EMEA Base Oil Price Report
Base oil markets in Europe, the Middle East and Africa have been relatively quiet over the last week, due mainly to the holiday period being in full swing, leading to little price movement across all grades.
Further API Group I supply limitations have stemmed from a strike at a refinery in Northwestern Europe. Production has stopped at the plant and no base oils are being loaded. Suppliers with spare capacity and the ability to respond promptly to demand have helped to fill the market gap.
The strike has caused issues for charterers of vessels whose owners and operators have declined to offer for cargoes from this source, since they may have a vessel in position which would have to be cancelled or chartered could face hefty demurrage.
Group I markets are balanced with reports of good availability, with no suggestions of an oversupply, perhaps partially due to the strike in Northwestern Europe.
Group II prices are stable with no pressure to adjust prices for September. There are sufficient local availabilities to maintain the markets at current levels, and with further reports of Far Eastern sources looking to move material into the European arena, this further impetus to the supply chain could put prices under pressure soon.
Group III markets are showing reasonable demand for this time of year, with the recent heavy discounting now giving way to higher levels.
Crude oil value has moved marginally higher over the last few days with dated deliveries of Brent crude rising by around $1 to a level of $59.25 per barrel for October front month. West Texas Intermediate crude has also responded to higher numbers with this crude reported at a level of $55.65 per barrel for September front month settlement. ICE LS Gas Oil has moved slightly ahead to post at $561 per metric ton but now for September front month.
These prices were all obtained from ICE trading in London late Monday.
Europe
European API Group I base oil export prices are stable. Prices for solvent neutral 150 remain at levels between $575/t-$598/t, with SN500 at $580/t-$605/t. Bright stock appears to have found its own level with no further erosion reported. Prices for this grade remain at $675/t-$700/t. These levels refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.
Local markets around Europe are still quiet and will remain so until activity returns at the end of the month. There are some ex-tank sales of Russian imports which have arrived into Antwerp-Rotterdam-Amsterdam from the Baltic but these are low key compared to normal business. The United Kingdom reports at least one Baltic cargo arriving during August and rumors around the market imply that there are a number of enquiries being floated for further trades prior to the imminent U.K. Brexit departure.
The differential between domestic and export pricing is maintained with domestic levels around €55/t-€85/t higher than export prices.
Group II base oil prices remain in the same ballpark as last reported with a number of offers for Far East material being made through traders and also by producers themselves. These are not being aimed at the main markets in Northwestern Europe and Antwerp-Rotterdam-Amsterdam, but are specifically being targeted in the Mediterranean where prices traditionally are higher, allowing these sellers to compete and in some cases undercut existing levels offered by European majors. European Group II prices remain unchanged with FCA levels reported at $720/t-$815/t (€640/t-€730/t) for light viscosity grades (100N, 150N and 220N), and the heavier 500N and 600N grades in a range between $750/t-$825/t (€665/t-€740/t).
These values pertain to all Group II base oils, including those with full slates of finished lubricant approvals and smaller imports in flexies from the Far East and the U.S.
Group III base oil prices appear to be settling down and finding their genuine levels. If anything, there may be slightly less material around the market, but with a few replenishment cargoes almost nearing discharge ports within Europe, this may change. However, some sellers are announcing that they have a heavy schedule planned for September, when the offtake levels may start to rise dramatically.
Prices for Group III oils with partial slates of finished lubricant approvals are being assessed at €665/t-€710/t for the 4 centiStoke grades with the 6 cSt and 8 cSt base oils at €675/t-€720/t. These prices pertain to FCA sales ex hubs in Northwestern Europe.
Fully approved Group III prices are now at €775/t-€845/t for 4 cSt products with 6 cSt material at €865/t-€900/t and 8 cSt grades at €785/t-€855/t, FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Sea
Baltic trade has had a boost over the last week or so, with more Russian export material being railed to borders for onward transpiration to shore tank storage. There is added interest from a number of U.K.-based blenders and traders to take material ex Baltic prior to the Oct. 31 deadline, when the U.K. will leave the EU.
