Europe-MidEast-Africa Base Oil Price Report

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Talking with a number of suppliers and receivers this week, it would appear that for once both sides of the market are satisfied as to availabilities and prices.

Producers seem content to have moved prices to acceptable levels, and buyers are perhaps finally realising that the low prices seen a couple of months ago will not be repeated. Blenders have been busy increasing their finished lube prices to reflect the new base oil levels.

Feedstock values have been moving up and down, but always around stable pivot prices. With crude trading slightly weaker for both Dated Brent and WTI, at $48 and $49 per barrel respectively, no real movements in product prices are likely to change base oil levels from current numbers.

The trend in all petroleum pricing is static, with some potential weakness ahead with an oversupply of distillates potentially flooding the European and Mediterranean markets. However it is not anticipated that this bubble will affect base stocks, since vacuum gas oil as a primary feedstock for base oils is showing balanced demand, with flat pricing.

Prices have not materially changed since last week and are seen in the range of $425 to $485 per metric ton, basis FOB, mainland European ports, for API Group I solvent neutrals.

One interesting effect of this market is that there seems now to be only one set of European prices: domestic numbers and export prices for Group I are one and the same, at least for the larger buyers. Smaller barge and road tank deliveries still carry a premium of course.

Bright stock in large quantities has actually become scarce, and only one or two refiners have availability for spot sales of this grade. Prices have firmed a little on the back of this sentiment, and are now quantified in the range of $610 to $640/t basis FOB.

Demand recovery is still lacking, but looking at the quantities of material available in the spot market, there are very few large parcels of base stocks looking for buyers at this time. The market appears to have found a balanced scenario, with low demand, and low sales, coupled with lower production rates.

Russian barrels appear to be flowing again, albeit slowly and at much higher prices than previously. Prices for typical Russian Group I export grades are in the range of $410 to $450/t FOB Baltic ports. There is very little material available out of the Black Sea region, but there have been a record number of turnarounds within Russia over the last few weeks, amid rumours that many of these were not exactly planned. This has certainly affected export availabilities.

When compared with last year, it appears that the base oil market is down around 25 percent to 35 percent by volume, although this varies greatly from area to area within the Europe/Middle East/Africa regions. Some regions have reported downturns of more than 50 percent in demand for finished lubricants, which must reflect in base oil usage.

Group II/II+ prices continue to maintain their differential from Group I grades, and appear to be reflecting the prices at which these grades are sold in the U.S. (on the basis of FOB U.S plus freight). There is some weakness in the lower viscosity grades, whilst the high vis grades are maintaining their substantial differential, sometimes as much as $100/t over the lighter material.

Prices for the full range of all Group II/II+ material are between $740 to $820/t. Some Group III grades are rumoured to have been discounted in price over the last couple of weeks, and levels for the three main grades are being assessed close to $800/t ex tank.

Far East producers appear to be trying to make inroads into the Middle East and may be looking to compete against local producers such as the Iranians and the Saudis. Some suppliers are willing to offer Group II material against Group I priced product which is currently being used by blenders. Prices of $550 to $575/t basis CIF have been touted in the Middle East Gulf area for Group II type base oil.

African business has been slow, although there are reports of some mixed cargoes being sold into Ghana and Nigeria to the usual receivers. Prices into West Africa are assessed at $595 to $655/t, basis CFR for solvent neutrals, and for bright stock at around $720/t. These are small increments over last weeks levels due to slightly firmer freight numbers and the lack of availability of cargo lots of mixed grades, to be loaded from a single European or U.S. port.

In Durban, South Africa,Engen’s 155,000 t/y Saforrefinery is starting up, which will stabilise the need for imports coming into this region, although there will always be a requirement for additional material to be brought here for the local blenders representing the majors.

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.

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