EMEA Base Oil Price Report
Buyers and sellers returned to their desks this week, but base oil trading remained quiet, likely to pick up as the week progressed.
Markets were rocked, however, by a jump in crude oil prices after the United States assassinated Iranian military commander Qasem Soleimani, leading to threats of further attacks by both sides.
API Group I values are being reviewed by sellers, and some are already offering higher numbers than at the end of last year. Rising feedstock prices are being cited as the main reason, but some producers have not raised prices.
Group II prices are also firm this week as sellers seem to be assessing conditions, including the impact of the European Union’s new quota on Group II imports. The new regime could have a number of effects, but they probably will not be understood until the quota is exceeded.
he Group III segment begins the new year with the same surplus. It appears unlikely to disappear any time soon, although several maintenance turnarounds are scheduled for the first quarter, and these could temper the over-supply.
Crude oil prices gave back some ground after spiking above $70 per barrel mark in the wake of Soleimani’s death. Dated deliveries of Brent crude dipped to $68.85/bbl, now for March front month settlement, while West Texas Intermediate reached $63.20/bbl, still for February front month.
ICE LS gas oil declined to $620 per metric ton for January settlement. These prices were obtained from London ICE trading late Monday.
Europe
European export prices for Group I oils face some upward pressure as availabilities are relatively tight, particularly for buyers wanting cargoes that include all three main grades. For now values are unchanged, with solvent neutral 150 selling between $545 per ton and $580/t, SN500 at $555/t-$580/t and bright stock at $615/t-$650/t.
These levels refer to cargo-sized parcels of at least 2,000 tons, sold on an FOB basis ex mainland European supply points, always subject to availability.
Prices for Group I sales within Europe also have not had time to adjust, but face the same dynamics as exports. Some blenders in Northwestern Europe have expressed supply concerns following a fire at a major refinery in that region, while others reported making arrangements with alternative suppliers and resellers in Antwerp-Rotterdam-Amsterdam. These are expected to be spot sales, or at least January contracts, until the status of the refinery in question can be evaluated.
The price differential between exports and sales within Europe are unchanged, with exports €45/t-€65/t lower.
The Group II segment is marking time since it is too early to assess the impact of the quota system. Supply and demand remain balanced, and prices are unchanged at $745/t-$790/t (€675/t-€740) for 150 neutral and 220, while 500N and 600N are at $785/t-$825/t (€715/t-€750).
These prices apply to the wide range of Group II oils, including European and U.S. products with full slates of finished lubricant approvals and partly approved grades from the Middle East, the Far East and the U.S., some of which are imported in flexitanks.
European Group III markets are showing plentiful availabilities to date, but there are a number of large refinery turnarounds planned for this year, and this could limit the quantities of material becoming available throughout the markets. However, producers have planned these maintenance schedules well in advance and sources within some of the main suppliers have said that they have contingency plans to increase inventories to cover contracted supplies during downtime at the facilities, with the effects of maintenance being minimal.
There are hopes that demand for Group III base oils within the EU could receive a boost should the EU quota system shorten up the Group II market. Some Group III grades may be substituted for some Group II grades, and with prices closely aligned, some blenders may look at this option.
Prices are maintained this week with partly-approved Group III base oils between €650/t-€725/t for 4 centiStoke grades and €665/t-€740/t for 6 and 8 cSt, all on an FCA basis ex Northwestern European hubs. Prices for Group III oils with full slates of approvals are unchanged at €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
As with other markets Baltic trade has only just resumed this week, and with the Russian Orthodox Christmas celebrations starting on Tuesday 7th January activity may be limited in this region for the coming few days. Prices are deemed to have remained in the same ranges as previously advised prior to New Year.
There has been some loading activity with a cargo of around 6,000 tons moving from Kaliningrad to Singapore. This is considered to be a contract trade, and may be as an adjunct to cargoes which are loaded out of the STS facility at Kavkaz, Russia, in the Black Sea from the same producer.
Cargoes are also moving to the United Kingdom and Antwerp-Rotterdam-Amsterdam with a suggestion that increased Antwerp-Rotterdam-Amsterdam trade is perhaps as a result of the fire at the northwestern European refinery.
Baltic FOB prices in respect of Russian export base oil grades are unchanged, with SN150 remaining between $465/t-$490/t and SN500 between $470/t-$498/t. Bright stock which is sold and loaded ex Gdansk is indicated between $620/t-$650/t FOB.
In the Black Sea region a 5,000 tons cargo of Russian export barrels for receivers in United Arab Emirates is still being considered to load STS ex Kavkaz, Russia. The cargo was booked on a prompt basis, but shipping may have been remote, delaying the loading until this week. The other larger 12,000 tons cargo for receivers in Greece and Singapore should load this week.
STS prices for Russian export grades are still assessed at around $455/t in respect of large quantities of SN500, with smaller parcels of SN150 at around $435/t.
A cargo has loaded out of a NE Black Sea port for receivers in Gebze, Turkey. Prices for this movement continue to be indicated at exceptionally competitive rates with SN500 around $498/t CIF, and SN150 at $489/t CIF.
