API Group I prices are stabilizing across Europe, the Middle East and Africa due to an uptick in demand and less availability of material. Meanwhile Group II values in Europe have fallen and Group IIIs are under pressure because of imports of unapproved grades and aggressive pricing for new Group II output within the region.
Crude oil and feedstock costs firmed the past few days. Dated deliveries of Brent crude are now at $67.40 per barrel for May front month settlement, around $1 higher than last week. West Texas Intermediate rose some $2 to $58.95/bbl for April front month. ICE LS gas oil slipped to $606 per metric ton for April front month. These prices are established from ICE London trading late Monday.
Cost increases are bad news for base oil producers now because they are unable to pass on increases due to supply-demand imbalance. There are reports of some Group I suppliers suggesting they will pull back on base oil production and shift feedstock to distillates, which currently offer better returns.
If Group I availabilities tighten, the end effect could be to push buyers to use Group II rather than formulations that blend Group I and Group III. This will be good news for the Group II camp where sellers are struggling to maintain margins and prices at current levels.
Europe
Prices for Group I exports from Europe have stabilized but are not rising. All Group I values remain unchanged with light neutrals offered at $560 per ton to $580/t, and SN500 at $575/t-$610/t. Bright stock is at $775/t-$810/t, facing improved demand from Egypt, West Africa and South America but with suppliers competing hard for sales.
The above price levels refer to large cargo-sized parcels of Group I offered on an FOB basis ex mainland European supply points, always subject to availability.
Domestic prices for supplies of Group I base stocks within Europe also remain unaltered this week. The bullish sentiments alluded to last week appear to have been a little hazy, although suppliers in general have commented this week that they will not allow prices to decrease further, but at the same time these sellers are still held by the same pricing constraints as the export market.
Buyers dispute suggestions that prices are about to rise, arguing that they have wide choices of where and from whom to purchase, insisting that they are in no hurry to move to Group II at the moment.
However, many have commented this week that they are encouraged by offers heard around the market from the new source for Group II in Rotterdam and its satellite hubs around Europe, and that the price differential between Group I and Group II may start to narrow over the next period.
The gaps between domestic and export prices are also maintained, domestic levels remaining between €65/t-€100/t higher than export numbers.
As mentioned above, Group II base oils have come under price pressure from various angles with reports of competitive price levels being offered from the new production in Rotterdam, whilst at the same time the market is being bombarded with small quantities of lower priced material from other regions such as Far East and U.S. Whilst some of these grades cannot meet ACEA and European OEM formulation approvals they can be used in limited quantities in the market, and the mere fact that they exist at lower prices brings a suggestion that perhaps alternative numbers have traditionally been too high.
The volume effect of the Rotterdam production is not yet able to be evaluated, and it may take some time to gauge whether any potential increase in avails will also have a direct effect on the European Group II base oil market. The argument has been that the new production will merely substitute for previously imported barrels which will no longer be required for the European market, thus maintaining equilibrium.
Group II prices are moved lower this week with FCA and truck/barge delivered levels for the light vis grades 100N, 150N and 220N, currently assessed between $765/t-$840/t (€675/t-€745), The heavier grades have come under greater pressure with levels now showing for 500N and 600N in a wide range between $785/t-$910/t (€695/t-€805). These prices are in respect of the full range of Group II grades, non-approved, partly-approved, and fully-approved.
Group III prices are maintained, with the market continuing the two-tiered format with fully approved oils and partly-approved sparring for inclusion in the European markets. Some sources have declared that they will not have availability during April when a turnaround is taking place at a Russian refinery. Buyers who have not covered requirements for this period are expected to turn to partly-approved supplies which continue to be available from sources in Middle East Gulf and Far East.
Levels in respect of partly-approved Group III grades are unchanged between €765/t-€775/t in respect of 4 centiStoke grades. 6 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 appears to be holding current levels being priced between €835/t-€870/t in respect of 4 centiStoke product, 6 cSt material remaining between €860/t-€880/t, with 8 cSt material 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 regions remain unchanged in price terms but the amount of trading which is taking place from the Baltic is poor compared to times past. The problem has been that Russian export barrels have been too highly priced to allow traders and distributors to purchase quantities by rail and have material delivered into shore storage at the Baltic terminals. Long availabilities of Group I base oils from mainstream European production has also been very competitively priced thus obviating the need for what would have been expensive lower specification Russian export grades.
There has been some positive news from the Baltic with confirmation of a large cargo of Russian and Polish grades being loaded around mid March for receivers in Nigeria. This was the cargo identified a few weeks back, during which time negotiations have been completed and the parcel is now fixed clean. There were options to load grades other than bright stock out of northwestern European sources, but Baltic FOB prices plus port costs may have been the key to loading out of Riga port.
