EMEA Base Oil Price Report
Source: Lubes n’Greases
Base oil markets are steady this week, with few price pressures from the raw material side, given that fundamentals have remained relatively flat. There are pockets of activity developing, both in regional markets and also for export cargoes, which have been loaded for traditional receivers in markets such as West Africa.
Supply and demand of API Group are balanced, with reasonable availabilities of all grades, although some European sellers are not in a position to offer the full range of oils. Many bright stock producers are showing long positions with little uptake to clear stocks in tank.
Some players around Northwestern Europe have expressed frustrations at the effects of the strike at a refinery in the region, which is now ended but is being followed by a period of planned maintenance which has further curbed availabilities of Group I base stocks from this plant. There may be no spot availability from this source until at least October and perhaps even later.
Group II markets are stable with good availability of all grades. Material from the Far East keeps finding a way into the European domain with more and more sellers trying to establish a foothold in the Mediterranean regions.
Group III oils are showing some strength as some prices were adjusted upward at the beginning of September, but grades with partial slates of finished lubricant approvals are still being sold at very low prices around Europe. Supply still seems ample, though some believe a new formulation for Volkswagen engine oils could cause demand spike since it allows Group III to replace PAOs.
Crude and feedstock prices stayed steady last week but started to rise Monday. Dated deliveries of Brent crude started are now quoted at $62.50 per barrel for November front month settlement, some $4 higher than last reported. West Texas Intermediate climbed a similar amount to $57.75/bbl, still for October front settlement. ICE LS gas oil surged some $35 per metric ton to $591/t, September front month. These prices were obtained from London ICE trading late Monday.
Europe
Prices for European Group I exports remain in the same ball park as last week without any clear impetus for change. Availabilities are still adequate overall, although some producers are short on light neutrals for export. This may be due more to maintenance turnarounds and production cutbacks than increased demand.
Solvent neutral 150 is still priced between $575 per ton and $598/t and SN500 is offered at $580/t-$605/t. Bright stock may be trending long as a number of suppliers are keen to move large parcels to deplete inventories, and prices have dipped to $665/t-$695/t.
Export markets are tough for traders looking to sell into traditional outlets in Middle East Gulf and India, where Asian prices are weakening. In West Africa there is competition from aggressively priced Group I coming out of the United States Gulf Coast.
The above price levels refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.
Group I trading within Europe has returned to normal after the summer holidays. There is a modicum of buying interest from some large blenders, based on a sense that rising crude costs could exert upward pressure on base oil values. For the moment, prices remain at the levels they’ve been for the past three months, still €85/t-€100/t higher than export prices.
European Group II prices maintain stability although there is increasing sentiment of prices softening with more and more competitive offers arriving from Far East sources where dull demand and increasing production of these grades is resulting in lower prices and an oversupply in some regions. The European Group II price levels are the highest in the world and as such are attractive for any barrels which can be supplied into this growing market.
There still remains a reticence within European blenders to make a full commitment to Group II over existing supplies of Group l, since the premium to be paid for Group II grades is substantial and can affect profitability of blending operations. Players have a preference for Group II prices falling rather than Group I prices rising, although there may eventually be convergence from both sides.
European Group II price ranges remain as per last week with FCA levels assessed between $700/t-$815/t (€625/t-€730) in respect of the light vis grades (100N, 150N and 220N ), and 500N and 600N in a range between $720/t-$825/t (€640/t-€740).
These prices pertain to the full range of Group II base oils, which includes major approved grades and offers in respect of non- approved or partly-approved grades from the Far East and the U.S.
Group III prices are now stable after the small increases applied to some supplies at the beginning of September, but largely the market remains balanced with adequate supplies of all grades available and demand relatively constant, although this could be spurred by the new European formulations which allow increased quantities of Group III products to be used in certain finished lubricants.
Prices in respect of Group III partly-approved base oils are assessed in wide ranges, reflecting some prices which are much lower than the norm, these coming in offers and supplies from new sellers in the market, these prices are pitched between €655/t-€710/t in respect of the 4 centiStoke grades with the 6 cSt and 8 cSt base oils between €660/t-€720/t. These prices are in respect of FCA sales ex hubs in northwestern Europe.
After the small increases applied to some sales at the beginning of the month fully-approved Group III prices are re-assessed between €795/t-€855/t in respect of 4 cSt, €825/t-€915/t for 6 cSt and €795/t-€870/t for 8 cSt, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
A large cargo of Group I grades being exported through Baltic ports is being loaded for receivers in Nigeria. This cargo will load at two or more ports to lift some 13,000 tons of Russian export grades in addition to material loading from Gdansk. Prices have obviously been successfully negotiated to allow this movement to take place, since recently prices levels being offered from Russian refineries have been too high to the extent that Baltic export grades have not been competitive enough versus alternative sources in USG and mainland Europe.
There are plans for a number of parcels of Baltic origin base oils to move into the United Kingdom prior to the end of October when it looks like Brexit will eventually happen. Buyers are preparing for a worst case scenario where a No Deal situation will exist between U.K. and the EU, an event which could cost blenders working with Russian and other Baltic material a substantial increase in costs. Cargoes between 3,000 and 5,000 tons are moving into Antwerp-Rotterdam-Amsterdam from Kaliningrad with September contract barrels arriving into these ports during second half of this month.
Prices are maintained at current levels with FOB numbers in respect of SN150 remaining between $475/t-$500/t and SN500 between $485/t-$520/t. Bright stock loading ex Gdansk refinery is re-assessed a little lower this week, following the general European trend downwards, and is now reported between $665/t-$685/t FOB.
