Base oil demand in Europe, the Middle East and Africa finally showed signs of taking off as a number of API Group I producers reported no longer having stocks in tank that needed to be moved out.
In addition, temporary maintenance shutdowns at a couple plants could further tighten supply. Group II demand is also positive, but prices for them are being treated roughly for both contract and spot transactions. Maybe this is the inevitable result of new capacity (ExxonMobil’s new plant in Rotterdam) hitting a market that was already flush with supply, but some players insist it is merely a matter of perception.
Group III has seen increasing quantities coming into the market, and some prices for oils with partial slates of finished lubricant approvals are showing a keen edge.
Crude oil and feedstock prices fell toward the end of last week and then recovered to end up back where they were. Dated deliveries of Brent crude posted yesterday at $66.50 per barrel for May front month delivery, whilst West Texas Intermediate is at $56.75/bbl for April front month settlement. ICE LS gas oil is unchanged from last week at $616 per metric ton, still for March front month. The above prices were established from ICE London trading late Monday.
Europe
European Group I exports may have reached their nadir and could start to show signs of a recovery on prices. There are indications of supply tightening due to production cutbacks and maintenance turnarounds taking place. There have been notably large cargoes moving out of Europe to the Middle East Gulf, India and West Africa, and suddenly these large parcels are not so easy to come by, particularly where grade split is important.
Neutral prices are maintained this week with light solvent neutrals offered between $560/t-$580/t, with SN500 remaining between $575/t-$610/t. Bright stock FOB levels if anything may have firmed by a few dollars here and there, particularly if the offered prices for the EGPC supply are factored into the ranges. Prices are assessed between $795/t-$875/t, the upper end of the range specifically reflecting current tender offers.
The above price levels refer to large cargo sized parcels of Group I base oils FOB ex mainland European supply points, always subject to availability.
Group I domestic prices within Europe are under discussion again, but this time suppliers are perhaps moving to lift selling prices, where previously they had been defending current prices. Bullish sentiments are heard this week with some suppliers stating that they are will not allow prices to drift further, and are saying that prices for April will be higher than those agreed for March.
Buyers have played down this apparent change of attitude, commenting that there is still a lot of Group I product around and the options for supply of these grades still abound in the marketplace. There would appear to be an impasse building between the buying and selling factions which may only become directional over the next few weeks.
The differential between domestic and export prices is maintained this week with domestic levels remaining between €65/t-€100/t higher than export numbers.
Where Group I may be about to reverse the current drift in pricing terms, Group II base oils have come under price pressure from a number of directions. The implications of the new production in Rotterdam are still to be realized, whilst the same time, lower priced imports, albeit in smaller quantities, are moving into the European market from the U.S. and Far East and are putting pressure on the established supply channels in the European markets.
The result has been that Group II prices have been moved lower with established sellers primed to maintain market share almost at any cost. Some sources have made comments which suggest that these downward moves in Group II pricing are merely an adjustment to numbers, where it was considered that Group II prices had remained higher in the European arena than in any other global market.
Prices are down this week with FCA and truck/barge delivered levels for the light vis grades 100N, 150N and 220N, between $815/t-$855/t (€725/t-€755) and with 500N and 600N between $915/t-$950/t (€805/t-€840). These prices are in respect of the full range of Group II grades, non-approved, partly-approved, and fully-approved.
Group III prices are pitched lower, with large quantities of Group III base stocks coming into Europe from Middle East Gulf and Far East. There are reports of potential limited avails due to a Russian producer going into turnaround next month which may cause some shortening up for receivers in Eastern Europe who are reliant on this source for quantities of 4 centiStoke Group III material.
The market remains split with a two-tiered supply scene where non-approved or partly-approved base oils are being sold at lower levels than material carrying ACEA and European OEM’s approvals. Prices in respect of the partly-approved Group III grades are lowered again to reflect prices between €765/t-€775/t in respect of 4 centiStoke grades. Six and cSt and 8 cSt base oils are offered between €775/t-€785/t. Prices relate to FCA sales in various locations in northwestern Europe.
Fully-approved material is also taken lower and is now priced between €835/t-€870/t in respect of 4 centiStoke grades, 6 cSt material is between €860/t-€880/t, with 8 cSt material selling between €840/t-€875/t, basis FCA Antwerp-Rotterdam-Amsterdam.
The prices above do not reflect prices for material which is delivered in bulk cargoes to large or major buyers. Prices in respect of these trades may be lower than FCA levels above.
Baltic and Black Seas
Baltic base oil prices are probably stabilizing, possibly due to the fact that they cannot fall any further according to one source, who stated that margins and prices had been pared to the bone, and that there was no possibility of further reductions. With the Group I market perhaps becoming less long, and the European mainstream surplus reducing, there may be scope for Baltic suppliers to step back into the frame and re-commence supplies to areas such as Antwerp-Rotterdam-Amsterdam and the United Kingdom.
Buyers in the U.K. are looking to take a couple of Baltic cargoes before the end of March when there could be problems with the U.K. leaving the EU. A Few of the buyers in the U.K. have commented that they would have liked to increase stocks of base oils from Baltic and other European sources, but lack of additional storage has been one of the problems in addressing this situation. Importers in the U.K. are attempting to avoid running into new tariffs and duty in respect of EU designated origin material.
FOB prices are assessed slightly lower with levels at $495/t-$520/t in respect of quantities of SN150 with SN500 between $498/t-$525/t. Bright stock out of the southern Baltic is stable and is holding at levels assessed between $785/t-$820/t FOB.
Black Sea trade is mixed with a couple of large STS exports of Russian grades going to United Arab Emirates and also to Rotterdam for bridging to South American markets. Around 15,000 tons of material has been loaded in two recent shipments from Kavkaz, Russia. Azov Russian Group I material is offered lower again this week, delivered into Gebze, Turkey. Delivered prices ex Azov are assessed at around $540/t-$565/t in respect of SN150 with SN500 between $550/t-$595/t.
