Having ever imagined that the EMEA base oil market would have found some stability for the last week of August, and the last week of the holiday season, no one could have been more wrong.
Availabilities of Group I solvent neutrals, particularly heavier grades were in short supply suddenly, especially in the Mediterranean and North African areas, where there would appear to be considerable demand for the scant availabilities found in the market.
Prices have started to move upwards again on the basis of these apparent shortages, albeit by relatively small amounts, but with a positive momentum nevertheless. Prices for Group I material on an FOB basis in the Mediterranean were established within the band of $765 to $810 per metric ton, where the movement has been more emphatic at the lower end of the pricing range.
Some producers have commented that they would rather keep material in-tank within inventory, than sell at this time. Obviously, these base oil refiners are convinced that prices are going to move upwards within a relatively short period of time, otherwise they would be certainly inclined to take every opportunity to move their barrels, meeting any spike of demand which could be attributed to the market.
Brightstock remains available from most of the normal suppliers, and this weeks numbers would put this grade at around $965 to $1,015, but it must be pointed out that the top ranged prices for this grade are predominantly for large quantities which could be destined for the West African markets or East Mediterranean tender markets.
Crude prices have somewhat faltered since last week and both markers, Dated Brent, are showing at parity, at just over $70 per barrel, coming off the levels of last week by some $3 to $4/bbl. However, clean petroleum prices are showing no signs of following the crude oil trend, and are climbing further and further against crudes stability. This has obvious repercussions for all feedstocks used to produce base oils.
With low sulphur vacuum gas oil topping $525/t at the end of last week, and International Commodity Exchange gas oil futures all indicating numbers above $600/t for the next three months, producers are again coming under renewed pressure to at least maintain netback levels by increasing prices.
The base oil price adjustment methods are wild, woolly, and varied, depending on the local philosophy of each refinery, and it remains a question of timing as to when these costs are allocated or passed on to the individual production units. One producer can be applying increases this week, whilst another may not have to move levels until another month or perhaps more has passed, thus providing a rather murky picture as to where base oil prices actually lie throughout the region.
A case example is being provided at the moment, where as mentioned above, the Mediterranean region appears to be short and is guardedly holding product back to attain better /necessary price levels. Whilst in Northwest European areas, business has not seen the same demand, and prices have not moved by the same extent, other than perhaps marginally by around $5 to $10/t. Next week will surely show a different picture, which makes EMEA regional pricing all the more difficult to gauge on a total regional basis.
In the Middle East Gulf, business has been brisk and Iranian exports have been re-kindled by demand in India and UAE predominantly, and prices have moved slightly so far to reflect this demand. Levels are ascertained at between $780 and $830/t, basis FOB. There have also been some notable imports of GroupII and GroupIII material by blenders in the region, all being imported from Far East production centres.
In West Africa, Nigerian enquiries have resulted in a number of offers being made for cargoes of mixed grades, and as forecast, the numbers do not make for popular reading by receivers. Offers have reportedly contained numbers in excess of $900/t for heavy neutrals and between $1,035 and $1,150/t for supplies of brightstock. These prices will move upwards even further should prices now escalate from mainland Europe during September.
South Africa remains quiet in the wintertime, but still a considerable quantity of base oils has found its way into this area, supplementing the regional production mainly in Durban. There is talk of planned maintenance schedules coming up for the refining units in his region, but dates have yet to be confirmed, and since it is only a short time since one of the main refineries underwent a major turnaround, disruption to local supply should be minimal.
Prices are deemed to be around European highs at the moment in South Africa, between $750 and $850/t for GroupI solvent neutrals, depending on where, and by which method the delivery takes place.
Again, there have been a number of enquiries from this region and neighbouring locations for European GroupI base oils in drums, isotanks or flexitanks. This is an interesting scenario, since the arbitrage between European mainland supply and some of these countries may be now be in place, since even sales from South African producers will still carry high costs when transported by these and other methods into the African hinterland.
Back in mainland Europe, Group II/II+ supply continues on course with the importers approvals programme gaining steam all the time, and with this process running in parallel with supply to traditional GroupI blenders, the market is certainly expanding both in size and also into areas which have not been solicited previously. Prices are set in the ranges of $900 to $1,050, but with increase being applied at production source by the importers, the market will possibly see these levels start to rise for new imports.
Rerefined oils are also gaining market share, and whilst these oils are trying to compete and replace some GroupI blend stocks, they are holding their own and are being seen as real alternatives to existing base oils. Prices are necessarily lower than the U.S. imported grades, but it must be stressed that whilst these oils may not carry universal and global brand approvals, they represent quality production which can be utilized in many new blends which are now coming into being after new ACEA standards.
Lastly, but by no means least, GroupIII is still haunting the market, with the producers / sellers demonstrating to blenders how their material can be used throughout the EMEA marketplace. Sellers are using experimental blends, new tech projects with existing GroupI refiners, and flexible pricing to entice buyers to start using these grades on a long term basis. Prices remain in the frame or between $950 and $1,200/t in some cases, but there are still reports of low GroupIII numbers, which never actually can be proved or disproved at the end, or even the beginning of the of the day.
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.