Russian Black Sea prices continue to attract strong buying interest from traders and receivers in markets such as Middle East Gulf and the west coast of India. Prices remain at low levels with a cargo of more than 10,000 tons of Group I Russian export barrels loading from the STS facility at Kavkaz, Russia, with part of the cargo going into Greek receivers whilst the balance will sail on the Rotterdam. Prices in respect of this cargo, and for other offers emanating from this source, are indicated at $454/t for SN500 with SN150 at $436/t.
Offers for Mediterranean produced Group I base oils are bombarding Turkish buyers but few are responding positively to these offers since many blenders do not require European standard specifications to produce finished lubricants, There are two option for these buyers, one is to purchase small truckloads from Izmir refinery which carries the same spec as Mediterranean sourced material, and the other is to use Russian barrels which are available at lower cost.
Mediterranean offers contain prices for receivers in Turkey with CIF prices indicated at $577/t in respect of SN150 with SN500 at $582/t. SN600 is seen offered at $598/t, with small quantities of bright stock indicated at $745/t CIF. Little buying interest has been generated at these levels, given the Russian prices in respect of material loaded ex Kavkaz, Russia, then landed into Gebze, Turkey, port.
Group II and Group III base oils continue to be made available on an ex-tank basis within Turkey, These base oils have been sourced from northwestern Europe, Spain, Far East and the U.S., both in bulk and in flexies. Quantities are still rather small with the emphasis of the Turkish market still heavily reliant of Group I base oils, although this is changing, and Group II availability and offtake is growing dramatically.
Middle East Gulf
Red Sea reports are lacking this week, although it may be safe to assume that there will be large cargoes of both Group I and Group II base oils loading from Yanbu and Jeddah going into the west coast of India and United Arab Emirates.
Iranian Group I cargoes are missing from the market this week as Iranian/ U.S. relation have taken a turn for the worse with Iran refusing to meet with U.S. officials who had made the offer for discussions on the nuclear deal and other sanction points. Some EU countries have offered monetary assistance to Iran to offset the loss of revenue attributable to the lack of crude exports which are down by some 80% from pre-sanction days.
Base oils are still reputed to be coming out of Iranian ports although not evidenced by this report or any other shipping circles. Prices in respect of Iranian SN500+ are being indicated at around $545/t FOB. This information is derived from U.A.E. sources.
Group I supply activity is quiet in Middle East Gulf other than quantities being routinely supplied from Yanbu and Jeddah by Saudi suppliers. Other offers for a further cargo to load ex Kavkaz, Russia, for receivers in Sharjah have been heard with prices indicated at around $550/t in respect of SN500 and $530/t for smaller quantities of SN150. These prices will undercut Iranian levels, although the Iranian barrels will carry a slightly higher specification.
Group III base oil prices ex Al Ruwais and Sitra ports are maintained, although trade is quiet out of these ports at the moment. This may be due in part to the turnaround in Abu Dhabi which may have curbed new supplies moving to distributors in Europe and U.S. There have been no intimated changes for prices delivered into hubs for September.
Estimated FOB price levels remain between $685/t-$725/t in respect of the three Group III viscosity grades of partly-approved base oils. 8 cSt grades going into India and China will produce lesser contribution levels due to lower local selling prices in these regions. Partly-approved Group III base oils are sold respectively through Adnoc and Bapco.
‘Nexbase’ Group III base oils which also load ex Sitra refinery in Bahrain, and which are marketed by Neste, will have higher netback levels attributed to these oils due to higher selling prices in Neste markets because this range of Group III base oils carries the full range of European OEM approvals.
With prices for these grades moving upwards by some $10/t-$15/t in European markets from Sept. 1 the notional FOB or netback levels are raised and are now assessed between $785/t-$895/t in respect of 4, 6 and 8 cSt grades delivered into the European market. With most of the European supplies for these base oils being made from Porvoo, few instances of supplies from Bahrain are seen going into the European 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 in Middle East Gulf are maintained with prices remaining static in respect of imported material sourced from U.S.Far East, Saudi Arabia and now Europe. This material is resold within Middle East Gulf regional markets and has price levels FCA ex U.A.E. hub storage in ranges between $775/t-$880/t in respect of the light vis grades 100N/150N/ 220N with 500N/600N between $785/t-$900/t.
Africa
Reports from North African markets have identified another cargo of around 3,500 tons loading out of Italy and discharging in Mohammedia. This is a cargo with the three standard Group I grades on board, and replaces to lost production which occurred when the refinery at Mohammedia closed a couple of years ago. The Egyptian Q3 bright stock tender will complete this month with the supply of one cargo going into Alexandria in the next week or so, with another supplementary cargo to be supplied before the end of the month. This optional cargo appears to be planned along with the issuance of the new tender for the Q4 supplies of bright stock.
West Africa has re-awoken after the summer holiday period, with the reports of three large cargoes of base oils loading from various points to arrive into Apapa during late September or early October. The largest of these parcels is loading out of the Baltic with some 13,000 tons of Group I grades. The second of the cargoes is moving from Antwerp-Rotterdam-Amsterdam plus an Atlantic/ Mediterranean port suggesting that all required grades have not been possible to load out of a single loadport. The final cargo will load out of a main port in USG with 7,000 tons of base oils bound for Apapa..
Although reports of the prices in respect of these cargoes has not yet been disclosed, assessment is made on delivered prices using a basis of FOB levels from each of the sources, it is safe to assume that prices remain at current levels for material going into Nigeria. Group I prices are maintained as per the last report with levels calculated to lie between $695/t-$720/t in respect of SN150, SN500 between $695/t-$720/t, and bright stock between $875/t-$910/t. SN900 is indicated at $715/t-$725/t. The Nigerian market is relatively stable and has seen prices remaining around similar levels over the last few months.
These prices refer to parcels or cargoes of minimum 7,000 tons each, delivered into Apapa port, 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.