Offers from Mediterranean sources are believed to have risen, perhaps due to local prices from the refinery at Izmir remaining relatively high or because of a general review of prices by a Greek refinery. Group I grades are still competitive against the local Turkish prices, giving these suppliers an edge when looking to expand trade into the Turkish market.
Indications for Mediterranean Group I offers are heard at $589/t in respect of SN150 with SN500 at $598/t, basis CIF Gebze, Aliaga or Derince. SN600 is indicated at around $612/t, with bright stock around $682/t.
Group II and Group III grades are being offered on FCA terms ex-tank Turkish ports with last prices heard between $710/t-$760/t in respect of the range of Group II grades, some $10/t-$15 higher than previously established, with partly-approved Group III base oils between $799/t-$835/t, also a shade higher than last reported.
Middle East Gulf
Red Sea shipping sources report that some form of COA has been arranged for the supply of a number of cargoes of bright stock for Egyptian General Petroleum Corp. in Alexandria. These parcels each of 2,500 tons will load either from Yanbu’al Bahr or Jeddah, Saudi Arabia, and sail through Suez to discharge in Alexandria. Other cargoes of Group I and Group II base oils are planned for the United Arab Emirates and India for loading during January.
With U.S. sanctions still biting hard against Iranian exports of crude and petroleum products, the outcome of any Iranian counter measures remains an unknown. The Straits of Hormuz could once again be targeted for vessels shipping cargoes out of Saudi Arabia, Kuwait, Bahrain and U.A.E.. Exports of Group III base oil and imports of Group I and Group II base stocks could be affected by any subsequent action.
FOB or FCA prices in respect of Iranian SN500+ continue to be nominally indicated by sources in Iraq and U.A.E. at around $520/t-$540/t FCA Iranian facilities. This is on the basis of local delivered prices, less associated transportation and handling costs. The reality of this situation is that with no cargoes per se emanating from the southern Iranian ports, it is difficult to confirm these numbers.
Group I offers from traders based on U.S. Gulf Coast supply have been withdrawn for the time being, with sources citing that shipping would be a concern, with freight rates moving higher as P&I clubs push up insurance rates. Until the offers were withdrawn prices were being indicated at around $589/t CIF U.A.E. ports, in respect of SN500, with SN150 around $579/t and bright stock around $666/t CIF.
There are rumors that receivers in U.A.E. are actively looking at further cargoes from Kavkaz, Russia, and Baltic, and also alternative sourcing from European Mediterranean suppliers.
Middle East Gulf exports of Group III base oils ex Al Ruwais and Sitra with notional FOB prices are maintained for the moment although rising shipping costs caused booth by IMO 2020 and also the Iranian situation could ultimately affect these numbers. FOB levels remain between $650/t-$690 mt in respect of the range of partly-approved Group III base oils being sold into Europe, U.S., India and Far East. 8 cSt grades sold into Indian and Far Eastern markets will produce lower FOB prices due to local selling prices being different in those regions from prices achieved in Western markets.
‘Nexbase’ Group III base oils ex Sitra refinery may contribute higher notional netbacks because of these base oils being sold at premium prices, due to holding the full range of European OEM approvals. Notional netbacks in respect of these premium base oils are estimated between $760/t-$855/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades.
Notional FOB prices on a netback basis are based on prices derived and informally assessed from regional selling levels, less marketing, handling and freight costs.
Middle East Gulf regional Group II prices are maintained this week, since there have been no reported increases announced by suppliers as yet. With possible increased costs of shipping being imposed on parcels of these base oils being moved into the region, prices may have to be adjusted over the next couple of weeks.
Prices are unchanged at the moment with levels on basis of FCA ex U.A.E. hub storage assessed between $745/t-$900/t in respect of the light vis grades 100N/150N/ 220N, with 500N/600N between $755/t-$910/t.
Africa
Mediterranean and North African markets are busy with a number of cargoes which were arranged before year-end loading and discharging into ports in Israel, Egypt and Morocco. The second bright stock cargo for Alexandria is due to load this week ex Red Sea.
With the arrival of large cargoes of Group I base oils West Africa is in receiving mode with no new developments on further parcels being arranged. One vessel has arrived carrying a Baltic cargo but no confirmation of any U.S. Gulf Coast cargoes, although sources have said that there may have been a parcel loaded at year-end which has not been confirmed as yet.
The supply of smaller cargoes into Guinea and Cote d’Ivoire is being considered at this time, with possibilities to load out of Italian Mediterranean ports. Additionally, the Ghana tender supply is due to be arranged from a Mediterranean source later this month with the last parcel being delivered into Tema port as a pert-cargo en route to South Africa.
Prices for Group I base oils are unchanged at $630/t-$645/t for SN150, $640/t-$655/t for SN500 and $720/t-$745/t for bright stock. Blended SN900 is indicated at $650/t-$675/t. These prices apply to cargoes of at least 10,000 tons being delivered into Apapa port, in Lagos, Nigeria, and selling on an FCR basis.
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.