API Group II and III base oils continued facing downward pricing pressure the past week across Europe, the Middle East and Africa, thanks to wide availability and competition between suppliers. European Group I exports appear a little more balanced with supplies tightening for some grades, and opportunities arising in export destinations, but prices within Europe prices declined.
Market share seems to be the pressing priority at the moment with Group l, II and III suppliers all aggressively defended positions and customer bases.
Crude oil and feedstock prices gained momentum as dated deliveries of Brent crude crested $70 per barrel and posted yesterday at $70.90/bbl for June front month delivery, whilst West Texas Intermediate was at $64.30/bbl for May settlement. ICE LS gas oil rose sharply to $628 per metric ton for April front month. These prices were obtained from ICE London trading late Monday.
Europe
Spot prices for European Group I exports weakened by between $5 and $10 per ton this week, and producers are growing concerned that ever decreasing margins may lead their companies to shift feedstock to production of distillates. Values for light grades are now at $550/t-$575/t while SN500 is at $575/t-$600/t and bright stock at $745/t-$785/t.
The above levels 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.
Prices for sales within Europe have also started to dip, and buyers are still unhappy that they have not fallen further. Some claim that export offers should be applied to ex-tank prices within the region, although this would be difficult for resellers and distributors to comprehend. The differential between domestic and export prices is unchanged, with exports €85/t-€120/t lower.
Group II prices continue to fall, perhaps starting to bring European vales into line with those seen in the United States and the Far East. The premium over Group I oils continues to erode, and suppliers are becoming ultra-protective of market share and existing customers.
Heavy grades have come under the greatest pressure as there are reports of discounts of more than $50/t being applied to prices that had been stable for an extended period of stability.
European prices for Group II oils available on an FCA basis or delivered by truck or barge are $745/t-$855/t (€660/t-€760) for 110N, 150N and 220N, while 500N and 600N are $775/t-$895/t (€685/t-€795). These values apply to Group II grades supplied in flexitanks or by vessel or barge and regardless of finished lubricant approvals.
Group III base oil prices are coming under pressure from heightened competition in the markets The two-tiered market continues with partly-approved material producing ever lower selling levels, for whilst sellers have tried to align April prices with those achieved in March, pressure has resulted in discounts being applied to selling levels across the board.
Levels in respect of the partly-approved Group III grades are adjusted to between €700/t-€755/t in respect of 4 centiStoke grades. Six cSt and 8 cSt base oils lie between €710/t-€765/t. Prices are in respect of FCA sales from various hub locations across northwestern Europe.
Fully-approved material is also adjusted lower and is assessed between €815/t-€870/t in respect of 4 centiStoke product, 6 cSt material is between €825/t-€885/t, with 8 cSt material between €820/t-€865/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 supplies of SN150 are coming under mounting price pressure due to widely available quantities of this lighter grade. This situation is the reverse of one year ago, when availability of SN150 was tight. FOB prices are down again with levels in respect of SN150 between $475/t-$500/t, but with SN500 maintained between $485/t-$520/t. Bright stock from this region attracts levels between $760/t-$785/t FOB. SN900 is being indicated in large quantities at $525/t FOB Riga. With turnaround and maintenance programs nearing completion at a number of Russian Group I plants, availability is forecast to become easier in the next few weeks, perhaps adding more pressure to prices.
Group I and Group III cargoes are being pushed hard for Turkish receivers, with price levels which are attractive but still Turkish trade is dull, with most local blenders opting to lift from the Turkish refinery at Izmir on a load-over-load basis.
Greek offers CIF Gebze, Turkey, and Derince are heard at around $525/t for SN150 and $535/t in respect of SN600. Few buyers are rushing to buy at these levels, countering prices by as much as $50/t, making it unacceptable for sellers to offer at such levels. Prices have moved lower in respect of cargoes loading on an STS basis ex Kavkaz, Russia, Levels in respect of FOB avails ex Azov are assessed at around $465/t-$485/t in respect of SN150 with SN500 between $480/t-$495/t.
Kavkaz, Russia, cargoes are being assessed for receivers in Singapore and United Arab Emirates, and a parcel of around 7-8,000 tons is also being explored for Rotterdam.
Middle East Gulf
Although there are still continuing issues at Yanbu refinery, cargoes of both Group I and Group II base oils continue to be identified for regular receivers in India, U.A.E. and Pakistan.
Iranian Group I cargoes are not identified as moving out of Middle East Gulf, although parcels of Group I are being moved out of Hamriyah to India and Pakistan perhaps lending suggestion to Iranian material being exported to U.A.E. and thence from that hub to buyers outside the immediate region. The cargoes may be assembled in U.A.E. using smaller vessels to deliver out of Bandar-e Emam Khomeyni and Bandar Abbas.
At the same time U.A.E. buyers are looking at large quantities of Russian Group I exports from the Black Sea and also from Baltic sources, although the former looks more likely due to lower freight costs. CIF prices are heard into U.A.E. for Group I base oils at $553/t in respect of SN500 ex Mediterranean sources.
Group III FOB prices in respect of partly-approved Group III grades from Al Ruwais and Sitra are reviewed this week to new levels between $715/t-$755/t in respect of 4, 6 and 8 cSt base oils. Eight cSt grades going into markets in India and Far East will produce lower FOB prices due to local selling prices.
Nexbase branded base oils from Sitra refinery, which are sold by Neste, will have FOB levels between $875/t-$925/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades which are delivered to European and U.S. markets.
Group II prices around Middle East Gulf are revised with selling levels moving lower. Group II base oils which are sourced from Far East and U.S. and holding full global approvals are being sold FCA ex U.A.E. hub storage.
Group II prices for Middle East Gulf are revised downwards this week being assessed between $885/t-$925/t in respect of the range of light grades 100N/150N/ 220N, with 500N/600N selling between $895/t-$935/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.
The first of the monthly 3,000 tons cargoes covering the Egyptian bright stock tender has been loaded ex a northwestern European refinery for delivery into Alexandria. It will be interesting to see if the same source is used for further supplies under the EGPC contract.
Africa
South African receivers are to take a large 14,000 tons parcel of Group l, Group II and Group III base oils which has been loaded ex northwestern Europe and the United Kingdom. This cargo loaded during the last week of March and is expected into Durban around mid-May, WSNP.
The cargo identified last week to load ex U.S. Gulf Coast for Nigeria, has been nominated and will load this week. The make-up of this cargo is not announced as yet, but it may be considered that both Group I and Group II base oils will be loaded. The possible Baltic cargo is still not confirmed and traders are looking at options to take quantities of Group I heavy neutrals and also bright stock.
Prices for Group I grades landed into Nigeria are maintained as per last report amidst calls from buyers to have much lower offers which have been turned down by sellers. Numbers remain around $670/t-$680/t for quantities of SN150, along with SN500 between $680/t-$690/t. Bright stock is assessed between CFR/CIF between $900/t-$945/t. SN900 is indicated between $700/t-$720/t CIF/CFR.
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.