EMEA Base Oil Report Week: 25/9/18
Base oil prices in Europe, the Middle East and Africa were steady this week despite plenty of speculation about where the markets are headed. Some pundits have suggested that rising crude oil costs could push base oils upward, while others contend that loose supply will hold down values.
With availability so ample, sellers could find it difficult to convince buyers to accept mark-ups, although some suppliers are loathe to let margins be further compressed.
Crude and feedstock values strengthened the past few days, with dated deliveries of Brent crude rising to $81.00 per barrel for November front month, a new recent high, while West Texas Intermediate crude has broken through the $70 barrier to post at $72.30/bbl, now also for November settlement. ICE LS Gas Oil rose to $704 per metric ton for October front month. These prices were established from London ICE trading late yesterday.
Europe
European API Group I export prices remain unchanged at this time, although some players have indicated that should crude and raw material costs remain at current levels, or increase further, then base oil prices will have to respond and could be forced upwards. At the moment levels are maintained with light solvent neutrals between $720/t-$740/t, with SN500 and SN600 between $795/t-$820/t. Bright stock is also stable, but in a wide range between $865/t-$895/t depending on supply location and specification.
These prices refer to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always subject to availability. Domestic prices for sales of Group I products within Europe also remain flat this week, but significantly some sellers are talking about higher levels coming into force at the end of September, with these higher prices applying to sales of Group I base stocks in October. Last week the consensus around the local markets was that Group I price levels would soften, this has been turned around this week, with crude defying forecasts by rising, it may only be a question of time before base oil numbers have to follow suit.
The differential between local prices and export numbers is maintained this week, and is assessed between €70/t-€90/t. Group II pricing is the one area which normally responds quickly to rises in crude and feedstock levels, with producers applying source increments which then filter down to selling prices in the field. In addition demand is still healthy for Group II base oils with a growing appetite for further development in this market sector. Prices remain stable this week, but the feeling around both sellers and buyers is that levels are possibly about to come under the spotlight with numbers rising for October sales. FCA and truck/barge delivered prices are left unchanged but with the proviso that the market may be on the brink of an upward change. Light-viscosity grades are priced between $875/t-$920/t (€745/t-€785) with 500N and 600N at $955/t-$975/t (€815/t-€820).
In the Group III camp partly-approved imported material FCA prices are maintained, with no news of any impending price changes to be levied from Oct. 1. Levels are advised between €765/t-€770/t ($885/t-$895 ) in respect of 4 centiStoke grades, with 6 cSt material selling at €775/t-€780/t ($900/t-$910). 8 cSt material is moving out of storage at between €785/t-€790/t ($910/t-$920).
Fully approved Group III base stocks holding ACEA and European OEM approvals are priced higher, at €795/t-€810/t for 4 cSt grades, €800/t-€820/t for 6 cSt and €810/t-€825/t for 8 cSt, all on an FCA basis Antwerp-Rotterdam-Amsterdam.
Prices are based on ex-rack or truck delivered smaller lots of Group III base oils, and do not reflect prices for material which is delivered in bulk cargoes to larger users. Prices in respect of the latter trades may be considerably lower than the levels detailed above.
Baltic and Black Seas
Baltic reports this week contain the news that the other large enquiry for Nigeria has been covered but no shipping fixtures have been noted as yet. It is anticipated that the cargo will comprise of around 12,000 tons in total, but exact quantities to be loaded out of the Baltic are not yet confirmed. Routine cargoes moving into Antwerp-Rotterdam-Amsterdam and the east coast of the United Kingdom make up the trades for this week, and another enquiry has been posted for a large quantity of Russian export base oils to be loaded ex Baltic for Far Eastern receivers, this may be similar to the cargo reported last week.
Strangely FOB prices appear to have dipped, although this is historical reporting and pertains to the Nigerian cargo loading currently. Forward prices are thought to be under review which can only mean one direction, upwards. Rises in Baltic prices would constitute a reversal from current events, but may reflect the rises anticipated for crude and feedstocks. Prices currently remain assessed at around $680/t-$700/t in respect of SN150, and between $755/t-$775/t for SN500. SN900 indicates at around $795/t, with min 90 VI bright stock ex southern Baltic around $840/t-$855/t FOB.
Black Sea base oil trade reports cargoes moving into Turkish ports from Mediterranean sources with indicative prices assessed for the light solvent neutrals at around $755/t-$765/t and SN600/SN500 between $825/t-$845/t CIF. Sources have indicated that October prices will show higher numbers, although the question of exactly how much higher was declined.
