The Easter holidays intruded on base oil markets this week, as many buyers and sellers vacated their desks to leave business transacting at a slower pace than normal. Most prices in Europe, the Middle East and Africa remained static.
API Group I oils are more or less where they were a week ago, while Group II prices weakened further and a further influx of Group III to Europe put supply clearly above demand.
Crude and feedstock levels moved higher this week, potentially creating further problems for API Group I suppliers since margins have already been squeezed nearly to nothing.
Dated deliveries of Brent crude rose to $74.25 per barrel for June front month settlement, around $3 higher than last week. West Texas Intermediate crude climbed around $2 to $65.75, now also for June settlement. ICE LS gas oil escalated around $17 per metric ton to $648/t, for May front month. These prices were from ICE London trading late Monday.
Europe
Prices for European exports of Group I are reportedly stable this week, with a few sellers looking to move prices off the bottom of the market, but so far without any real success. Viewing the market in total, there still appears to be more material available than is required by receivers in export destinations, thus causing inherent weakness to prices.
Values are maintained this week, with light solvent neutral grades between $550 per ton and $575/t and SN500 at $575/t-$600/t. Bright stock appears to have stabilized, although this may be a mirage caused by the Easter holidays. For now at least, prices are $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.
Domestic trade has been dull across Europe during the last few days with many buyers and sellers taking time away from operations for family time and vacations. Prices remain flat, with negotiated April monthly prices remaining in force for the few deliveries and trades which have been carried out over the past few days. Sellers maintain that they are expecting lower levels after the month end, with some larger buyers claiming that they should be purchasing at export prices rather than local or domestic tariffs.
The Group II debate continues, with some major blenders opting to move across to the new grades, away from Group I solvent neutrals although most say that they are continuing to take quantities of bright stock to accommodate the blending of marine grades, although this may change significantly after the end of the year when IMO 2020 comes into effect, and with the use of lower-sulfur fuels the requirement for higher viscosity and higher TBN lubricants may start to dwindle. The increasing dependence on Group II will continue however with the overall move to higher specification lubricants.
The differential between domestic and export pricing is maintained with domestic levels being levied between €85/t-€120/t higher than export selling prices.
Group II prices were gauged to have weakened a little during the past week, this perhaps being due to the momentum from aggressive selling levels from new production, but price erosion has not been dramatic, and with some source increases coming into play the market may be looking at a period of more stable numbers.
European Group II prices are trimmed by around $5/t across the board, with FCA levels for the range of light vis grades 100N, 150N and 220N now assessed between $740/t-$850/t (€655/t-€755), with heavier grades 500N and 600N now between $770/t-$890/t (€680/t-€790). The price ranges are extensive, with some very low prices still being heard in respect of imports in flexitanks, although this practice appears to be thinning out. Major suppliers are still sending out signals that new production will find a market, even if that position has to be bought by low offers for new business.
Prices are in respect of the full range and availabilities of Group II grades, some supplied in flexies, and covering non-approved, partly-approved, and fully-approved material.
As mentioned beforehand the Group III markets suggest that supply is starting to exceed demand, even taking account of planned maintenance and turnarounds at a couple of producing refineries around Europe. According to sources there are ample stocks now around the European supply hubs, and with no suggestions that Group III grades could be short, the market is bracing itself to ride out a period when demand is not strong enough to absorb all supplies hitting the European scene. The two tire market continues, but there are cautious reports of length of supply affecting both sectors, both partly-approved and fully-approved.
Prices for partly-approved Group III grades are maintained as unchanged this week, between €700/t-€755/t in respect of 4 centiStoke grades, with 6 cSt and 8 cSt base oils between €710/t-€765/t. Prices are in respect of FCA sales ex hub locations located in northwestern Europe. These levels may start to slip should a definite oversupply situation arise.
Fully-approved material is also left as per last report. Levels continue to be assessed between €820/t-€890/t in respect of 4 centiStoke product, 6 cSt material between €845/t-€895/t, and 8 cSt grades between €825/t-€885/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 reports are rather sparse this week, with few sources available for comment. There are suggestions that a further large parcel is being sourced from the region for receivers in Nigeria, although no formal confirmation of this possible trade was forthcoming as yet.
Prices have largely remained around the same levels as last week amid reports that some sales have been completed for supplies from Russian refineries for May arrival. In a number of instances production has returned after maintenance was completed at a couple of refineries.
