Europe-MidEast-Africa Base Oil Price Report


Base oil prices have started to rise throughout the EMEA region in line with other petroleum products, without the usual time lag between feedstock levels rising and base oil prices moving into line.

Local domestic deliveries have immediately moved upwards, whilst the cargo-sized parcels which normally take longer to reflect price movements have almost taken on a posted price appearance, with uniform and unanimous increases in numbers from almost all suppliers.

Feedstock markets have risen sharply as a response to the crude increases witnessed this week. With Dated Brent at $67 per barrel and WTI at $68/bbl, there has been a significant rise of more than $6 to $7/bbl in crude levels, compounded by the upward movement during the week prior.

Consequently International Commodity Exchange gas oil for June is trading at $583 per metric ton and low sulphur vacuum gas oil at yet another recent high of around $475/t. These movements all point to base oil prices going up, and producers have reported that, as of yesterday, they have only started to apply the necessary increases which they anticipate will be required to gain acceptable netback values for these base stocks.

Across the region sellers have pushed their numbers up, in some instances by about $20 to $30/t, and in some remote cases by around $70 to $80/t. These movements have resulted in prices for SN 150 and SN 500 in the range of $475 to $580/t basis FOB mainland Europe, with bright stock in the area of $635 to $670/t. Even with these increases, comparing these base oil prices with feedstock levels, base oil may have some way to travel.

There still exists a wide range of prices for API Group I grades caused by some producers moving prices up whilst others remained at the existing levels. There are reports that those producers who did not increase their prices originally will now impose larger increases, playing catch up. Hence the price range could narrow over the coming weeks.

At the eastern fringe of the region, in Iran, cargoes of all grades of Group I solvent neutrals have been increased by one supplier to levels between $610/t for SN 150 up to $625/t for SN 650, with SN 500 somewhere in the middle, all basis FOB. This is a $70/t increase over previous levels. A large 5,000 ton cargo was reportedly sold at these price levels ex Bander Khomeini or Bander Abbas. This leads to the expectation that pricing of smaller local cargoes into the United Arab Emirates will increase by a substantially larger margin than mentioned above.

Nearer mainland Europe, prices from Luberef (Saudi Aramco Lubricating Oil Refining Co.) in Saudi Arabia have been increased on a delivered basis into the Middle East Gulf area, which would reflect FOB increases of about $40 to $50/t over previous levels.

Egyptian and Algerian prices have moved by around the same, and those producing in the Mediterranean at the moment (there are still turnarounds in place until this week) have also pushed their solvent neutral levels upwards, plus bright stock where produced.

These movements have all been in the Group I arena, but there are signs of upward price movement on Group II and Group III prices into the European market. The market could soon see levels approaching $1,000/t for Group III material, basis ex tank, given the relative values of Group I base oils and other petroleum products.

Group II/II+ prices have started to edge up, and the light vis material can be placed in the range of $700 to $740/t, with the heavier grades moving towards $900/t basis delivered mainland Europe and South Africa.

West Africa is still suffering from problems on the credit side, caused by lack of confirmed funding of letters of credit, and also congestion in the discharge ports, particularly in Nigeria, at Apapa. The general increases in base oil pricing could ultimately have a detrimental effect on this market, as once again we could see the lack of credit facilities and hard currency playing their part in severely limiting buying activity in this area. This would be unfortunate for many of the receivers in the area, since the region has only just been recovering from the last round of high pricing which caused similar problems in the recent past.

Although no actual cargoes for Nigeria have been reported this week, the notional levels for supplies of SN 150 and SN 500 lie in the range of $640 to $675/t basis CFR, West African ports, whilst bright stock would now be delivered at close to the $730/t mark.
Its remarkable that this market is no longer subject solely to the supply and demand factor, since presently throughout the region there is indeed a surplus of capacity, followed by a surplus of material readily available for any demand spike which could materialize. The petroleum products market in Europe is long on almost all grades, bar kerosene, and there is no shortage or known constraint of crude supplies to any refinery.

Yet prices for all petroleum derivatives are rising, reflecting only the costs of raw material production.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at

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