EMEA Base Oil Price Report
Base oil markets have entered a period of stability across Europe, the Middle East and Africa, with good availability for all types and grades but no glaring oversupply situations.
Demand waned the past week due mainly to the onset of the holiday period, and after a mini buying spike that saw European buyers take advantage of low prices to build inventory for late August.
The quiet period typically sees numerous blending plants temporarily close or reduce hours, sometimes to allow for equipment maintenance.
API Group I supplies are in balance with demand, except that a number of suppliers are openly advertising availability of large slugs of bright stock. Group II prices have flattened with ample availabilities and no signs of further deep discounts. Group III still suffers from a potential over-supply, but sellers and buyers agree that nothing egregious exists at the moment.
Trade of all grades will slow down over the next few weeks, but production will continue, meaning larger quantities may be moving by the end of August. Prices could face downward pressure from this rise in availabilities, although producers insist that they have this situation managed and that no sudden glut of material will appear.
Dated deliveries of Brent crude rose a few cents during the week to post yesterday at $63.65 per barrel for September front month settlement. West Texas Intermediate has also steadied and posted at $56.80/bbl, also for September front month. ICE LS gas oil was at $589 per metric ton for August front month. These prices were obtained from London ICE trading late Monday.
Europe
Prices for Group I exports from Europe are slightly firmer in offers this week, particularly at the lower end of the spreads. These levels have not been confirmed as completed deals but may reflect seller attempts to impose markups during a quiet spell in the market – a strategy sometimes seen in times gone by. Some reportedly claimed to be tight on avails of solvent neutrals SN150 and SN500, although a steady stream of offers has been heard for all grades from the main outlets.
Solvent neutral is priced between $575 per ton and $598/t, while SN500 is at $580/t-$605/t and bright stock dipped to $690/t-$720/t. Sellers are looking to target export trades of heavy-viscosity Group I into West Africa and the Middle East Gulf, but they may face aggressive pricing from alternative sources such as Russia and the United States.
The above price levels refer to large parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always subject to availability.
Prices for Group I sales within Europe were described as stable, although buying has virtually ceased. Contracted deliveries will still be made to blenders that allow them during August. The differential between intra-regional and export pricing widened marginally due to firmer export levels and is now assessed at €55/t-€85/t.
Group II prices have settled around the levels mentioned last week, with no further efforts to pass along hikes in source markets or to apply discounts to win new business. There may be more action to come from Far Eastern sources, where prices are weakening and 500N is being quoted at lower levels than 150N. With a potential over-supply in that region, more material may be targeted at the lucrative European markets where Group II is expanding in popularity with traditional blenders.
European Group II base oil prices are maintained at previous levels, even as the Euro strengthens versus the U.S. dollar. FCA numbers are $720/t-$815/t (€640/t-€730) for 100 neutral, 150N and 220N and $750/t-$825/t (€665/t-€740) for 500N and 600N.
These prices pertain to all Group II base oils, including those with full slates of finished lubricant approvals and smaller import parcels in flexitanks.
Group III activity has slowed although demand continues to grow. The market remains extremely competitive, and whilst OEM approvals are important, price remains the ultimate tool in establishing a market share. Values for oils with partial approvals are unchanged at €665/t-€710/t for 4 centiStoke grades and €675/t-€720/t for 6 and 8 cSt, all on an FCA basisex hubs in Northwestern Europe.
Prices for fully-approved Group III oils are also unchanged at €710/t-€840/t for 4 cSt oils, €800/t-€865/t for 6 cSt and €775/t-€835/t for 8 cSt, FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
Baltic trade continues to be a shadow of its former self with fewer cargoes moving through the various shore storage plants in Riga, Liepaja and Ventspils, Latvia. Even a major supplier located in Svetly, Kaliningrad oblast, Russia, has opted to move material from their refineries to more attractive markets in Ukraine and Eastern Europe. The reported mini revival of trade appears to have been just that, with only one small cargo reported moving from the Baltic to the east coast of the United Kingdom and another 4,000 ton parcel under contract moving to Antwerp-Rotterdam-Amsterdam. No further talks have been heard of another Nigerian cargo.
There have been instances when material from Northwestern Europe and Poland travels to Baltic ports to cover local blending in Lithuania and Latvia, such is the dearth of Russian exports being made available at the low bid prices from players in the Baltic.
Prices are unchanged at $475/t-$500/t for SN150 and $485/t-$520/t for SN500. Polish bright stock is indicated lower this week, now at $685/t-$710/t, FOB Gdansk.
Black Sea sources report continuing interest from buyers in the United Arab Emirates and India to procure large parcels of Russian Group I base oils through the STS facility at Kavkaz, Russia. However, the strange fact remains that prices from this source appear to be moving lower to accommodate a satisfactory level of throughput.
STS prices at Kavkaz are now as low as $465/t for SN500 and $448/t for SN150. These levels are well below European vacuum gas oil, which may indicate that feedstock costs are allocated differently in Russian refineries, assuming that margins are still positive by moving these quantities. Various inquiries being floated for material sourcing from Kavkaz for cargoes of 5,000 to 18,000 tons for destinations such as the U.K., Rotterdam, the U.A.E., the West Coast of India and Singapore.
The Turkish market remains confusing amid reports of buyers opting for Group I material from the local Izmir refinery over imports from the Mediterranean. The offtake has been slow enough, though, for the refinery to offer a bulk export cargo of 5,000 to 6,000 tons. Another Russian parcel is also on offer for 5,000 tons of two Group I grades to ship to Derince, Turkey.