The Kavkaz, Russia, STS cargo for U.A.E. has prices CIF U.A.E. indicated at around $575/t in respect of SN500.
Turkish demand remains sluggish for Russian material, since Mediterranean sources are able (not willingly!) to compete against Russian exports to make sales of Group I material into Gebze and Derince, Turkey. Local Turkish supplies still play a major part in the Group I scene, with the refinery at Izmir supplying many of the blenders looking for Group I base stocks using local currency.
Surprisingly, prices heard at the end of last week regarding offers from a Mediterranean source, delivered CIF Gebze are a little firmer than previously noted at around $590/t for SN150 and $610/t for SN600. This supplier has recently loaded two large cargoes of Group I base oils for the east coast of Africa, India and Singapore, so perhaps the pressure is alleviated to sell further material at marginal prices.
Group II going into Turkey some in flexies, is suggested in one instance at around $675/t and $700/t in respect of 100N and 500N. This material is being sourced out of USG but carries no European approvals. Group III offers are being made from suppliers in the Middle East Gulf with prices which are indicated at around $855/t-$900/t CIF Gebze, port in respect of non-approved base oils ex Sitra refinery.
Middle East Gulf
Red Sea reports are that a Mediterranean sourced cargo of some 5,000 tons+ of Group I grades has loaded and sailed for discharge in Aqaba in Jordan. Perhaps the problems at Yanbu have ruled out this supply coming out of that refinery. There are other contracted cargoes which appear to be unaffected ex Yanbu for U.A.E. and India.
U.A.E. receivers are to take a number of Group I cargoes from sources in Black Sea, Mediterranean and USG, since with Iranian Group I supplies missing from the market, these sources are able to compete and supply acceptable specified material which can be used locally as primary blend stock. Supplies of Group I base oils are being made ex Mediterranean into regions such as East Africa, which would traditionally have been supplied using Iranian grades.
CIF offers in respect of Group I base oils are indicated between $560/t-$575/t for heavy neutrals, with Group II grades loaded on the same vessel ex U.S. Gulf Coast at between $630/t-$670/t. Offers of Group II grades are also being made for deliveries in flexies, which can often compete against local Group III production.
Exports from Al Ruwais of ADbase oils are being made to Europe and Far East with two cargoes of 8,000 tons and 11,000 tons respectively being planned for delivery in April. These cargoes will be loading during second half March.
In addition, Group III material will also load ex Sitra for the west coast of India, and now with these two sources alone potentially exporting around 75,000 tons of Group III grades per month, the region is firmly established as a major source for these products. This quantity is in addition to GTL Group III+ base oils being produced and exported from Qatar, those quantities being assessed at around a further 60-75,000 tons per month from that source.
Assessments for FOB prices in respect of Group III grades from Al Ruwais and Sitra are maintained with levels between $725/t-$765/t in respect of 4 centiStoke, 6 cSt and 8 cSt partly-approved base oils. Eight cSt grades being sold into India and Far East locations will have variant FOB prices due to lower local selling prices in those markets.
Branded Nexbase, distributed by Neste from the Sitra refinery, which carry European OEM’s and ACEA approvals, are also unchanged with numbers between $875/t-$925/t for 4, 6 hand 8 cSt grades moving to European, U.S. and other Western markets.
Group II availability shows very little effects from the Yanbu situation whilst Group II base oils sourced from Far East and U.S. carrying global approvals are sold either delivered in bulk or FCA ex U.A.E. hub storage. There does not appear to be any movement for the new Rotterdam production to be considered for Middle East Gulf markets, perhaps this is for the future.
Prices in respect of the range of Group II base oils in Middle East Gulf are assessed between $950/t-$985/t in respect of the light grades 100N/150N/ 220N, with 500N/600N between $1010/t-$1025/t. Prices are in respect of small quantities of less than 25,000 tons per load, delivered around Middle East Gulf. Prices may vary with destination and distance from hub supplies.
Africa
Mediterranean trade into North African is quiet this week with few new parcels identified as loading for receivers in Morocco, Algeria or Tunisia. The EGPC tender will close this week with a decision in around ten days time. A number of traders have been trying to access quantities of bright stock to cover this tender, although at least one major will also be bidding for at least part of the contract. The tender covers three cargoes of 3,000 tons, plus an option for a further cargo for delivery in May.
No further details have been made available regarding the cargo to load for Cote d’Ivoire and Guinea, although the supply to be made into Tema is being worked presently. The Group I supply of SN150, SN500 and bright stock will be loaded later this month.
West African receivers in Cote d’Ivoire and Guinea are looking for supplies of Group I base oils to cover requirements for local blending in those countries. The quantities are not large, hence supply is often considered in conjunction with either a cargo bound for Tema or Apapa.
Nigerian news is that cargoes are being considered from sources in USG in addition to at least one other parcel being worked out of the Baltic. The cargoes out of USG may comprise of Group I and Group II grades loaded in tandem.
Group I grades landed into Apapa are currently assessed and are maintained as previously at $$670/t-$680/t in respect of the range of light neutrals, with heavier SN500 landing between $680/t-$690/t. Bright stock which has been sourced and loaded ex Baltic is estimated to land between $898/t-$925/t with SN900 indicated between $700/t-$720/t CIF/CFR.
Group II prices remain as per last indications landed into Apapa at around $795/t-$865/t in respect of both light and heavy vis material.
These prices refer to large cargoes with a minimum loaded quantity of 10,000 tons delivered CFR/CIF into Nigerian ports such as Apapa or Port Harcourt.
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.