For the first time for a long spell the European base oil market would appear to be relatively stable, with little price movement up or down.
Even if crude and feedstock values fluctuate downwards due to recent lower demand figures, base oil prices for solvent neutral API Group I grades will remain in the area of $425 to $475 per metric ton, basis FOB, mainland European ports. The domestic market is largely in the same position, with smaller deliveries by barge and truck maintaining a cost premium over the range noted above.
Bright stock remains in a pricing haze, where some producers have been willing to negotiate numbers down to levels below $600/t. Others have been pushing the price up, saying that these higher levels are commensurate with the solvent neutral grade slate.
The range for brightstock can go up to $675/t FOB, particularly for small ancillary quantities which are complementing other grades in making up larger cargo lots.
Suppliers are naturally trying to sell at the higher end of the ranges, but are flexible when inventories start to move upwards, and will discount these highs by some $25 to $40/t.
Crude is seen to be weak in the market today, with Dated Brent remaining at just below $49 per barrel, but with WTI falling by almost $4.50/bbl to end below $45. Feedstock prices have not varied or moved much in a quiet market, and vacuum gas oil and International Commodity Exchange futures for the front month and beyond are trading in a stable pattern.
The turnaround situation has certainly stabilized the amount of material available for sale, and whilst the market could not be considered short, there is no overproduction at the moment to tempt prices downwards.
Amid rumours of selling all or part of the Agip Plas 585,000 t/y Group I refinery in Livorno, Italy, or at least inviting interest from buyers or participant partners, the ENI unit has gone into scheduled maintenance during the last two weeks, and will not restart production until June. Although ample planned inventory is allocated to contract and domestic buyers, this extended turnaround may have an effect on the spot export market, since this refinery is typically engaged in selling a large proportion of production to this sector of the base oil market.
Two areas where material is definitely in short supply are the Baltic and Black Sea regions. Predominantly supplied with Russian material, these areas are bereft of any real supply at least until the second half of May. Russian refineries are pushing to raise the prices being solddelivered to the frontier, due to higher production and transportation costs within the country. This is due to the restructuring of all Russian petroleum product business, and will take time to stabilize after the reorganisation has taken place. Prices for small parcels of oil are being thrown around at prime European levels, and for high viscosity index, better quality material, are being seen at $500/t basis FOB Baltic ports.
Elsewhere, most of the market appears quiet. In the North African and Middle East Gulf areas, very little has been heard of any trades beyond normal cargoes formed of business under contracted supply.
Prices have moved upwards slightly in the Middle East Gulf region, and Group I neutrals are being seen at $485 to $525/t depending on cargo size and payment terms. Terms are forming a major part of the pricing structure in this area, where discounts will be offered for prompt or prepayment, and payment against letters of credit on 30 days basis produces a small premium for sellers.
South Africa has seen some imported cargoes from the Far East and from Europe, but with production regaining impetus in this area, these may be one-off deals. Delivered prices for Group I and Group II material in South Africa are seen around $650 to $700/t basis CFR/CIF.
West Africa has again been slow to show this week, and no new business has been witnessed nor observed in this area. Enquiries are still flowing through the system, as suppliers and traders try to lift prices into the region, due to higher European FOB numbers and freight levels firming slightly over recent weeks. Prices are assessed at $595 to $645/t basis CFR for solvent neutrals, and for bright stock around $700/t-plus.
Group II and II+ activity has been growing on the European scene, but how much ingress into the existing Group I and Group I/Group III markets is difficult to tell due to demand still being very low compared to the normal historical offtake. Prices are still mostly below $800/t for all Group II/II+ material, with Group III around $820 to $850/t ex tank.
All in all, producers appear to be relatively relaxed regarding their position in the market, having moved their price levels into positive netback status, and having cut back production to reflect demand. Buyers are still looking for low prices, but more and more are being faced with the reality that the base oil market has certainly bottomed out in Europe, and has now reached a temporary equilibrium, for this week anyway.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.