Greek and Italian sellers continue to make offers to Turkish receivers. Prices for Group I sold on a CIF basis in Turkey ex Mediterranean sources remain at $590/t for SN150 and $585/t for SN500. SN600 is offered at around $600/t, and bright stock is indicated at $765/t CIF.
Group II and Group III base oils are offered from Far East sources directly to blenders in flexies, these supplies being an alternative to material available ex tank from appointed distributors.
Middle East Gulf
There are no reported Red Sea cargo movements this week, although a number of vessels are already lined up to load during August from Yanbu and Jeddah. Cargoes of both Group I and Group II base oils are programmed to load for receivers in India and the U.A.E.
The stand-off between U.K. and Iran regarding the arrest of a British registered vessel sailing through the Straits of Hormuz bound for a Saudi Arabian port to load and the previous arrest of an Iranian tanker in Gibraltar continues although this situation only appears to have the support of a few of the NATO allies such as U.S. and France with Germany opting out of playing any part in joint Middle East Gulf operation. No apparent progress has been announce on the resolution of this dispute but with a ‘new regime’ being announced in the U.K. last week, perhaps the solution has now been set into motion.
Iranian material continues to appear in the U.A.E. market, although no official channels can be established to confirm quantities of the Group I base oils being moved out of the usual southern ports of Bandar-e Emam Khomeyni and Bandar Bushehr. U.S. and U.K. sanctions are only effective in creating clandestine movements of base oils out of Iran, which are being re-exported on occasion from U.A.E. ports. Base oil exports are no longer reported in the normal way although local sources claim that premium SN500 is priced around $590/t, or equivalent in local currencies.
Russian offers for export grades to be ex Kavkaz, Russia, in Black Sea continue to be targeted at receivers in U.A.E., with indication prices this week at around $542/t in respect of SN150 and $557/t for quantities of SN500. Given FOB levels and freight costs associated with a cargo of around 10,000 tons, these prices are both attractive to sellers and also to receivers.
Al Ruwais supplies of Group III base oils appear to be less for August with the facility completing a turnaround. There are ample stocks of material which have been laid down for continuing supply to markets in India, Far East, Europe and the U.S., thus maintaining supplies to the distributors in those regions.
Assessed FOB price levels in respect of Group III base oils are again maintained this week remaining between $685/t-$725/t for the three Group III viscosity grades. 8 cSt grades moving to India and China will achieve lower contribution levels due to lower local selling prices. These prices are in respect of partly-approved material loading out of Sitra in Bahrain and also Al Ruwais in Abu Dhabi.
Group III branded Nexbase base oils ex Sitra refinery which being marketed under the Neste banner should attract higher FOB levels due to premium selling price levels in destination markets. This range of Group III base oils holds the full range of European OEM approvals. Strictly speaking these grades will be costed at the same rate as the Bapco material which carries only part-approvals, although hypothetically a higher contribution may be achieved.
Notional FOB levels remain unchanged for these grades and are assessed between $700/t-$865/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades delivered into European and U.S. markets.
FOB prices in respect of the Group III+ GTL grades moving out of the Pearl project in Qatar are not disclosed, neither can they be assumed by this report.
Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.
Group II base oil prices within Middle East Gulf regional markets are marked down lower due to prices from Far East sources coming under pressure, and other supply sources having to match or at least compete with these competitive imports. Prices are now placed in spreads with levels based FCA ex U.A.E. hub storage, and range between $775/t-$880/t in respect of the light vis grades 100N/150N/ 220N and with 500N/600N between $785/t-$900/t.
Re imported Group II material from Far East sources, some of these prices are possibly competing with Group I base oils particularly for light neutrals and the light Group II grades.
Africa
South African buyers have issued a number of enquiries to traders for the supply of Group I base oils to be imported into that market during September, this may be to supplement local supplies which have been subject to the local refinery coming out of turnaround which appears to have been delayed by up to a month. In addition further cargoes loading out of Rotterdam and U.K. are programmed for a major to arrive into Durban during September/October. According to local shipping sources in Durban parcels of between 8,000 tons -12,000 tons are being considered, these being made up of Group l, Group II and Group III base oil grades.
Mediterranean and North African trading includes an increasing number of cargoes moving into Israel after the suspension of production at the refinery in Haifa last year. Parcels of various base oils from a variety of sources are being delivered. Sources from Far East, Mediterranean, northwestern Europe and BalckSea have been involved with the coverage of requirements.
There are also reported base oil movements into Morocco and Egypt mainly for the supply of Group I grades.
West African reports contain news of a large 15,000 tons cargo of Group I grades loading out of USAC which will move to Apapa, and will discharge during September. The composition of the cargo is not know as yet, but the typical slate from this particular refinery will include SN150/180, SN500 and bright stock. This follows another large parcel from the same source being supplied to receivers in the west coast ofI.
There have been no further bulletins regarding further cargoes to be loaded out of the Baltic, although news heard early this week may suggest that STS Kavkaz, Russia, may be re-examined in light of the prices available from that source. Heavier Group I material may not be available in quantity, thus limiting supply options, although a two-port loading could be considered for a large cargo.
Prices in respect of material discharging into Apapa, Nigeria are assessed around similar levels as last reported. Levels are indicated between $685/t-$710/t in respect of SN150, SN500 between $695/t-$720/t, and bright stock between $885/t-$925/t. SN900 is indicated at $710/t-$720/t.
Prices ranges cover all specifications of base oils including those requiring a guaranteed VI of min 95. This specification is required by some blenders for SN150 and SN500, those prices being reflected at the higher end of the spreads.
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. Smaller cargoes such as the one of 7,000 tons that loaded out of the Baltic a couple of weeks back, will have relatively higher prices, relating to the higher freight element which will necessarily be involved.
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.