There are reports that an 8,000 tons cargo had been fixed out of Kaliningrad, Russia, to discharge into the west coast of India, normally a voyage which would have a prohibitively high freight charge. But this cargo may be a replacement for an alternative supply made by the same seller which may have been planned for loading out of the Black Sea. Opportunistic shipping may be the answer to the conundrum.
Prices however remain around last reported FOB levels, with SN150 at $475/t-$500/t and SN500 at $485/t-$520/t. Bright stock loading ex Gdansk, Poland, refinery is reported between $675/t-$695/t FOB.
Russian exports from the STS facility at Kavkaz, Russia, in the Black Sea are at enquiry stage with a number of large cargo loadings anticipated the next few weeks. STS Kavkaz, Russia, prices have possibly come even lower over the last week, with SN500 being indicated at $454/t and SN150 reported at $437/t.
Turkish base oil markets are stable with some receivers contemplating taking further Mediterranean-sourced Group I offers. Sellers in Greece and Italy have offered Group I material to Turkish buyers with prices CIF indicated at $583/t for SN150 with SN500 at $589/t. SN600 is seen offered at $594/t, with bright stock indicated at $755/t CIF.
Group II and Group III base oils are being offered from the Far East and U.S. in flexies, and are an alternative to material available ex tank from traders and distributors.
Middle East Gulf
Red Sea shipping reports indicate that a number of large cargoes are moving out of Yanbu’al Bahr and Jeddah, Saudi Arabia. One such parcel contains 16,500 tons of Group I and Group II base stocks for receivers in India, and another prompt cargo may include some 20,000 tons for receivers in Jordan, the Middle East Gulf and the West Coast of India.
Another Iranian Group I cargo was reported through “normal” shipping channels, perhaps suggesting that some vessel owners or operators are prepared to run the gauntlet against U.S. sanctions, which have curtailed exports of base oils and other petroleum products from Iranian ports. The shipment in question is a smaller cargo than previously noted from the region – 2,600 tons going into receivers in Mumbai. Prices for premium Iranian SN500 are indicated at around $565/t, basis FOB.
Group III oils with partial slates of approvals from Al Ruwais, United Arab Emirates, and Sitra, Bahrain, are still priced at $685/t-$725/t on an FOB basis for all three viscosity grades. Eight cSt oils moving to India and China achieve lower contribution levels due to lower local selling prices.
Sitra Group III marketed by Neste carry full slates of approvals and have higher netback levels. Notional FOB or netback levels are assessed at $785/t-$895/t for all three viscosity grades, delivered into 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.
Values on Group II base oils being imported and resold in Middle East Gulf markets are unchanged at $775/t-$880/t for 100N, 150N and 220N and $785/t-$900/t for 500N and 600N, FCA U.A.E. hub storage.
Africa
North African markets have seen European Mediterranean sourced material going into ports in Israel, Algeria and Morocco and Egyptian buyers taking a cargo of bright stock from the Spanish Mediterranean coast.
In West Africa the inquiry is still on the market for 3,000 tons to be imported into Port Gentil, Gabon, so far as a stand-alone cargo not combined with material for other West African destinations.
There is also news this week that two large parcels have been sold out of the U.S. Gulf Coast for shipment to Nigeria. One of these, a 12,000 ton cargo, included three Group I grades to be delivered into Tema, Ghana. It was always deemed a possibility that approved Group I grades would be loaded out of a European refinery for the Ghana supply, but this may be a first for U.S. Group I grades to be supplied under the annual tender. The second cargo of 7,500 tons will be sold directly into Apapa port in Lagos, Nigeria.
Prices for Group I base oils being sold into Nigeria remain unchanged at $695/t-$720/t for SN150, $695/t-$720/t for SN500 and $875/t-$910/t for bright stock. SN900 is currently indicated at $715/t-$725/t.
These ranges cover all specifications of base oils including SN150 and SN500 requiring a guaranteed viscosity index of at least 95. All prices are on the basis of CIF/CFR Apapa, Lagos, and refer to 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.