EMEA Base Oil Price Report

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European, Middle Eastern and African base oil markets are considered stable to firm, with prices settling down some after relatively dramatic hikes during the past few weeks.

Sellers have continued to push levels higher in offers seen over the last few days, but with demand drifting a little, at least in Europe, there has been an element of buyer resistance as contract prices are due to be reviewed from March 1.

Spot export prices have already increased and although sellers continue to try to move them further, the consensus is that levels may flatten out unless other factors are detected. Local markets havent yet felt effects from the latest increases.

Crude oil levels are again stable, with dated deliveries of Brent crude quoted yesterday at $55.55 per barrel for April front month settlement. West Texas Intermediate crude was also down around $2/bbl. Crude does not appear to be taking on any real direction, and with doubts regarding the effectiveness of OPEC production cuts, some say crude may see further slides before recovering.

ICE LS Gas Oil is trading at $495 per metric ton this week, almost in line with last week and showing a degree of stability not witnessed for some time.

Europe

European FOB export base oils, after firming in past weeks, moderated this week. There are no reports of prices coming off, and any increments are smaller and pertain only to certain API Group I grades. Light grades remain tight, but levels remain $590/t-$625/t, with solvent neutral 500 and SN600 only marginally higher on the low end at $635/t-$665/t.

Producers of bright stock are trying to talk the market higher, but its hard-going. Sellers want to see a larger delta between bright stock and heavy neutrals, reflecting the additional production costs. Offers and material sold are $690/t-$765/t.

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

Some buyers have intimated that levels for SN150 and SN500 have increased by 80/t-120/t over levels for February sales. Some said they would have preferred staged increments. Sellers, on the other hand, claim that the increases are necessary to both reflect the higher spot market levels and to cover replenishment cargoes for resale ex tank and on a delivered basis.

Blenders are concerned about volatility and are expected to raise finished lube prices for March delivery and onwards to cover raw material cost increases.

Due to increments in the former, the differential between domestic pricing and export levels was pushed to 45/t-70/t.

Group II source increases during recent weeks appear to have been covered and suppliers are looking to maximize selling levels, which they say may come under pressure

Increases vary between suppliers, but the main players appear to have moved levels $5/t-$15/t upwards this week. Light grades coming into main terminals in Europe are $690/t-$710/t. Heavier grades, mainly 600N, are $810/t-$825/t CIF.

These CIF prices will yield ex-tank or FCA levels of 695/t-720/t in respect of light 100N and 220N, with heavier vis 600N between 830/t and 865/t.

Group III prices have continued to track upwards with renewed vigor. But there are conflicting tales regarding the timing of when production may be reintroduced at the Pearl installation in Qatar. Depending on production loss there and from the impending turnaround season, availabilities may tighten.

Despite long-term supply uncertainty, sellers have been quick to raise prices on a bulk delivered basis, pointing the way for smaller FCA lifters of these grades to pay higher rates almost immediately.

Prices have continued to rise, with 4 centiStoke material now $745/t-$770/t (700/t-725/t), and 6 cSt grades at $760/t-$785/t FCA northwestern Europe. Fully approved oils FCA Antwerp-Rotterdam-Amsterdam are 775/t-810/t for the two main grades, with quantities of 8 cSt material around 740/t.

Baltic and Black Sea

The Baltic region remains quiet with the only reported cargoes being the medium-sized parcels discharging into Antwerp-Rotterdam-Amsterdam and the United Kingdom. The immediate future appears to be bleak in terms of large parcels of Russian export barrels for West Africa and Nigeria, in particular.

Traders are still encountering problems with payments out of Nigeria, with one company reportedly awaiting funds for a cargo delivered in November. Preference is for loaded cargoes to come out of the Mediterranean rather than the Baltic, but this may be to receivers who can operate through companies outside West Africa.

With Russian refineries coming back up after turnaround, supply does not appear to be an issue, although some sellers have declared that they will not have avails of Group I export material until late March. SN150 remains tight, with only some sellers offering parcels over 1,000 tons.

With few offers for larger parcels, prices are difficult to gauge. A growing number of receivers in Africa are looking for smaller avails of flexi-delivered Russian material, which can be found.

SN150 in bulk, but small, volumes is $528/t FOB, with SN500 around $573/t. SN900 is offered in bulk at 3,000 tons, at $655/t FOB fixed price, but only for later March loading.

Greek sellers continue with contracted cargoes into Derince, Turkey, in addition to enquiries for both Russian SN150 and SN500 ex Black Sea. SN150 seems to be particularly short at the moment with an enquiry for some 3,000 tons uncovered after three weeks in the market. Buyers stated that Russian export prices have moved into line with Mediterranean numbers, rendering this option uncompetitive. Uzbek exports are also priced out of the market, also perhaps due to imaginary high demand for light neutrals.

