EMEA Base Oil Price Report
BY RAY MASSON
Base oil prices in Europe, the Middle East and Africa are mostly stable, with a few exceptions, thanks to lower crude and feedstock prices. That stability may already be coming under pressure, though, since crude prices have already rebounded.
API Group I prices are stable for now, with the threat of tightening supply minimized by the upcoming holiday season. Some sellers are starting to lift prices in offers, citing recent rises in raw material costs. These efforts are being strenuously contested by buyers, who are slowing down purchasing commitments while awaiting resumption of full trading in September.
Group II markets in Europe and the Middle East also remain relatively flat. Demand for such grades is rising as a number of large blenders reportedly are switching from Group I stocks.
Group III prices continue to come under pressure from the sheer quantities of these grades being made available on the market. News of Neste striking a deal for Chevron to produce Group III for Neste in the United States raises the prospect that less of Neste’s oils will be drawn to that market from Finland or Bahrain.
Crude levels initially rallied then later fell following OPEC’s meeting in Vienna on Monday, after an agreement was reached to maintain the production cutbacks for nine more months. Dated deliveries of Brent crude moved ahead to $65.20 per barrel, now for September settlement. West Texas Intermediate crude rose to $59.00/bbl, still for August front month. ICE LS gas oil climbed $5 to $592 per metric ton in July front month trading.
Prices were obtained from London ICE trading late Monday.
Europe
European Group I export values remain unchanged amid suggestions that availabilities for light neutrals are tightening, although most export destinations have only small requirements for the lighter grades. Producers are concerned that margins are under pressure again.
Levels remain between $550 per ton and $575/t for SN150, $575/t-$600/t for SN500 and $700/t-$740/t for bright stock. Theories that bright stock prices are under pressure due to the award of the Egyptian General Petroleum Corp. tender appear to be unfounded, since that supply levels reportedly will be maintained at current levels of 11,000 tons for the third quarter. The above price 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 levels within the European arena also appear to have remained level according to July prices heard this week. Some sellers were looking to move prices higher but postponed when crude and feedstock levels remained lower. This could change in July depending on raw material cost movement, but with the traditional slowdown starting during August, these actions may be put back until a later date.
Some blenders have started to build inventories, fearing that crude and feedstock rises may affect prices after the summer break, leading to a spike in demand which may provide a platform for suppliers to look at increasing levels.
Domestic and export levels kept their distance, with domestic levels assessed to be €65/t-€90/t higher than export levels.
Group II levels are stable amid ample availability of product throughout the markets, with new production fueling competition in pricing. This is evident in offers to new buyers across the markets, perhaps looking to establish these customers as future outlets for this production.
Further confidential information received from sources close to the EU commission have suggested that the import duty waiver on Group II base oils may be extended after discussions resume in mid-July.
FCA Group II base stocks values remained between $720/t-$815/t (€640/t-€730) for the light vis grades 100N, 150N and 220N this week, with heavier grades 500N and 600N between $750/t-$825/t (€665/t-€740). Values at the lower ends of the ranges pertain to smaller imports of material in flexitanks, which once again are starting to appear from sources in the U.S. and Far East.
Group III prices are steady, but more availability is increasing the likelihood of discounts as companies seek to hold onto their established market share.
The news that later this year Neste will access the U.S. market using Group III production from Chevron’s Richmond, California, refinery has been received in various ways by other participants in the market. Chevron, by producing these grades, will create competition by producing Group II+ base oils from that refinery. This may seem at odds to some parties.
Group III values are maintained for now between €665/t-€710/t for 4 centiStoke grades with 6 cSt and 8 cSt base oils between €675/t-€720/t. These prices are for partly-approved grades for FCA sales ex hubs in northwestern Europe.
Fully-approved Group III prices remain unchanged between €710/t-€840/t for 4 centiStoke product with 6 cSt material between €800/t-€865/t, and 8 cSt grades between €775/t-€835/t, FCA Antwerp-Rotterdam-Amsterdam. Some fully approved base stocks have been discounted to levels almost at parity with those prices applicable to partly-approved material.
Baltic and Black Seas
Baltic reports are that trade is dull with fewer and fewer cargoes being loaded out of this region. One of the largest operations in Svetly, Kaliningrad has not loaded any cargoes this week, an unusual occurrence, but with the supplying refinery just coming out of turnaround, this situation may not be out of the ordinary.
The underlying dilemma appears to be one where traders and resellers located in the Baltic region are unable to buy replenishment supplies from Russian refineries at levels which would allow a margin to sell into receivers in mainland Europe where prices still remain low. One glimmer of hope may be that some, only some, Russian refiners are now banned from selling into the Ukrainian market, and this might lengthen the supply of material for export, which may encourage material to flow through Baltic resellers.
One 4,500 tons cargo is fixed into Antwerp-Rotterdam-Amsterdam, and another unusual movement is 4,000 tons loading for receivers in USG.
