EMEA Base Oil Price Report
Base oil markets are getting back to some form of normality as buyers and sellers returned to work this week after summer holidays. Activity seems slow so far, but perhaps the coming days will yield some direction about the direction of the markets.
API Group I remains balanced despite a strike at a Northwestern European refinery. The strike had shortened availability, but gaps have been filled from alternative sources around Europe and the Baltic. It is too early to gauge whether demand will rise during the next few weeks, although sources said some blenders are back in buying mode and interested to establish supply contracts for next year for Group I grades.
Group II availability is ample in Europe and the Middle East Gulf. There have been no rumblings of any moves on prices, as margins appear to still be acceptable to sellers. Here, too, some blenders are entering into negotiations regarding contracted barrels for next year and, indeed, for the fourth quarter of this year.
Group III availability within Europe could shorten since maintenance turnarounds are scheduled at a number of plants during the next few months. Most suppliers claim to have made provisions to have the product available for any eventualities.
Crude and feedstock prices remain around the same levels as last week. Dated deliveries of Brent crude did breach $60 per barrel at the end of last week, but bell back to $58.40/bbl by yesterday, now for November settlement. West Texas Intermediate crude posted at $54.70/bbl for October front month. ICE LS gas oil was at $556 per metric ton for September front month.
These prices were obtained from ICE trading in London late Monday.
Europe
European prices for Group I exports are stable between $575 per ton and $598/t for solvent neutral 150 and $580/t-$605/t for SN500. Bright stock has also stabilized and is unchanged this week at $675/t-$700/t. Some sentiment was expressed this week that prices are starting to weaken – the rationale being that markdowns are emanating from markets such as the Far East, which offers alternative sourcing for some European export markets. Traders in those areas are therefore requesting lower numbers from European suppliers for September loadings.
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 trade within Europe should return to normal this week as sellers and buyers get down to business. Some said trading may start slowly since many buyers topped up inventories before the summer recess. However, there are a small number of inquiries around for ex-tank supplies for this month, and some blending operations are looking to renew contracted supply arrangements for next year.
Many lube blenders have confirmed that they remain committed to some Group I supplies, although perhaps in smaller quantities than in previous years. Many are now working with both Group I and Group II base oils and supplementing with Group III where required.
Group I prices for sales within the region appear to have are essentially unchanged from July, with no signs of impending pressure upward or downward. The differential between pricing for intra-regional and export sales remains around €85/t-€100/t lower for exports.
Group II prices continue to hold their significant premium over Group I levels. This appears to be one major stumbling block against buyers changing over completely to Group II base stocks, since they maintain that certain grades of finished lubricants do not require Group II.
Prices in the Far East are falling, increasing incentive for sources in that region to target European markets where prices are higher. The incidence of incoming parcels is growing and is no longer confined to small parcels in flexies. Bulk shipments have been offered to mainstream users around Europe.
European Group II price ranges have widened to take account of these new offers, with the lower end of ranges moving downwards by some $20/t-$30/t. FCA levels are now assessed 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 Group II oils with and without full slates of finished lubricant approvals.
Group III prices are mixed with some notices of price increases commencing September 1, but with resistance to these increases there are rumors of some buyers being advised that prices are to remain fixed as per August numbers. At the same time there are suppliers who are showing aggressive offers to new and existing buyers, in what appears to be a quest to increase market presence in the European arena.
As mentioned there are a number of plants going down over the next few months and this could have an effect on the overall supply situation, although sellers claim to have inventory to cover normal supply arrangements particularly for contracted buyers.
Prices in respect of Group III partly-approved base oils continue to be assessed between €655/t-€710/t for 4 centiStoke grades, with 6 and 8 cSt base oils between €660/t-€720/t. These prices are in respect of FCA sales ex hubs in northwestern Europe.
Fully-approved Group III prices are placed between €775/t-€855/t in respect of 4 centiStoke base oils with 6 cSt material between €865/t-€915/t, and 8 cSt grades between €785/t-€865/t, FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
Baltic trade has been lifted by further availabilities of Russian export grades finding their way at acceptable prices, into shore storage in the Baltic ports. There have been a number of routine cargoes into Antwerp-Rotterdam-Amsterdam, and September will see a particularly large interest in a number of cargoes for the the United Kingdom, with traders and blenders building inventories prior to Brexit date of 31 October.
There are inquires for Baltic sellers to load 5,000 tons for the west coast of India out of Gdansk port, this is in addition to other parcels for United Arab Emirates and West Africa. It is remarkable that with Baltic prices maintaining a premium over those available ex Black Sea that cargoes can still move from this region to export markets such as India and U.A.E., but this can perhaps be explained by the grade mix and also the higher specifications attributed to Polish material from Gdansk refinery.
