EMEA Base Oil Price Report
Base oil markets throughout Europe, the Middle East and Africa are stable, but local issues are affecting prices and availabilities in some regions. Europe availabilities have tightened, and the tensions with Iran loom as a potential threat to raw material costs.
API Group I values may be showing small signs of firming, since the supply scene remains constant and demand has solidified.
Group II is reportedly stable with ample availability, however there is a meeting within the EU Commission this week to consider extending the waiver of a 3.7 percent duty on imported Group II base oils. Private sources close to the commission have indicated that the waiver will be extended.
Group III values are under pressure due to increasing availabilities from various global supply sources. Within Europe, locally produced stocks continue to come under threat from imports carrying partial slates of finished lubricant approvals.
Crude oil rallied after the reported Iranian assault on a British tanker. Dated deliveries of Brent crude rose around $2.70 to $67 per barrel for September front month delivery. West Texas Intermediate crude has also responded and posts at $60.35 per barrel, now also for September settlement. ICE LS gas oil climbed around $25 to reach $605 per metric ton in August front month trading.
Prices were obtained from London ICE trading late July 15.
Europe
Group I export values were unchanged this week. The market is split on whether it is starting to lean, with sellers suggesting the climate is ripe for markups whilst the buying fraternity claims that prices are stable. Adjustments may not happen until the end of July, but at that stage the summer holiday period will have started and the market may go into limbo. There are also regional variations, with Mediterranean offers firmer while Northwestern European suppliers maintain numbers seen throughout July.
Prices remain between $550 per ton and $575/t for solvent neutral 150, at $575/t-$600/t for SN500 and at $700/t-$740/t for bright stock. These values refer to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always subject to availability.
Values for Group I sales within Europe appear to be firmer due to buying interest from blenders laying inventories down before stopping scaling back operations during August. The situation in Iran poses a threat that crude costs could rise, and base oil buyers are insuring against that risk.
The differential between domestic and export values is maintained with domestic levels assessed €65/t-€90/t higher.
Group II values are steady with adequate availability, while importers are assessing the possibility that the duty waiver on these grades may be revoked, suspended or merely maintained by the EU Commission later this week.
FCA values for Group II base stocks maintained between $720/t-$815/t (€640/t-€730/t) for the light-viscosity grades 100N, 150N and 220N, with heavier grades 500N and 600N between $750/t-$825/t (€665/t-€740/t).
These levels pertain to all Group II base oils, including major’s approved grades and other smaller imports in flexies from regions such as the Far East, where prices are under pressure due to extensive availability.
Group III demand is positive but levels are coming under further pressure from increasing availability.
Group III levels remain stable between €665/t-€710/t for 4 centiStoke grades with 6 cSt and 8 cSt base oils between €675/t-€720/t. These are for partly-approved grades for FCA sales ex hubs in northwestern Europe.
Fully approved Group III values are also unchanged between €710/t-€840/t for 4 centiStoke product with 6 cSt material between €800/t-€865/t, and 8 cSt grades between €775/t-€835/t, FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
Baltic trade remains scant with few traders or resellers in the area holding large inventories of Russian export grades. Opportunities are limited with traditional outlets either being covered from alternative supply points or Russian export prices plus freight costs making material from the Baltic a less attractive option.
Even outlets such as Scandinavia, the United Kingdom and Antwerp-Rotterdam-Amsterdam are declining options to take material from the Baltic, since options from mainstream European producers are now available at more competitive values.
Should mainstream supplies of Group I tighten up, Baltic sources may return to the fore. Currently, however, Russian domestic base oil trade is buoyant, and supplies are being made into Ukraine which possibly yield higher netbacks to Russian producers than Baltic resellers.
Values for Russian export grades remain as last reported with Baltic FOB levels for SN150 between $475/t-$500/t and SN500 between $485/t-$520/t. Polish bright stock is indicated between $695/t-$725/t FOB, this grade being largely unaffected by the defining Baltic supplies from ports further to the north.
In Black Sea trading, Kavkaz, Russia, STS loadings are back in the news with a couple of large parcels being offered to Indian and United Arab Emirates buyers. These values remain low at around $475/t for SN500 with SN150 at around $465/t. SN900 is assessed at around $525/t.
The Turkish market is quiet, with local producers holding prices, Coupled with lack of demand, offers from Mediterranean sources are not being taken up by importers. Russian exports are not making any inroads into an otherwise dull market. The problems incurred by the Turkish government are spreading through the larger economy, causing what would otherwise be called a recession.
Group II and Group III base oils are being supplied from European and Far East directly to blenders in flexies, in addition to material available ex-tank from distributors representing majors.
Group I offers for base oils basis CIF Turkish ex Mediterranean sources are being heard at around $595pmt for SN150 and $600/t for SN500. Bright stock is indicated at $775/t CIF. These levels have been deemed uncompetitive against local purchasing in small lots by truck.
Middle East Gulf
Red Sea trades are confirmed loading out of Yanbu and Jeddah for receivers in India and U.A.E. These cargoes are presumed to comprise of Group I and Group II base oils, whilst Group III grades continue to be imported through Yanbu, supplementing the local production of Group I and Group II.
In the Middle East Gulf the Iranian situation has been further exacerbated by the arrest of an Iranian tanker in Gibraltar, believed to be carrying crude oil for Syria. Being in breach of EU sanctions this activity has perhaps been used in retaliation by Iran in harassing a British tanker making its way through the Straits of Hormuz, requiring intervention by a British naval vessel.
Tensions are building with further U.S. sanctions hitting Iranian exports, curbing the movement of petroleum products out of Iran. Base oil exports are reported as being conducted from the southern Iranian ports of Bandar-e Emam Khomeyni (BIK), BB and BA, although ‘real’ information is not possible to glean from sources. Prices remain indicated at around $590/t, or equivalent in local currencies.
Latest indication prices CIF U.A.E. for base oils being loaded ex Kavkaz, Russia, in Black Sea are $549/t in respect of SN150 and $552/t for SN500.
Even during a planned turnaround exports of Group III base stocks are due to continue to be loaded and exported from Al Ruwais meaning that there will be no break in supplies to FOB buyers and supplies to distributors in Europe and USA.
FOB price levels for Group III are unchanged 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.
Branded Group III Nexbase base oils ex Sitra refinery marketed by Neste, will be allocated higher FOB levels due to some premium selling price levels in destination markets, due to holding the full range of approvals. However, due to heavy discounting in key markets, FOB levels are moved downwards by $5/t-$10/t 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.
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 within Middle East Gulf regional markets continue to be priced as per last report with selling levels based on FCA ex U.A.E. hub storage, which range between $795/t-$900/t in respect of the light vis grades 100N/150N/ 220N and with 500N/600N between $815/t-$920/t.
Africa
North African reports contain news of cargoes being supplied into Morocco, Algeria and Egypt from various Mediterranean and northwestern European supply points. The EGPC 3Q supplies are believed to be commencing during second half July with a cargo of between 2.5-3,000 tons of bright stock loading on a prompt basis ex a European refinery.
West Africa Group I prices for material moving into Apapa, Nigeria continue to be assessed around the same levels as reported last week with levels 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 guaranteeing a VI of min 95. This specification is required by some blenders for SN150 and SN500, and those prices are placed 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.
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.