FOB prices remain as previously reported with levels for SN150 between $475/t-$500/t and SN500 between $485/t-$520/t. Bright stock from the southern part of the region remains assessed between $760/t-$785/t FOB.
Black Sea and Eastern Mediterranean regions report dull trading conditions with neither buyers nor sellers reflecting a positive outlook. Sellers from Mediterranean sources are frustrated by Turkish buyers not being prepared to take cargoes into storage, instead these historically traditional purchasers of Group I material continue to rely on local supplies from Izmir refinery which can be bought in smaller quantities and using local currency. Buyers are resigned to operating on a smaller scale at the moment, with limitations being imposed by the state of the Turkish economy. Finished lubricant demand is down within the Turkish markets and few exports are being considered at the moment.
There still remains evidence of Mediterranean offers CIF Gebze, Turkey, and Derince, but with few takers or interest being shown in these Group I cargoes. Prices remain keen and are heard at around $525/t for SN150 and $535/t for SN600.
There are new cargoes being assessed from Kavkaz, Russia, for receivers in United Arab Emirates, Singapore and Rotterdam, although dates and confirmation of quantities are still sought. Prices in respect of these large cargoes loading on an STS basis ex Kavkaz, Russia, are unchanged and are assessed at around $465/t-$485/t in respect of smaller quantities SN150 with SN500 in a spread between $480/t-$495/t.
Middle East Gulf
Red Sea news has a number of cargoes loading out of Yanbu and Jeddah for receivers in U.A.E. and India. The recent problems at Yanbu refinery appear to have been eradicated and normal operations as assumed to have returned to the refinery.
There are new reports of Iranian Group I material being made available for export from this source, but no direct contact with sellers can be made to ascertain if this is actually the case. Shipping reports carry no information on any cargoes moving out of Iran or the Middle East Gulf, but sources in U.A.E. suggest that quantities of SN500+ are landing into Sharjah.
Buyers in U.A.E. are looking at further Black Sea sourced supplies of Russian Group I exports with one cargo almost finalised. CIF prices basis delivered U.A.E. for Group I base oils are around $535/t in respect of SN500 ex STS Kavkaz, Russia.
FOB prices in respect of partly-approved Group III grades being loaded out of Al Ruwais in U.A.E. and Sitra in Bahrain remain unchanged this week and are at levels between $715/t-$755/t in respect of 4 centiStoke, 6 cSt and 8 cSt base oils. 8 cSt grades for destinations in India or Far East will produce lower FOB prices due to local selling prices.
Branded Group III base oils ex Sitra refinery marketed by Neste also have prices which remain unaltered with FOB levels assessed 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. For the sake of good order and by way of explanation, nominal FOB numbers referred to in this case are based on netted back price levels established from regional selling prices, less handing and freight costs.
FOB levels in respect of the branded products sold by Neste will be afforded the same levels as partly-approved material sold by Bapco, since the physical product from the refinery is the same but in the case of the Nexbase brand, full approvals have been granted to the material
Group II prices in the Middle East Gulf regions are tweaked a little lower with selling levels in respect of base oils which sourced from Far East and U.S. and holding full global approvals, which are sold FCA ex U.A.E. hub storage, are re-assessed in ranges between $875/t-$910/t in respect of the light grades 100N/150N/ 220N, with 500N/600N between $885/t-$925/t.
Africa
South African buyers are still in the market to purchase smaller quantities of Group I base oils delivered in flexies. Also shipping sources have confirmed another large parcel of base oils loading out of Rotterdam and the United Kingdom which will discharge in Durban, possibly during early June.
Nigerian buyers are looking for further cargoes either from Baltic sources or alternatively ex USG, although prices from the latter may have started to firm on the back of crude and feedstock upward moves. This may be enough reason and justification to bring Baltic supplies back into the equation, since that source of late has been uncompetitive against supplies out of the U.S. The enquiry for a cargo to load ex Baltic is still on the table and more news may evolve on this possibility during the course of this week. The new Baltic cargo may load quantities of Russian heavy neutrals and also bright stock, and rumors have the cargo at around 14,000 tons in total.
Group I prices landed into Nigeria are maintained with levels remaining between $670/t-$680/t in respect of quantities of SN150, SN500 will land between $680/t-$690/t, and bright stock is assessed between $900/t-$945/t. SN900 is estimated to land at between $700/t-$720/t. All prices are basis CIF/CFR Lagos.
The prices above refer to large cargoes of minimum quantity of 10,000 tons in total, landed into Nigerian ports such as Apapa, Lagos.
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.