EMEA Base Oil Price Report
As happens this time of year, many base oil buyers have largely ceased activity for the remainder of the year, yet a few pockets of action continue.
One refiner along the Mediterraneaniterranean is having production problems, so there are inquiries for material to cover any shortfall for that company’s in-house and contractual commitments.
Prices for API Group I grades have stabilized overall, perhaps because they have little room to decline further. In addition, a more balanced supply-demand picture is emerging as a number of suppliers are showing substantial buying interest for January, lending hope that markets may undergo an upturn during the first quarter. The squeeze on margins has some Group I refiners seriously considering whether to continue producing these grades.
The Group II segment is grappling with the new quota system due to go into effect next month for oils of that grade imported into the European Union. Some lubricant industry associations are advising members to stock up in advance of price increases that could occur when 3.7 percent duties kick in.
In the Middle East Gulf, Group II producers are moving large quantities into markets such as the United Arab Emirates and India, at prices that are sometimes in line with Group I oils, spurring some blenders to switch from Group I.
The Group III supply glut continues with product from all corners of the globe entering European markets. A key European refiner is producing again after successfully completing a maintenance turnaround.
Crude prices firmed on the back of positive economic data from Far East and U.S. markets and signs of a possible softening to the trade war between China and the U.S. Dated deliveries of Brent crude rose to $65.35 per barrel for February settlement, while West Texas Intermediate climbed to $60.25/bbl, now also for February front month. ICE LS gas oil topped the $600 per metric ton mark to reach $606/t, now for January settlement.
These prices were obtained from London ICE trading late Monday.
Europe
Group I export prices in Europe are reported as stable, although reports are that there is very little extra material kicking around the markets, which is a trend not seen in previous years. Traditionally, at this time, sellers are looking to move inventory to clear stocks prior to year end, but this phenomenon is not apparent this time around with availabilities being tighter than in previous seasons.
FOB prices in for all grades remain unchanged with SN150 remaining between $545/t-$580/t and SN500 between $555/t-$580/t. Bright stock is also stable this week with levels between $615/t-$650/t.
The above levels apply to cargo-sized parcels of at least 2,000 tons of Group I base oils, sold on an FOB basis ex mainland European supply points, always subject to availability.
Group I domestic prices are also static with most of the 2019 business completed for the year. Many traders and resellers are looking forward to next year to place stocks and cargoes which are anticipated to arrive into storage over the next few weeks.
The news on contractual supplies for Group I grades is not at all clear, with confusion reigning in markets where some blenders were committed to moving across to Group II blend stocks, whilst this decision has become rather confused after the tariff decision on some of these grades which are being imported.
The price differential between domestic European Group I levels and exports is maintained between €45/t-€65/t, domestic prices being higher.
European Group II markets have been spooked by the latest tariff possibilities with buyers unsure of how to react to potential rises in price due to import tariffs being imposed. There are recommendations from various trade associations around Europe, pushing buyers to stock up prior to any possible increase in prices caused by duty imposition.
Other buyers who have contracted supplies with European producers of Group II will not be affected by any of the tariff changes, and according to industry sources neither will any existing buyers who are currently being serviced by imported product.
Existing customers will continue to receive competitive prices in respect of all Group II grades, the duty element being absorbed, or at leat compensated by sellers in this market.
It is also anticipated that the quota system will be realistically revised following the initial six months of the regime.
FCA levels remain at $745/t-$790pmt (€675/t-€740) for 150 neutral and 220N, while 500N and 600N are at $785/t-$825/t (€715/t-€750).
Prices refer to the wide range of all Group II base oils, including European and U.S. fully approved grades and also unapproved or partly-approved grades from Middle East, Far East and the U.S., some of which are imported in flexitanks.
Group III prices remain under pressure and due to the mounting oversupply scenario. However, the market is slow due to the seasonal slowdown, with most buyers looking to close down operations over the next few days, or in some cases move to part- time working, until the first week of January.
Prices in respect of partly-approved Group III base oils are therefore maintained between €650/t-€725/t in respect of 4 centiStoke grades, with 6 cSt and 8 cSt base oils between €665/t-€740/t. Prices are in respect of FCA sales ex hubs in northwestern Europe.
