EMEA Base Oil Price Report
BY RAY MASSON
Base oil prices across Europe, the Middle East and Africa were flat again the past week.
Availability of API Group I volumes for export from Europe appears to have decreased, but demand is also lower, with few arbitrage opportunities open at the moment. Those openings are confined to West Africa trades, though European cargoes face competition there from United States Gulf sources. Markets within Europe are holding up, but observers predict that demand will start to fall in late September or early October.
Group I availabilities are sufficient to allow few opportunities for producers to raise prices. Margins remain less than ideal, and many refiners have curbed production of the Group I slate to the bare minimum, redirecting feedstock to production of distillates.
Group II prices have remained at the same levels for the past few months, but margins are effectively being squeezed because the euro is losing value against the dollar. The market is awaiting a decision by the European Commission about whether to extend or amend a duty waiver for Group II imports.
Prices for Group III oils with full slates of finished lubricant approvals rallied at the beginning of September, but some of these increases have been reduced or were not applied due to competition from Group IIIs with partial slates of approvals. Blenders say they do not need all of their Group III oils to have full approvals since approvals are only needed for certain formulations. Blending operations using Group III have begun carrying two tiers of in order to improve margins.
The number of offers and volume of base oil coming into Europe from the Far East and Middle East Gulf continue to rise, and this is exerting downward pressure on prices.
Crude oil prices costs spiked over the weekend drone attacks on Saudi wells, including one that damaged a main crude source. Dated deliveries of Brent crude rose to $65.50 per barrel for November front month settlement, around $3 higher than last week. West Texas Intermediate climbed to $59.10 per barrel, for October front month. ICE LS gas oil peaked above $620 per metric ton, now for October front month.
These prices were obtained from London ICE trading late Sept. 16.
Europe
Prices for Group I exports from Europe are stable so far this week but could face upward pressure from rising crude costs. As mentioned, the market is not long, and upcoming maintenance turnarounds at two plants could limit some export availabilities, at least for large composite cargoes comprising three or more Group I grades.
Prices for solvent neutral remain between $575 per ton and $598/t, while SN500 is at $580/t-$605/t. Bright stock is longest of Group I grades, but are unchanged at $665/t-$695/t. These prices refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.
Sellers have focused on Group I trade within Europe since prices there are around $100/t higher than exports. Buying interest is waning, however, with the seasonal lull in production of finished lubricants. Still, many buyers say they will stock up now to take advantage of low values.
The differential between Group I sales within Europe and exports is unchanged, with the former €85/t-€100/t higher.
European Group II prices are stable but may start to face downward pressure from keenly priced offers from Far East sources. At the moment, values in Europe are higher than in other major Group II markets. Prices in Europe are unchanged this week at $700/t-$815/t (€625/t-€730) for 100 neutral, 150N and 220N, while 500N and 600N are at $720/t-$825/t (€640/t-€740).
These prices pertain to the full range of Group II oils, including those with full slates of approvals as well as those with partial or no approvals.
Group III prices are varied with some prices having been increased others discounted and some being sold at exceptionally low rates. Supply wise, the markets remain balanced with sufficient supplies of material to cover all requirements. There are hints of increasing availabilities coming on to the European scene, with suppliers having increased quantities of Group III grades being sold in this arena.
With different attitudes to price being adopted by the various suppliers in the market prices in respect of partly-approved Group III base oils are assessed in wide ranges.
Prices are gauged between €655/t-€710/t in respect of 4 centiStoke grades with the 6 cSt and 8 cSt base oils lying between €660/t-€720/t. These prices are in respect of FCA sales ex hubs in northwestern Europe.
Fully-approved Group III prices are assessed higher, but it must be noted that this sector is widely divergent with some prices being almost in line with partly-approved oils, and others some $100/t-$200/t higher. Levels are assessed between €795/t-€855/t for 4 cSt, €825/t-€915/t for 6 cSt and €795/t-€870/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
Baltic sales are low compared to times gone by, with sellers and distributors having low inventory levels due to a lack of material being brought out from the Russian refineries. This may be due to producers selling avails into the local markets rather than supplying the export trade, but more likely is that traders and distributors in the Baltic regions are bidding at prices which are considered too low by producers.
Large cargoes such as West African supplies are almost purchased from refiners to order and once these parcels have been cleared from inventory. No replacement barrels are forthcoming.
Cargoes into Antwerp-Rotterdam-Amsterdam and mainland Europe are almost non-existent with only a couple of pre-Brexit parcels being organized for the east coast of the United Kingdom. There are further enquiries for quantities to move to U.K. but mainstream options from Europe are also being considered since landed prices are comparable.
Prices for the few cargoes being supplied through the Baltic ports are maintained with FOB numbers in respect of SN150 between $475/t-$500/t and SN500 between $485/t-$520/t. Bright stock loading from a lower Baltic supply point is assessed at the same level as last reported, between $665/t-$685/t FOB.
With more Russian export barrels being diverted to Black Sea supply points, notably Kavkaz, Russia, where the STS supply system continues to load large parcels for sales into export markets such as the west coast of India, United Arab Emirates, Singapore and Rotterdam.
Prices remain at exceptionally low levels for Russian export grades with levels assessed at $455/t for SN500 with SN150 at $435/t.
Offers for Mediterranean produced Group I base oils continue to be sent to Turkish buyers but preference is still to take smaller quantities from the local refinery at Izmir. This is the case even against the producers raising prices by around $30/t, but these quantities can be purchased in small loads and in local currency.
Mediterranean offers have prices indicated at $574/t in respect of SN150 with SN500 at $585/t. SN600 is seen offered at $595/t, with smaller quantities of bright stock at $740/t CIF.
Group II and Group III base oils are available on an ex-tank basis in the main Turkish ports of Gebze, and Derince, Turkey. Reports are that supplies of these base oils are expanding and that distributors representing the major producers and suppliers are looking to establish Turkey as a large potential market for Group II and Group III base stocks.
Middle East Gulf
Red Sea reports are missing this week, although it is 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 the U.A.E.
Iranian Group I cargoes are missing from the market this week as Iranian and 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 for premium 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. Eight 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 from 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 September 1 the notional FOB or netback levels are raised and are now assessed between $785/t-$895/t in respect of 4 centiStoke, 6 cSt, 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 third-quarter 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 load port. 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, with 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 10,000 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.