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February 13, 2018

Volume 1 Issue 7

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EMEA Base Oil Price Report

Declines in crude oil and feedstock prices caused a pause – at least temporarily – on the upward pressure for base oil prices. It is too early for these changes to be passed on to base oil values, but some buyers have already called for downward corrections.

Dated deliveries of Brent crude posted at $62.70 per barrel in late trading on Monday in London, up from Friday’s $61.74/bbl, which was the lowest price of the young year. Both prices were for April front month. West Texas Intermediate crude went for $59.35/bbl for March settlement Monday, while ICE LS gas oil traded at $556 per metric ton, still for February front month, down almost $50/t in the week.

Europe

European export prices are still perceived as stable to firm, with offers for export sales containing prices that are moving higher. It’s too soon to say if these values will be achieved, but buyers are shifting to negotiation mode. It’s worth noting, though, that it typically takes time for crude oil price increases and decreases take time to filter through to base stocks.

With the pricing debate starting to take place, this columnist deems it prudent to err on the side of caution and leave values unaltered from last week. Light solvent neutrals are offered between $765/t and $785/t, while heavier neutrals are being pushed at between $835/t-$860/t. Two large buyers confirmed receiving offers in these ranges from suppliers, but both recounted asking for re-offers today hoping to receive lower numbers. Bright stock is unchanged at $925/t-$965/t,

A number of independent traders said this week that many of the cargoes and prices being posted are transactions within companies or between affiliates and thus do not reflect the open market.

The above levels pertain to large cargo-sized parcels of Group I base oils offered and sold on an FOB basis from mainland European supply points.

Local markets throughout Europe appear subdued as buyers who accepted mounting increases in recent weeks are suggesting that sellers are playing down the current downward trend. Buyers are now calling for mid-month price reviews should fundamentals remain at present levels or keep falling. They suggest that the decreases to date are so substantial, around 7 percent for dated Brent, that base oil prices should be examined and adjusted forthwith. The second half of February will be crucial to establishing pricing for Group I sales within Europe.

Differentials between local FCA sales and spot export levels remain unchanged at €80/t-€95/t since the former are yet to be established.

The phalanx of source increases applied to Group II base oils from almost all producers appears to have slowed and may have ceased for the time being. Tongue-in-cheek suggestions are coming from some buyers for suppliers to start reducing prices; since producers were so fast to impose markups, buyers wonder, will they move as quickly to start discounting. As some suppliers were still advocating additional increases during last week, it seems improbable.

Like the Group I scene, it is too early to gauge what will happen in the short and longer term, hence FCA prices from Group II distributors remain unchanged this week at €885/t-€9010/t for light-viscosity oils and €955/t-€985/t for 500 neutral and 600N.

Group III prices have been moving upwards almost continuously, although by smaller increments. Here, too, there is debate about what the latest drop in crude will have. Some producers reason that this may be a temporary blip.

European imported prices remain at $880/t-$910/t, on a CIF basis, for 4 centiStoke and 6 cSt grades landed into Northwestern Europe, with local euro based FCA sales remaining at the new Feb levels. Values are €845/t-€860/t FCA Northwestern Europe for 4 and 6 cSt. Base stocks carrying full slates of ACEA approvals will be priced higher: €880/t-€895/t for 4 and 6 cSt and €855/t-€870/t for 8 cSt, FCA Antwerp-Rotterdam-Amsterdam.

The latter prices are for FCA or truck-delivered Group III base oils sold to local blenders and do not apply to material delivered in bulk cargoes to large users of these grades such as major blenders or additive manufacturers.

Baltic and Black Seas

Reports from the Baltic describe record quantities of Russian base oil exports being distributed through its ports. Prices still appear to be rising, with no signs yet of any cracks in offers for FOB and CIF sales of main grades.

Sellers said they may have been nearing the pinnacle of possible prices after the rises over the last few weeks, but whether these levels will be affected by recent events still remains unclear. Refinery prices are still relatively high coming out of Russia, so no immediate discounting action will be volunteered by resellers and distributors at this stage.