Buyers in the United Kingdom have almost purchased as much material as required from the Baltic in the time available left prior to possibly leaving the EU on the 29th March, along with all the potential duty and tariff complications which may, or may not ensue.
FOB prices remain in the same ranges as last reported with levels for SN150 at between $495/t-$520/t and SN500 lying between $495/t-$525/t. Bright stock ex southern Baltic is assessed at levels between $775/t-$810/t FOB.
Black Sea regions report sporadic trade with only a couple of Russian export cargoes being considered along with Uzbek avails being nominated to load out of optional Eastern Black Sea ports. One large STS cargo ex Kavkaz, Russia, is planned to load for receivers in Singapore, with around 15,000 tons or Russian export grades comprising the cargo. FOB or STS prices ex Azov are assessed at around $485/t-$500/t in respect of SN150 with SN500 between $495/t-$520/t.
The Kavkaz, Russia, STS cargo for Singapore will have to be priced CIF at around $585/t in respect of SN500 to be able to compete with locally available Group I grades.
Turkish demand remains sluggish for anything other than locally produced Group I base oils, with Mediterranean sources still offering available cargoes for import into Gebze and Derince, Turkey. Prices heard re an offer ex Mediterranean sources for material delivered CIF Gebze, is reported at around $575/t for SN150 and $598/t in respect of SN600.
Group II is moving into Turkey from various sources in Red Sea and USG with prices suggested at around $655/t and $675/t in respect of 100N and 500N.
Group III offers are indicated at around $855/t-$900/t CIF Gebze port for non-approved base oils ex Sitra refinery, with ex tank prices indicated at $1025/t in respect of 4 centiStoke and 6 cSt grades.
Middle East Gulf
Red Sea news contains further information on a further Mediterranean sourced cargo may be considered for delivery into Aqaba in Jordan. Vessels and cargoes loading ex Yanbu and Jeddah are few, perhaps as a result of the current problems at Yanbu refinery.
United Arab Emirates buyers have gone cold on accepting offers of cargoes for supplies of Group I material from sources in Black Sea, Mediterranean, perhaps suggesting that Iranian Group I base oils are once again available for export. No cargoes have come to the notice of this report, with some sources based in U.A.E. denying any contact or dealings with Iran. There have been reports of price changes with material going lower, but what factual basis this data carries is unproven.
CIF offers are still on the table from traders in respect of Group I base oils and are being indicated between $560/t-$575/t for heavy neutrals, along with Group II grades ex U.S. Gulf Coast offered between $730/t-$770/t. There are also offers in flexies for quantities of Group II material containing comparable pricing.
With large Group III cargoes ex AL Ruwais and Sitra identified as moving to China and Sharjah respectively, Group III trade appears to be in rude health within the Middle East Gulf region.
Assessments for FOB prices in respect of Group III grades from Al Ruwais and Sitra are once again 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 or Far East locations will have variant FOB prices due to lower local selling prices in those markets.
Nexbase, which is the branded base oil distributed globally by Neste, is routinely and contractually supplied ex Sitra refinery, and carries unchanged FOB estimated levels between $875/t-$925/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades moving to European, U.S. and other Western markets.
Group II prices have reacted to the European downturn and have been readjusted to reflect new selling levels with Group II base oils sourced from Far East and U.S. with full global approvals are being sold FCA ex U.A.E. hub storage.
Prices in respect of the range of Group II base oils in Middle East Gulf are assessed lower this week and are now between $920/t-$965/t in respect of the light grades 100N/150N/ 220N, with 500N/600N down-priced to between $885/t-$945/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
Cross Mediterranean reports are few this week for cargoes moving into North African ports and with the Egyptian bright stock tender now closed, the award should be announced with the next week. A number of selling parties have expressed interest to supply bright stock to cover this tender and the result is awaited with interest. The tender covers three cargoes of 3,000 tons, plus a buyer’s option for a further cargo in May.
South African shipping sources have confirmed that another contracted cargo from a major supplier, will load ex Antwerp-Rotterdam-Amsterdam and U.K. with around 14,000 tons of base oils and drilling fluids for discharge in Durban during May.
West Africa news is that another U.S. Gulf Coast cargo is being considered for delivery into Apapa, during April. This will be in addition to the 12,000 tons loaded out of the Baltic but will go to different receivers, being handled by two separate trading companies. No further information has been gleaned regarding the intended supplies into Cote d’Ivoire and Guinea, with Ghana news re the Tema supply also awaited.
Group I grades being landed into Apapa port in Lagos are maintained as per last report with no only FOB prices and estimated freight levels to assess the Baltic prices landed CIF/CFR. Levels are maintained at $$670/t-$680/t in respect of the range of light neutrals, with SN500 landing between $680/t-$690/t. Bright stock which has been sourced and loaded ex Baltic is estimated to land between $900/t-$945/t with SN900 currently 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-viscosity 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.