Mediterranean prices are $635/t-$650/t delivered in respect of SN150, with SN600 slightly higher at $670/t-$680/t CIF Turkish ports. Small quantities of Russian SN150 are at best around $535/t FOB/STS with SN500 on same basis at $580/t.

Red Sea shipping sources said the market has become quiet, perhaps after prices were seen to escalate quickly for Group I base oils irrespective of source. Enquiries from Sudan and Jordan appear to have been withdrawn, with only the large parcels of delivered quantities arriving from Mediterranean suppliers into Dar-es-Salaam.

Middle East Gulf

Reports center on Group III production problems in Qatar, with other producers or partners reportedly stepping in to cover the requirements. Its not clear how the use of Group III grades produced from Bahrain and Abu Dhabi will substitute for Group III+ grades from Qatar, since with variations in specifications, third party and in-house blending of finished lubricants may have to be reformulated.

Sources disclosed that steps to take barrels from Sitra and Al Ruwais are underway, although none of the primary parties involved have confirmed.

Some expect levels to continue to rise until receivers cannot accept further increases, which seems to be some way off, given news of another 9,000- to 10,000-ton parcel being loaded out of Al Ruwais next week. FOB levels have been estimated on a netback basis from Mumbai delivery, now $720/t-$745/t in respect of the 4 centiStoke and 6 cSt grades, with 8 cSt material at around $700/t.

Iranian trade has dipped from its peaks of some months ago, with a definite slowdown of exports. Some suggested Irans domestic market has seen increased demand. One small cargo of around 2,000 tons is being exported into United Arab Emirates, but large quantities moving into the west coast of India are not in evidence.

Its possible Russian material from the Black Sea has taken the place of the Iranian barrels, sine an approximately 18,000-ton cargo was loaded for U.A.E. and the west coast of India a couple of weeks back. Landed CIF levels were heard to be around $625 in respect of SN500, with quantities of SN900 at around $695/t.

With export levels even for the small quantities coming out of Iran now up to $720/t for SN500+ FOB, and lower spec SN500 at around $670/t, arbitrage from the Black Sea is open, at least at previous levels. Black Sea levels have risen over the last couple of weeks, perhaps narrowing this particular window of opportunity.

Ongoing contract barrels of Group I grades into Oman and Fujairah ex Red Sea are also assessed higher, following Mediterranean trends. Estimated prices are around $655/t in respect of SN150, $695/t for SN500, and bright stock at around $925/t, all CIF.

Last week Group II prices in offers from the Far East had increased dramatically. U.S. suppliers have all but withdrawn from offering Group II avails into the spot market, and even the major suppliers trying to cover all parts of the globe are suggesting that Group II could become tight. Prices for Group II grades have bounded ahead to $645/t-$670/t in respect of the light vis grades, with 500N between $835/t and $855/t. 600N is assessed at $850/t-$875/t CIF. Deliveries of smaller parcels of Group II to other receivers in Middle East Gulf ports, which are bridged from hub storage in U.A.E., will carry premiums of $45/t-$90/t depending on parcel size and delivery method.

Africa

South African shipping agents have confirmed that another large parcel of mixed base oils will be arriving from northwestern Europe during March, along with other smaller importers moving away from supplies of Group I SN150 and SN500 in U.A.E. to offers from traders for Russian export barrels in flexies into Durban. They say U.A.E. prices have risen too quickly, and that Baltic- and Black Sea-loaded flexies are more competitively priced. Receivers in Kenya and Tanzania are also following this trend, with a raft of Group I enquiries. Indication prices for these trades will be available next week for SN150, SN500, SN900 and lower-specification bright stock.

The Nigerian base oil market is extremely subdued despite what is normally a very busy time for imports, with only one Mediterranean cargo planned for March and only few other trades being considered. Lagos sources said they are still finding it difficult to arrange payments through the local banking system.

Group I base oils delivered into Nigeria are now estimated to be $695/t-$725/t for Group I solvent neutrals, $890/t-$920/t for bright stock ex U.S. or Europe, and $795/t-$810/t for SN900 ex Baltic. Prices are in respect of CFR/CIF levels Apapa port, Lagos, Nigeria.

Base oils delivered into Nigeria are $695/t-$725/t in respect of the range of Group I solvent neutrals, with bright stock ex U.S. or Europe around $890/t-$910/t and SN900 around $785/t-$795/t. Prices are in respect of CFR/CIF levels Apapa, Nigeria, and mainly dependent upon satisfactory payment arrangements.

Receivers in Cote dIvoire, Guinea, and Senegal are more becoming more progressive in sourcing from either cargoes discharging into three or four regional ports, or buying quantities – sometimes substantial – in flexies, which can be as competitive as taking smaller quantities in bulk. Parcels in flexies of 1,000 tons upwards are being arranged for receivers in West Africa.

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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