Stability may have been reached, but the truth of the matter is that one week is too short a time in the base oil market to set any overall pricing trend. This week has been relatively tame due to holidays and general malaise.
Availabilities are not abounding for API Group I material within mainland Europe, hence buying has been short, with few enquiries and even fewer deals being struck by end users and traders. Prices are more or less on par with last week, with perhaps a hint of movement in the bright stock camp, where premiums over listed prices are commonplace. New levels are in the region of $890 to $940 per metric ton for large export parcels of bright stock.
SN 150 and SN 500/600 are still marking time in the range of $690 to $750/t, but with no great strength in the market these prices lack a certain conviction that they can always be achieved at the higher end of the spread.
Group II/II+ grades have seen large rises from all players in the market, since the price increases initiated at sources of production have started to percolate through to the imported material being sold throughout mainland Europe, Middle East Gulf, and South African regions. Price levels have moved again, although the increases to $890 to $1,000/t reflect the price tags attached to the arrival of new cargoes coming into the various areas within EMEA.
The news broken here last week regarding the super cargoes from Iran has at last been confirmed by both suppliers and shippers. Some 24,000 tons of mixed Group I neutrals is already loaded, and 16,000 tons will be sold into India. The remainder of the cargo, some 8,000 tons, has been landed into the United Arab Emirates. This process may have been a one-off due to the pricing model which has been evidenced, but if further increases are anticipated, who is to say that this option may not be repeated, since the carrying vessel is a local Iranian chemical carrier which can be utilised for carrying multi-grade cargoes of base oils.
Timing has been of the essence in such dealings, since the intention of such a large cargo was to beat the rises in prices by taking this quantity as traders inventory which can then be resold in smaller parcels to individual purchasers when the cargo is landed. Prices were estimated to be between $590 to $620/t FOB when the sale was negotiated, with a beneficial freight using economies of scale. With prices now some $70-plus per ton higher, this type of transaction has obvious merits.
Bright stock has been seen selling into Iran, from stocks gathered from Indonesia and Thailand, and is being priced between $1,025 and $1,100/t CIF delivered into southern Iranian ports. The same vessels are being used to take Group I neutrals out to U.A.E. and to India and Far East destinations.
In the same area, Middle East Gulf, a remarkable growth seems to be taking place for Group III grades. This is happening despite an overall downturn in the year-on-year demand figures for base oils, and may indicate the future trend for the region. Prices for these grades have risen sharply over the last few weeks, and they are now selling into this region for $950 to $1,100/t depending on size of parcel, packaging, and delivery logistics.
The same cannot be said for mainland Europe, where demand is still woefully down against recent previous years. Group III is starting to be used more, but not on the scale witnessed in the Middle East Gulf, or even in some African countries. Prices in Europe are in the main a little lower than elsewhere, but Group III still commands between $900 and $1,050/t delivered ex tank.
As predicted, in West Africa activity has slowed right down, and there are few pieces of base oil business being talked at the moment. Only the hard core importers are playing the game now, with prices moving upwards steadily for any firm cargoes being booked. Levels are now up to current highs of $815 to $840/t basis CFR for heavy solvent neutrals. Bright stock, keeping in line with European mainland hikes, is anywhere between $ 975 to $1,050/t.
Russian output is limited at the moment, and the outlook is not encouraging for a renewed spurt of exports through the Baltic states or through Black Sea outlets. The material being offered is sporadic and subject to supply interruption, due in the main to the lower levels of production of base oils at Russian Federation refineries and to the vagaries of moving the base oils through the railway system in small quantities. Quantities of lower-grade solvent neutrals are coming out of Belarus, but not in sustainable quantities. Access to these oils is limited to a number of registered auction bidder companies, whose prime object is not the export of base oils.
For the material reaching the Baltic, prices are around $650 to $690/t for the lower quality grades, and those lucky enough to access higher rated material are paying the same as European mainland numbers.
Overall the market did not respond to the crude and product decreases of some 10 days ago, and as predicted crude has bounced back near the $70 per barrel mark, with Dated Brent now at $68/bbl and WTI around $67. Feedstock prices are also back on the upward sweep, so wait and watch appears to be the name of the game where base oils are concerned in this rather nebulous summertime market.
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.