Prices in respect of European OEM fully-approved Group III base oils remain between €740/t-€810/t for 4 cSt, €770/t-€840/t for 6 cSt and €755/t-€820/t for 8 cSt.
Baltic and Black Seas
Baltic reports are that a further large parcel of around 15,000 tons of Group I base oils has been trade has been loaded for Nigerian receivers. The cargo comprised of bright stock and SN500 loaded out of Gdansk, along with quantities of Russian export grades assembled and dispatched out of Riga port.
Other parcels have been loaded for the United Kingdom and Antwerp-Rotterdam-Amsterdam, with a number of other cargoes being negotiated for U.K. arrival prior to end January, when the U.K. will leave the EU customs union. The U.K. departure from EU will not affect customs tariffs in the first instance with continuance of existing arrangements being the immediate plan followed in due course by new FTAs which will mean that trade between U.K. and Europe should continue as at present.
Baltic prices remain unchanged with FOB levels for SN150 between $465/t-$490/t and SN500 between $470/t-$498/t. Bright stock ex Gdansk is indicated between $620/t-$650/t FOB.
In the Black Sea region Kavkaz, Russia, STS facility reports that another couple of large cargoes are to be loaded for regular receivers in Greece and Far East in addition to a cargo being offered to United Arab Emirates. Some 20,000 tons of material is expected to be loaded out of the STS facility in the next few weeks, confirming that this operation remains functional during the winter months, when delivery of material from a Russian refinery becomes more intricate due to ice on the river Volga.
Russian export STS prices remain around $455/t in respect of SN500, with SN150 around $435/t.
Offers of Group I from Mediterranean sources continue to be made to Turkish receivers, although buying interest has declined towards the end of the year Turkish blending is weak with local prices remaining buoyant.
Mediterranean Group I prices are firming and are indicated CIF Gebze, Turkey, at $578/t in respect of SN150 with SN500 at $586/t. SN600 is offered at around $595/t, with bright stock down, at around $668/t CIF.
Group II and Group III base oils ex-tank from Turkish distribution points have prices between $735/t-$755/t in respect of Group II grades, with partly-approved Group III base oils between $770/t-$800/t.
Middle East Gulf
Red Sea shipping reports indicate a number of large cargoes loading out of Yanbu and Jeddah, with perhaps up to 60,000 tons of base oils being loaded between now and the year end
Iranian Group I exports have reappeared in disguise with Group I cargoes being arranged from Hamriyah for destinations in India and Pakistan. FOB or FCA prices in respect of Iranian premium SN500 are indicated from U.A.E. sources at around $525/t-$540/t FCA.
Group I offers are heard from U.S. Gulf Coast and also Black Sea for U.A.E. receivers Indications for SN500 at $589/t CIF U.A.E. ports. SN150 is indicated at around $579/t with bright stock around $666/t CIF Hamriyah port, U.A.E.
Group III base oils ex Al Ruwais and Sitra are assessed around the same notional FOB levels. Prices remain between $650/t-$690/t in respect of the range of partly-approved Group III base oils sold into Europe, U.S., India and Far East. 8 cSt grades sold into India and Far East will contribute less, due to lower local selling prices.
Branded Group III base oils may achieve higher notional netbacks due to these base oils being sold at a premium because of holding the full range of European OEM approvals. Notional netbacks in respect of these premium grades are estimated at levels between $760/t-$855/t in respect of 4, 6 and 8 cSt grades delivered into Western 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 regions remain as per last, although with some offers being heard from Middle East suppliers, prices may have to be adjusted downwards over the coming few weeks. Levels FCA ex U.A.E. hub storage remain unaltered and prices are assessed between $745/t-$900/t in respect of the light-vis grades 100N/150N/ 220N, and 500N/600N between $755/t-$910/t.
Africa
Group I sales into West Africa have moved the total imports into this region to new highs with news that two more cargoes have been fixed out of the Baltic for Nigeria.
Group I prices for material arriving into Nigerian ports remain unchanged this week, with Group I grades discharging in Apapa indicated between $630/t-$645/t in respect of SN150, with SN500 between $640/t-$655/t, and bright stock between $720/t-$745/t. Blended SN900 is indicated at $650/t-$675/t.
Prices are in respect of cargoes of minimum 10,000 tons being delivered into Apapa port, Lagos, Nigeria.
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.