Prices in respect of Russian export grades are unchanged with FOB levels in respect of SN150 between $475/t-$500/t and SN500 between $485/t-$520/t. Polish bright stock is assessed between $695/t-$725/t FOB.
Another large parcel has been identified being loaded STS ex Kavkaz, Russia, in the Black Sea. This cargo is bound for Indian receivers and will comprise of around 6,000 tons of Russian export grades. Kavkaz, Russia, STS prices remain indicated at around $475/t in respect of SN500 with SN150 at around $465/t. SN900 is assessed at around $525/t.
Turkish buyers are turning their backs on imported base oils which are being offered from Russian and Uzbek sources in addition to European offers from Mediterranean suppliers. The volatile currency and economic situation existing in that country is piling pressure on the local base oil industry, which is almost reliant on the refinery at Izmir for supplies of Group I material. Smaller quantities of Group II are being supplied from Far East sources as well as by distributors representing the major players.
Prices for offers for Group I base oils, basis CIF Turkish from Mediterranean sources are heard at around $590/t for SN150 and $595/t in respect of SN500. Bright stock is indicated at $760/t CIF.
Middle East Gulf
Observing last week that Red Sea trade appeared less than normal, this week has seen a number of fixture and enquires for cargoes to be loaded out of Yanbu and Jeddah, with the majority of these parcels going into Indian ports. One large cargo of around 15,000 tons will discharge into two main Indian ports in July.
As the U.S. and Iran continue their war of words, news broke early this week that Iran had exceeded the enriched uranium quota which formed part of the agreement between that country and a number of other global nations. The resultant sanctions which could be applied are not clear, since Iran has given the pool of nations until July 7th to take action to curb the American sanctions currently in place.
This news will have a knock on effect on the export of petroleum products, including base oils, these transactions having been apparently removed from international view. There are claims that base oil cargoes are still moving out of Iran, although evidence of any trade is scant, but reports from United Arab Emirates still claim that an offer has been received Iranian SN500+ at a price equivalent to around $595/t FOB. No other reports or confirmations of movements has been received.
U.A.E. reports are that offers from Far East are competing with cargoes of Russian export base oils ex Kavkaz, Russia, in the Black Sea. Prices in respect of Group I supplies from the Far Eastern source are compatible with levels for the Russian exports, and with superior quality and specifications, preference may go in favor of the Far East source. Indication prices CIF U.A.E. for the Black Sea material are $544/t in respect of SN150 and $549/t for SN500, hence it may be assumed that the alternative supplies are on a similar basis.
FOB prices in respect of Group III are unchanged and remain between $685/t-$725/t for the range of three Group III viscosity grades, however 8 cSt grades moving to India and China will attain less contribution levels due to lower local selling prices.
Following the resolution of the dispute between Neste and Bapco comes the announcement that Neste will form an agreement with Chevron in the U.S. How this will impact on the Bahrain facility is unclear, although one source has offered that there will be no change in the offtake levels even if some of the current U.S. supplies are being made from the Bahrain source.
The Group III branded base oils ex Sitra refinery marketed as Nexbase by Neste, may attain higher FOB levels due to premium selling prices in destination markets, should this be the method of cost allocation due to this marketer holding the full range of approvals including 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 maintained between $710/t-$875/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades delivered into the European and U.S. markets.
Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.
Group II prices within Middle East Gulf regional markets remain in the same ballpark as last reported with selling prices FCA ex U.A.E. hub storage range between $795/t-$900/t in respect of the light vis grades 100N/150N/ 220N and with 500N/600N between $815/t-$920/t.
Africa
In North African trading the EGPC 3Q tender has been awarded to a Swiss based trader with the arrangement to supply four cargoes of 2,500 tons each and an option for a further 1,000 tons to be added to one of these parcels. Whilst prices remain strictly private and confidential, information gleaned from sources would suggest that prices are less competitive than under the last tender, perhaps suggesting that fewer parties participated in the bidding process.
Other North African reports give indications of a 4,000 tons Group I cargo being loaded In Italy this week for discharge into receivers in Morocco. This cargo will comprise of three grades.
The Black Sea enquiry for Nigerian receivers has re-emerged although exact timing as to when this cargo could be loaded are not clear. It may be that vessels are not easy to charter for this voyage, and that indication freight rates may have rendered the cargo uneconomic.
At the same time another source in the USG is in the frame for a large composite cargo of Group I and Group II grades to be loaded for Nigeria. There may also be scope for a Baltic parcel for consideration to be arranged during July after the restoration of supplies from a major turnaround at a Russian refinery at Perm.
Group I prices in respect of cargoes moving into Nigeria continue to be assessed at the same levels as last reported with levels indicated between $685/t-$700/t in respect of SN150, SN500 between $700/t-$720/t, and bright stock between $885/t-$925/t. SN900 is indicated at $725/t-$750/t. All prices are on the basis of CIF/CFR Apapa, Lagos.
The prices above refer to large cargoes of minimum quantity of 10,000 tons in total, landed into Nigerian ports.