After the reports from Kavkaz, Russia, of the latest Singapore parcel, another large loading is rumored to be in the offing for first half October. Again destination has not been offered for this parcel, although one source mentioned that this cargo may go into United Arab Emirates. Previous prices may have been in the region of $725/t-$735/t, very aggressive pricing in respect of quantities of SN500.
Middle East/Gulf
Red Sea reports show material moving out of Yanbu and Jeddah to the west coast of India. The enquiry for material to move into Durres in Albania appears to have disappeared off the radar, perhaps suggesting that the enquiry may have been flakish.
Middle East Gulf Group I trades show no evidence of Iranian avails which could be a measure of the material being required in the domestic market within Iran, or an early effect of the U.S. sanctions limiting the shipping opportunities to move cargoes from the southern Iranian ports.
A Black Sea cargo ex Kavkaz, Russia, moving into U.A.E. may make sense at this time, since with the shortage of Iranian supplies, lower cost Group I material may be short in Middle East Gulf markets, leaving only premium supplies from Saudi Arabia to fill the supply gaps. There are also enquiries which have been placed with U.S. Gulf Coast and USEC sources for Group I base oils, but there are no records of any meaningful offers from those sources at the moment.
Mediterranean sellers of Group I material also indicate that they have been contacted by Middle East Gulf buyers to investigate cargoes of Group I coming into the region.
Exports of Group III base oils from Al Ruwais and Sitra still appear as the major trade coming out of the Middle East Gulf. Indication FOB prices are maintained this week, although sources from both Sitra and Al Ruwais have told receivers in Indian markets that prices may start to move upwards during October, and that numbers could escalate by as much as $50/t. Levels for this week only are maintained notionally between $785/t-$810/t basis FOB Al Ruwais and Sitra in respect of all grades of partly-approved Group III base stocks. Expectations are that all Group III prices may start to rise next month.
Fully approved Neste material carrying U.S. and European approvals from Sitra refinery is estimated to netback between $845/t-$875/t for 4, 6 and 8 cSt grades moving westwards to Europe, the U.S. and other American markets. Exports of 8 cSt to Far Eastern markets may show lower netback levels due to lower local selling prices.
The numbers above refer to FOB levels established on a notional netback basis using published freight rates, and taking into account advised local selling prices, plus notifications of bulk CIF/CFR cargo prices from various sources.
Middle East Gulf Group II prices on basis FCA or delivered by truck or flexitanks, have hardened a little this week with small increases being applied by distributors. It is not clear as yet whether these price rises have been initiated by local distributors or whether supply sources have increased bulk delivered prices to local hubs.
Prices in respect of fully approved light grades 100N/150N/ 220N are revised upwards to between $1020/t-$1065pmt, and 500N/600N between $1095/t-$1135/t. These prices refer to Middle East Gulf delivered small quantities of less than 25,000 tons per load, but with total quantities delivered of up to 300 tons for any one purchase.
Africa
South African shipping contacts have reported that another two large cargoes of mainly Group I base stocks are being moved out of Europe for a major operating in South Africa. These cargoes whilst being designated as inter-affiliate, are having a major effect on the local South African markets.
West Africa markets are looking for quantities of Group II base oils to be delivered into Nigeria. There are a few problems attached to these enquiries, one bing the storage capability to accept Group II grades in place of existing Group I material, and also the price ideas which have been issued are below Group I levels!. One source contacted announced that because there are no very heavy-vis grades in the Group II slate (other than from the U.S. where one producer can now supply a 24 cSt Group II grade) prices should reflect this fact and hence selling prices should be less than numbers being paid for SN900 and bright stock.
Another large Baltic cargo has been mooted by receivers in Lagos, although prices have yet to be agreed for this parcel, and may not be as attractive as deals recently completed.
Prices into Apapa are therefore maintained this week in respect of Group I base oils being currently landed, with light solvent neutrals SN150-SN180 assessed between $755/t-$785/t, SN500/600/650 between $830/t-$855/t and bright stock indicated between $920/t-$940/t. SN900 ex Baltic, purely as an indication is estimated to be landed into Nigeria at around $865/t-$895/t.
These prices are in respect of large parcels in excess of 10,000 tons total of Group I base oils delivered CFR or CIF into Apapa port, Nigeria.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at pumacrown@email.com.