A degree of stability has settled over API Group I trade around Europe, the Middle East and Africa, with slightly increased demand and reduced production bringing the segment close to balance.
Prices for European exports and sales within the region are unchanged this week, and there were no shortages reported nor comments of the market being long. Prices have been tweaked upwards in offers, but ultimately have been discounted back to original levels. Upward pricing pressure has lessened due to feedstock prices decreasing.
Group II base oils continue to face downward price pressure due mainly to the level of competition. With good availabilities in local markets, there has been a move away from spot sales of lower priced grades from Far East and U.S. through traders since the combination of long delivery times and the fluctuations in the feedstock markets pose significant risk.
In the Group III segment, too, increasing competition among suppliers is presenting purchasing options for buyers. Some buyers have announced that they are scuttling contracts for most or all Group III purchases and will play the spot scene, where better deals can be done on an ongoing basis.
Against a background of the United States and Iran playing stand-off, it comes as little surprise that crude oil prices moved upwards this week. Dated deliveries of Brent crude rose more than $4 to $65.25 per barrel for August settlement. West Texas Intermediate climbed $5.50 to $52.30/bbl, now also for August front month. ICE LS gas oil jumped $30 to $587 per metric ton for July front month.
These prices were obtained from London ICE trading late Monday.
Europe
Although some suppliers pitched slightly higher offers, no reported deals were reported outside the range of values reported here last week. With most June export cargoes already booked, there are a few offers around for July loading, these perhaps being the last quantities to be traded before the holiday season that will kick in in earnest at the beginning of August.
There are a number of cargoes moving in what could be termed export trade, but many of these parcels are inter-affiliate or intra-company movements, which are being used to rebalance stock positions in different market locations.
Prices are still between $550 per ton and $575/t for solvent neutral 150, while SN500 is unchanged at $575/t-$600/t and bright stock is still at $700/t-$740/t. These levels refer to large cargo-sized parcels of Group I offered on an FOB basis ex mainland European supply points, always subject to availability.
Sources within Europe report that some sellers have been pushing values higher, but almost as soon as these are reported, there are contradictory noises discounting them or explaining that allowances have been applied to restore existing numbers.
The approaching holiday season could reduce the heat should raw material costs suddenly escalate, but currently the market appears balancee, with prices forecast to remain around present levels..
The differential between prices for base oils sold within Europe and export pricing remains unchanged with intra-regional levels around €65/t-€90/t higher.
Pressure on Group II prices appears to have been rekindled given reports of some very low numbers being offered to first-time buyers considering switches from Group I. Some have questioned how long these low prices would continue to be offered, leading some to consider contracts running beyond 2020. Sources report some suppliers being prepared to offer fixed-price incentives for longer periods than usual.
Imports continue to factor in this segment, holding their own against the new regional source that opened in the first quarter. Imports could be affected by an ongoing review and discussions in EU circles about extending a waiver on import duties for these products. Removal of the waiver could increase the cost of imported material by 3.7 percent. There has been lobbying to remove it, but confidential information from sources close to the EU commission suggest it will be extended for an unspecified period of time.
FCA selling levels for Group II base stocks are amended at the top ends of the spreads and now are $720/t-$815/t (€640/t-€730) for 100 neutral, 150N and 220N, while 500N and 600N are at $750/t-$825/t. These include all prices heard during the past week. FCA levels can apply to small truck quantities in addition to larger bulk supplies delivered by barge, train and truck.
Group III levels remain stable, but competition is increasingly fierce in this segment and may become moreso as new sources continue to enter the market. Some suppliers may have to abandon or restrict trade into regional markets where Group III options reach saturation. Some suppliers with full slates of finished lubricant approvals continue to heavily discount.
Prices are unchanged at €665/t-€710/t for 4 centiStoke grades and €675/t-€720/t for 6 and 8 cSt for oils with partial slates of approvals, sold on an FCA basis ex hubs in Northwestern Europe. Most of the selling is happening at the lower end of the spreads.
Fully-approved Group III oils are assessed at €710/t-€840/t for 4 cSt, €800/t-€865/t for 6 cSt and €775/t-€835/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam. These ranges are extended to reflect discounts that are coming close to prices for partly-approved grades.
Baltic and Black Seas
Baltic trade remains sparse, with few cargoes being negotiated or loaded. Group I supply in mainland Europe is ample, so there are few reasons to import Russian grades to pitch against local supplies. The only hope would be if resellers and traders in the Baltic could purchase replacement cargoes from Russian refineries at lower prices, but this will not happen at the moment, since domestic markets within Russian are sponsoring healthy demand and other eastern European markets are more appealing.
One cargo of 4,500 tons has been fixed into the United Kingdom, this being the only movement ex Baltic reported this week. No Antwerp-Rotterdam-Amsterdam parcels are to be found. The Nigerian inquiry remains just an inquiry, although traders are keen to add Russian solvent neutrals to supplies of bright stock out of the lower Baltic, which may be an incentive for some movement on this transaction.
Prices for Russian export grades therefore remain unchanged at $475/t-$500/t for SN150 and $485/t-$520/t for SN500, basis FOB. Prices for bright stock ex lower Baltic fell $5 at the lower end of the spread to $695/t-$725/t.