Prices remain unchanged this week with FOB levels in respect of SN150 remaining between $475/t-$500/t with SN500 between $485/t-$520/t. Bright stock loading ex Gdansk refinery is reported between $675/t-$695/t FOB.
On the premise that Russian export Black Sea prices cannot move any lower due to the costs of producing these base oils, they remain at the low levels established over the last couple of weeks. A large cargo of 10,000 tons of Group I Russian export barrels has loaded from the STS facility at Kavkaz, Russia, for a two-port discharge in Turkey and Israel. Landed prices into Turkey will be lower than both supplies from Mediterranean sources and availabilities from Izmir refinery.
Another large parcel over 10,000 tons is being arranged for Greece and Rotterdam from Kavkaz, Russia, with prices indicated at $452/t for SN500 with SN150 reported at $434/t in current offers.
Mediterranean sources are drawing blanks on continuing offers being made from Greek and Italian sources with Group I material intended for Turkey having CIF prices indicated at $579/t in respect of SN150 with SN500 at $584/t. SN600 is seen offered at $594/t, with bright stock indicated at $755/t CIF. Little interest has been generated at these levels, given the Russian prices ex Kavkaz, Russia,.
Group II and Group III base oils are available from sources in Spanish Mediterranean, Far East and U.S., both in bulk and in flexies, and are being touted as alternatives to material available ex-tank from traders and distributors representing major players.
Middle East Gulf
Red Sea reports include the loading of a large cargo from Yanbu and Jeddah which is to discharge in the west coast of India and the U.A.E. There are also further September cargoes which will move to Chennai and Mumbai, and also to Oman and the U.A.E. These cargoes will include both Group I and Group II base oils.
No sooner has this report intimated that no further Iranian Group I cargoes have been seen, than a large parcel of up to 10,000 tons of Group I Iranian base oils is recorded as loading on an internationally flagged vessel to discharge into two ports in the west coast of India and one in Pakistan. Whilst U.S. sanctions remain in place U.S. authorities have offered to meet with Iranian leaders to discuss events, both current and into the future.
This offer has not been taken up by Iran, but at the same time neither has it been turned down. Base oil prices in respect of Iranian SN500+ are indicated lower than previously noted at around $545/t FOB. This information is based on sources located within U.A.E. and India.
Other Group I activity includes the cargo ex Kavkaz, Russia, which wil partly discharge into Hamriyah in Sharjah, with prices estimated to be around $550/t in respect of SN500 and $530/t for smaller quantities of SN150. These prices will be competitive against any Iranian barrels which can find their way into the U.A.E.
Group III base oil prices ex Al Ruwais and Sitra ports are once again maintained, with 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 moving east to receivers based in India and China will produce lesser contribution levels due to lower local selling prices in these locations. These Group III base oils are sold by Adnoc and Bapco.
‘Nexbase’ Group III base oils marketed by Neste also ex Sitra refinery in Bahrain 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.
Notional FOB or netback levels are maintained and are assessed for the range of fully-approved grades, between $785/t-$895/t in respect of 4, 6 and 8 cSt grades delivered into European or 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 in Middle East Gulf have not seen any major changes and hence are maintained at current levels. These prices are in respect of imported material which is sourced from U.S.Far East, Saudi Arabia and now Europe. This material is marketed on a resale basis within Middle East Gulf regional markets has are 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
North African markets are busy with cargoes loading out of Spanish, Italian and Portuguese sources for receivers in Morocco and Egypt. These parcels comprise of Group l, Group II and Group III base oils, whilst bright stock cargoes continue to be arranged for supply into Alexandria, Egypt to cover the requirements for the EGPC tender.
South African traders and blenders have issued another raft of enquiries for the supply of smaller quantities of Group I base oils to be delivered into Durban during October. These quantities will be delivered in flexies and will be transported inland for onward distribution to smaller blenders. Another cargo from a major will load from northwestern Europe and/or the Mediterranean with Group l, Group II and Group III base oils aboard, for discharge into Durban during second half October.
West Africa is quiet this week, with no new reported cargoes being announced by either traders or receivers in Apapa, Nigeria. The two large parcels loaded on a vessel out of the USG for Nigeria and Tema in Ghana, has been clarified as being for the Tema contract after suggestions last week commented that the Ghanaian supply was not in respect of the annual Tema contract. Therefore it is expected that 5,000 tons of the three main Group I grades will be discharged into Tema.
Group I prices in respect of base oils currently being sold into Nigeria are once again maintained as per last report with levels assessed or estimated 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 currently indicated at $715/t-$725/t. There have been no recent movements in prices going into Nigeria, perhaps reflecting the relatively stable numbers available from sources in the U.S. Gulf, Europe and the Baltic.
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.