulk into major supply hubs in Europe are assessed at $645/t-$680/t, with 500N and 600N at $785/t-$825/t, basis CIF main ports Europe. Ex-tank sales carry premiums estimated to be around $35/t-$50/t (30/t-45) and will also incur transportation charges to destination.

The Group III scene remains an obfuscated market, with prices varying in different sectors of the same market. Some European players said the possibility arises where material imported into India may be re-exported to various destinations at lower prices than direct purchases from production sources. Actual cases of this have not yet been verified.

It is clear Group III oils are being delivered at extremely low prices to markets that suppliers consider key. Introduction of recently commissioned volumes has been aggressive from a pricing stance, and with few variations in specification and OEM approvals being sought for finished lubricants using the new oils, competition could soon intensify.

There is no evidence of significant changes to Group III prices during the past week, although there appears to have been some volume-based discounting. Prices for partially approved 4 centiStoke and 6 cSt grades are thus maintained at $665/t-$675/t, FCA Northwestern Europe. Prices for fully approved Group III, FCA Antwerp-Rotterdam-Amsterdam, remain at 705/t-735/t for the same grades, with 8 cSt material around 680/t. CIF prices for large cargoes of Group III base oil may be around $45/t-$70/t lower than the equivalent dollar prices for FCA sales.

Baltic and Black Seas

Russian exports from Baltic ports are mainly limited to smaller cargoes being traded into Antwerp-Rotterdam-Amsterdam, with no further developments for larger cargoes moving to West Africa. There are a few inquiries for material to be loaded for Nigerian receivers but no deals have been fixed. Nigerias finance problems continue, limiting the number of traders willing or able to consider that market. The last large cargo will load during next week for Apapa.

Offered prices for cargoes loading for the United Kingdom and Antwerp-Rotterdam-Amsterdam discharge remain around levels mentioned last week, although sellers acknowledged that some buyers are looking for lower levels, citing discounts elsewhere. SN150 remains at $570/t-$590/t and SN500 at $645/t-$670/t. SN900, where available in bulk quantities on a prompt basis, is now priced around $748/t, FOB.

Greek suppliers have provided cargoes of Group I SN600 and SN150 for delivery into Gebze and Derince, Turkey, with almost regular contracted supplies now going into the latter port for receivers. Sources said another large cargo from Kavkaz, Russia, is being planned for second half February, for discharge into the United Arab Emirates or the West Coast of India.

Prices for Group I imports into Turkey from Mediterranean suppliers have escalated after the latest round of increases in January and are now assessed at $612/t-$625/t for SN150, with larger volumes of either SN500 or SN600 at $698/t-$720/t, CIF Turkish ports.

With reports of ice affecting some Black Sea ports, there may be a curtailing of material available ex-Azov and Kavkaz, Russia, and although local sources have confirmed that parcels already in transit should not be affected, vessels loading these cargoes may be difficult to find, since the Black Sea is not a regular trading area for smaller ICE class vessels.

Sources report shipments from the Saudi Arabian ports of Yanbu-al Bahr and Jeddah, with one cargo moving into Indias West Coast. Other contract volumes are believed to be in the planning stages for February delivery into Oman and the U.A.E. A large European cargo is being shipped from Sicily to Dar-es-Salaam, Tanzania, after another large parcel was recently consigned to this port. Tanzanian shipping agency sources called the timing coincidence. A Jordanian inquiry for private receivers in Aqaba remains elusive, with no news on this requirement being covered yet.

Middle East

Middle East trade remains buoyant, with Iranian exports proving the mainstay for Group I exports out of the region. In fact there are no other Group I exports from Middle East Gulf sources except Iranian barrels re-exported from the U.A.E., because all other production of Group I grades has either been sidelined or mothballed. Production from Basra in Iraq has apparently still not resumed, and other blenders in Gulf Cooperation Council states are relying on Saudi Arabian Group I.

Prices on exports from Bandar-e Emam Khomeyni and Bandar Bushehr are said to have climbed higher and may now be around $665/t-$685/t for large quantities of premium SN500 ex-Sepahan Oils refinery on an FOB basis. These prices are mostly estimates since almost all exports are undertaken directly between producer and receivers in areas such as Pakistan, the West Coast of India and the Far East.

Third-party traders have been almost excluded from this business, adding value to the exports from producers in Iran. Smaller parcels are available locally to be taken into the U.A.E., sometimes for re-export. Re-exported Iranian SN500 is offered at $685 FCA, or $695 FOB, although smaller volumes delivered in flexitanks to receivers in South and East Africa are being netted back to U.A.E. at around $745/t.

Offers for large volumes of Group I grades have been aimed at receivers in U.A.E. from sources along the U.S. Gulf Coast, but these volumes are simultaneously offered to Indian buyers, who appear more capable of organizing cooperative purchasing involving a number of receivers for one cargo. Sources in the U.A.E. have echoed these sentiments, commenting that they are unable to take cargoes of 12,000 tons or more due to ullage restrictions.

According to receivers in Oman and Fujairah, Group I base oils ex-Red Sea will be delivered at around $665/t for SN150, $745/t for SN500, and $995/t for bright stock, all CIF/CFR.

Group III exports from Al Ruwais, U.A.E., are moving into the next stage now; a number of markets have been targeted, and the move must now be to maximize volume throughput in each region. Supplies to the West Coast of India appear to be one of the mainstay markets for this production, with two more cargoes totaling 13,000 tons going into Mumbai anchorage, and another inquiry for early February for almost 20,000 tons of Group III grades bound for India and South Korea.

Prices for Group III grades out of Abu Dhabi remain unconfirmed but are estimated to be around $485/t-$520/t for 4 cSt and 6 cSt oils, FOB

Africa

The Moroccan requirement identified last week was covered out of Livorno, with all three main grades of Group I base oils being supplied into Mohammedia.

South African traders confirmed that another sizeable cargo of Group I base stocks will arrive into Durban in March from a Northwestern European during March. The cargo is apparently to be loaded during mid February.

West African receivers in locations such as Senegal, Cote d’Ivoire and Guinea have all been covered, and the next deliveries arent due until the end of March. The Ghana tender delivery may top off with extra volumes of Group I material, which could be made available for receivers in countries other than Nigeria.

The Nigerian market has gone quiet in terms of new deliveries, but these are many inquiries ranging from small lots of 100 tons to 200 tons to a large parcel of around 16,000 tons that may load out of the Baltic and Northwestern Europe, or alternatively may look to take material from the U.S. Gulf or East coasts.

Around three cargoes with a combined 30,000 tons are due to arrive into Nigeria over the next few weeks. Receivers seem reticent to buy more cargoes at this time due to price hikes instigated in Europe and the U.S. A number of Nigerian buyers said prices have risen too high, too quickly – more than is justified by the crude run-up.

Prices for material arriving into Nigeria are difficult to discern since some were purchased and finalized before the recent markups. Light and heavy solvent neutrals are assessed at $585/t-$655/t, while bright stock ex-U.S. or Europe is landing at $955/t-$980/t. A Baltic containing SN900 will be priced at around $755/t-$775/t. These are for FOB levels applied to cargoes loaded before the price hikes.

An offer for Baltic and Northwestern European loading is at $718/t-$798/t for Group I solvent neutrals other than SN900, which has been priced at $855/t, and bright stock ex-European sources at $1,065/t. All prices are based on CFR/ CIF Apapa port, 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.