Europe-MidEast-Africa Base Oil Price Report

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Its a very weak market with prices sliding slightly yet again, and players find it difficult to believe that base oil levels can fall further, with all other petroleum products and crude prices static to bullish. The flurry of activity last week subsided as quickly as it appeared and has not taken up any of the excess from the market.

European prime solvent neutral prices are being talked at levels marginally below those mentioned last week, with a range of $385 to $440 per metric ton, basis FOB, but only small parcels of business have been completed to show these prices levels. Contract business has continued with cargoes loading for the Eastern Mediterranean, with mixed solvent neutrals plus bright stock, and bright stock cargo on a stand-alone basis for Egypt.

Price levels for higher color, lower viscosity index Baltic material are seen to be again lower than of late, with some talks of numbers approaching the low end of the $340 to $375/t price band. Some 4,000 metric tons of SN 650 (SAE 40) and 3,000 t of good quality SN 150 (SAE 10) are being pushed for first-half March loading. This material could be of Belarus origin, and may be split into smaller lots to make the sales. Prices will be about $370 to $380/t for the SN 650, and $350 to $360/t for the SN 150.

Availabilities of higher quality Russian grades are not particularly evident in the Baltic, perhaps because FOB prices are not yielding the expected netbacks required to transport, store and export these grades. These prices would have to be at levels close to $400/t FOB to make this business work, and this is not considered feasible by both sellers and buyers.

One grade which has seen downward price movement is bright stock, which is conservatively quoted at between $620 to $660/t for small lots. Given that this grade is relatively scarce in sizeable quantities, with only a couple of the majors having cargo-sized parcels for export, it is surprising that the levels are moving downwards. Perhaps its an indication of the continuing narrowing of the differential between this grade and the heavy solvent neutrals.

The Black Sea supply area has seen some material touted at really low numbers, possibly to move inventory and save on storage costs, and although the quality is not first class, buyers from Middle East and traders looking to move this material even further afield to places like India and Vietnam, have been sizing up these opportunities. Prices are rumoured to be in the low $330s/t for these grades, but further rumours around have suggested that bids have been made at sub $300. No sale has taken place as yet.

With feedstock levels (low sulfur vacuum gas oil) around the $300/t mark, it is difficult to see how these prices can stand up. Crude levels had an end-of-week spike, closely followed by a downward slide yesterday, back to the levels of last week. Gas oil has come back from a rally price of over $400/t and is now showing an ICE front month at $385. These product prices are standing firm at this time, so it is very difficult to see how base oil numbers can erode much further.

European API Group II and Group III prices have again been resisting the general downward base oil trend, but with new production of about 50,000 t per annum of Group II+ coming on stream from Scandinavia in May, it is hard to see how these products will maintain the current prices for much longer.

Group II is being sold within a wide price range, perhaps depending on destination and type of receiver. Group II numbers are put at $650 to $730/t, with Group III levels still being scheduled at $1,000/t and up. (These prices are very much determined by method of delivery and location of receivers, and are stated as a market guide only).

West Africa has been quiet this week. Meanwhile prices in South Africa from local producers have been confirmed at about $570 to $580/t delivered, for SN 150, SN 350 and SN 500. This has meant a sizeable reduction to the former prices, by some $150/t, and may be seen as a tool to prevent imports from invading the market.

Activity in the Middle East has been dull to say the least, with Iranian export prices for Group I SN 500 sought by buyers around $450 to $460/t FOB Iranian ports. The Saudi Arabian and some North African producers have again been under some pressure to move delivered prices downwards from levels which were perhaps yielding $30 to $50/t more than Middle East CIF/CFR European supplies. But with no apparent inventory problems, and a reluctance to initiate such a move, this action is being resisted using the high feedstock cost argument, and one might feel that these producers are the ones who have got it right.

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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