Europe-MidEast-Africa Base Oil Price Report


With scant activity on the base oil scene, the few players around are attributing the slowdown to the European and Middle East vacation period which is upon us.

Prices have gone largely unchanged since last week. Producers increases of some $50 to $80 per ton from weeks previous are beginning to filter through, although some buyers are still shouting from the rooftops regarding the dip in crude prices which they say means that base oil price levels should be coming down.

However, the market, and certainly the producers, have not seen things quite in that light, and have maintained their price pressure to keep numbers at least where they were last week, with slight amendments depending on grade.

API Group I SN 500 is still in the range of $690 to $725 per metric ton, basis FOB mainland European ports. SN 150 is looking slightly lower due to lack of availabilities and lack of demand, at $675 to $710/t. Bright stock has held its corner and is still in the price band of $800 to $850/t.

What is changing is that, predictably, crude oil prices are starting to move back up again to levels around $66 per barrel for Dated Brent, and around $64 for WTI. Both markers are showing signs of firming further, so there would appear to be no reason for base oil prices to even contemplate falling at this time. Feedstock values have rallied in tune with the crude movements, and low sulphur vacuum gas oil is back trading in the mid $400s, around $455, per ton. On the exchanges, gas oil futures have taken an extraordinary leap to show October close to $650/t. These indicators will surely lend weight to base oil prices moving even further ahead.

This week we have seen the arrival of cargoes into West Africa from Europe, perhaps distributing the last of the lower priced base stocks into the region. The CFR prices are reflecting numbers such as $795 to $840/t for SN 500 and 600, and bright stock up to $930 to $950/t. With the latest round of price increases in mainland Europe still to effect future levels into this region, it is expected that prices will approach $900 for heavy neutrals and in excess of $1,000/t for bright stock in the next round of deliveries. This may be problematic for some receivers in the region, and may stem the activity of all but a few players who are able to cope with increased prices.

Iranian business appears to have made an amazing comeback from the doldrums around election time, and there is again talk of more super cargoes being loaded from this supply point. These are cargoes of around 25,000 tons of mixed grades of Group I material which are being traded to Far East receivers, obviously with the view that prices will still continue to rise for these grades, and that inventory investment will pay back in the future. One of these cargoes has already been confirmed, and it now appears that other similar players are trying to get on the band wagon.

Prices for Group I Iranian material have seen considerable increases of more than $100/t since the first large cargo was purchased, and levels are now put at $715 to $735/t for the heavy neutrals. Obviously some parties in the Far East consider that current price levels still have some way to go.

Other Middle East Gulf area importers and producers are responding to the rising market by instigating smaller, more regular price increases of $15 to $25/t almost every week, perhaps being aware that this incremental pattern is not so aggressive as letting prices languish, and then having to react by imposing large price hikes which can be seen by receivers as extremely negative.

Russian material is coming out of the Baltic once more, but not in the quantities which were seen in the past. Prices are much higher than previously witnessed, at $660 to $700/t, FOB Baltic ports.

Whether there will be further quantities of material coming from Russian and Belarus refineries remains to be seen, since the pricing and purchasing mechanism is based on the past month, then reconciled after the end of current month, and not many players want to take positions on this basis. There are no hedging facilities for these smaller cargoes, so risks can be high for those buying material through this procedure.

Group II/II+ prices have again seen upward movements this week, possibly as an effect of the rising FOB prices from the offshore producers of these grades, with Korean and Singapore prices being hiked by some $40/t for all grades, and producers such as Motiva, Chevron, and ExxonMobil in the U.S. effectively moving to the same extent.

Group II/II+ landed prices into Europe are now in the region of $875 to $940/t for the vis spread, and with imported material still to arrive from higher FOB price levels, these numbers will only increase over the short term.

Group III prices are following suit. There is peer pressure on the local Group III producers to raise their price levels since they appear to be lagging behind the prices of remote production importers. Perhaps because many of the European Group III producers have been trying to break into the market, they may have been showing lower prices to buy their way into what is becoming a very competitive arena. Anyhow, most suppliers are now on relative parity regarding pricing, which is being established between $935 and $1,050/t depending on vis and delivery location.

The evidence in the market during the past few weeks has been that crude and feedstock prices have had a bumpy roller coaster ride, going upwards and then retracting swiftly, then advancing again. In the meantime we have witnessed a straight-line trend for base oil pricing, which bears out the rather fractious historic relationship between base oil prices and those of petroleum products and crude oil.

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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