Black Sea trade has expanded of late to include and number of large parcels being loaded on an STS basis ex Kavkaz, Russia, and another movement of some 6,000 tons loaded earlier this month for Rotterdam. The inquiries for West Africa and other cargoes to United Arab Emirates and the West Coast of India appear to be in abeyance at the moment, perhaps restocking for the floating storage.
STS prices at Kavkaz remain around $475/t for SN500, around $465/t for SN150 and around $525/t for blended quantities of SN900. There are also indications that quantities of bright stock could be available for export, although quality and specification of this material was not made available.
In Turkey the political situation has become more confused after the elections in which the ruling party lost a key foothold in Istanbul. This has led to further uncertainty in the markets, with local currency and pricing becoming volatile. With questions arising about the current situation and the future, importers, blenders and resellers are sitting on the fence before making decisions about importing base oils.
Offers are still being made from Mediterranean and Northwestern European sources for Group I material, supplementing values reported from Russian traders and Uzbek producers. Prices for Group I base oils offered on a CIF basis at Turkish ports are $588/t for SN150 and $594/t for SN500. Bright stock on an indication basis is at $760/t CIF.
There are also offers for parcels and smaller lots of Group III grades from Russian and mainland European sources, but none of these offers appears to have been taken up amid reports that quantities of Group III and Group II base oils remain available for sale on an ex-tank basis in ports such as Gebze, Turkey.
Middle East Gulf
Red Sea trade appears to have slackened, perhaps due to a slow-down of cargoes going into Oman, the U.A.E. and India. Only a couple vessels loaded for those destinations during the first half of June. The remainder of the month only shows one small parcel for the West Coast of India that may be presumed to consist of Group II grades.
The Aqaba, Jordan, inquiry remains uncovered, and traders in Europe are keen to offer for this supply.
Middle East Gulf reports are centered on the political tension between the U.S. and Iran. There is talk of the U.S. freezing millions of dollars in assets held by the Iranian leadership. The situation is becoming serious with the announcement that Iran now will break the nuclear accord with the EU this week. EU partners are being accused by Teheran of not limiting or not preventing U.S. sanctions.
It has been impossible to gain firm information about base oils moving out of Iran, although a source quoted last week has reiterated that an offer has been received in dirhams for Iranian SN500+ at a price equivalent to $594/t FOB. Indian receivers have been unable to confirm any Iranian supplies moving into Mumbai anchorage.
U.A.E. buyers are closer to obtaining a cargo of Russian base oils ex Kavkaz. It appears that this parcel would be partly discharged into Sharjah, with the balance moving to a port on the West Coast of India, but details are not confirmed. The initial cargo has loaded and is on the high seas with indication prices CIF U.A.E. at $544/t for SN150 and $549/t for SN500.
Group III base oils continue to be supplied ex U.A.E., Bahrain and Qatar, even though one of the facilities has been shut down for a few weeks of maintenance. Supplies will not face any disruption due to stockpiling for this event.
FOB prices remain as previously reported, $685/t-$725/t for all three viscosity grades, though 8 cSt oils moving to India and China will attain less due to lower local selling prices.
Official announcement that the long-running dispute between Neste and factions of Bapco is over marks a welcome return to normal trade. This dispute was exceedingly complex and ran over a number of years when supplies to Neste from the Sitra, Bahrain, joint venture were forbidden.
Nexbase-branded Group III marketed by Neste ex Sitra will have higher FOB levels due to premiums they carry in destination markets for holding the full range of approvals, including those for European OEMs. However, this seller continues to discount some prices within prime European markets, hence FOB levels for these sales are modified this week.
FOB levels are now in wider spreads at $710/t-$875/t for 4, 6 cSt and 8 cSt grades delivered into European and U.S. markets. Nominal FOB prices on a netback basis are based on prices extracted from regional selling levels, less marketing, handling and freight costs.
Group II prices within Middle East Gulf regional markets are maintained after realignment last week. The low offers mentioned stemmed from both Middle East and Far East suppliers, presumably aimed at encouraging local Middle East Gulf blenders to convert from Group I to Group II. Selling prices for FCA sales ex U.A.E. hub storage are at $795/t-$900/t for 100N, 150N and 220N, and at $815/t-$920/t for 500N and 600N.
Africa
The results of the Egyptian General Petroleum Corp. third quarter tender have now been issued, but it is too early for details of quantities and identify of the award winner. The presumption is that at least three cargoes of 3,000 tons each have been programmed for each month of the quarter, with an option for increased quantities in one or another of those cargoes. It was also noted that a Group I parcel is being supplied into Beirut, although it is not clear if this material is for local use or for Syrian blenders using storage in the Lebanese port.
South African reports confirm another large Northwestern European cargo will load toward the end of this month for shipment to Durban.
The Black Sea cargo inquiry for Nigeria has gone quiet, although traders suggested it is still being negotiated and may take a few more days before final confirmation and vessel nomination is completed. With further information that quantities of bright stock may be available ex Kavkaz, this opens up possibilities for future cargoes to move from this source to West Africa. Some traders had been reticent to opt for Black Sea supply because the Nigerian market demands heavier bright stock than would be available for loading.
Group I prices for cargoes discharging into Nigeria are unchanged at $685/t-$700/t for SN150, $700/t-$720/t for SN500 and $885/t-$925/t for bright stock, all on an CIF/CFR basis Apapa port in Lagos. SN900 is assessed at around $725/t-$750/t. These prices refer to large cargoes of at least 10,000 tons, landed into Nigerian ports.
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.