SN150 is being indicated in offers between $720/t-$740/t, while SN500 is at $765/t-$790/t. SN900 appears to be available in bulk between $825/t-$840/t FOB. Bright stock from both routine sources and also from southern Baltic producers is indicated between $865/t-$915/t, depending on specification and quantity.

Cross Black Sea trading remains at a high over the past few months for quantities of SN150 and SN500 moving into Turkish receivers in Gebze, Turkey,. A further large STS loading out of Kavkaz, Russia, has been noted with the return of Russian export grades being bridged to Rotterdam, and then onward to South American receivers often in combination with other base oil grades.

Sources in Antwerp-Rotterdam-Amsterdam and Greece have been nominated to supply a number of cargoes to Turkish receivers in Gebze and Derince. Prices for barrels of Group I base oils irrespective of source are believed to be offered delivered at around $795/t-$825/t for light neutrals and $870/t-$895/t for SN600, basis CIF. Buyers in Turkey, while aware of possible price changes to Group I base oils, are confident to take supplies for February and March arrival. Should prices change dramatically over the next few weeks, they said, they are confident that suppliers will adjust prices accordingly, even on a post-delivered basis.

Middle East Gulf

In Middle East Gulf, Group I Iranian material has declined in availability out of the southern ports of Bandar-e Emam Khomeyni, Bandar Bushehr and Bandar Abbas, although specialty oils such as rubber process oils are still being exported in quantity to the west coast of India and the United Arab Emirates. The lesser quantities of Iranian Group I SN500 are priced at the same levels last established for this grade, at around $840/t-$855/t FOB for premium SN500.

Group I base oils also continue to move out of Saudi Arabian suppliers with cargoes of Group I grades going into Omani and Indian receivers. The advent and availability of Group II grades ex Yanbu has now commenced with deliveries of these grades being made into buyers in India. No reference prices are obtainable for these grades yet, although a comparison in terms of pricing with alternative supplies from South Korea and Singapore must be adopted.

A rather interesting inquiry has resurfaced for vessels to lift a large cargo of 10,000 tons of base oils from Umm Qasr, near Basra in Iraq. It is not clear whether it signals the re-start of exports of Iraqi Group I base oils. Local traders in U.A.E. to not know the ownership of this material, although inquiries are continuing. This material is destined for Jebel Ali discharge.

Group III base oils are being loaded out of the three source ports in Middle East Gulf, with large swathes loading out of Al Ruwais, U.A.E., in cargo lots of 6,000 tons bound for India and 12,000 tons discharging in Sharjah, U.A.E. U.S. and Europe are also expecting large parcels of Group III base stocks from the Middle East Gulf.

Netback FOB Group III prices, which take account of declarations of landed prices in a number of destinations, are unchanged this week. Material ex Al Ruwais is estimated to load at $805/t-$820/t for 4 and 6 cSt grades. Bapco oils from Sitra, Bahrain, are estimated on a similar basis, given similar and comparative feedstock costs and freight. Neste Group III grades from Sitra, which carry more finished lubricant approvals, will netback to $855/t-$875/t.

Sources said the Luberef plant in Yanbu, Saudi Arabia, has begun making Group II and has sent or soon will send a shipment into receivers through Mumbai anchorage. News from receivers elsewhere within the region is still awaited.

Prices for U.S. and Far East Group II oils moving into the U.A.E. are unchanged this week, although one receiver confirmed that prices are still moving upwards. This may be the last vestiges of increases to be seen, depending on what takes place on the crude and feedstock front.

Prices are $765/t for 100N and 150N and $875/t-$890/t for 500N and 600N, CIF Middle East Gulf. Prices for local Group II sales in the U.A.E. remain at $875/t-$895/t for 100N, 150N and 220N and $995/t-$1040/t for 500N and 600N, all on an FCA or delivered basis.

Africa

East African buyers have issued new inquiries for Group I and II oils, heralding the advances of Group II and Group III base stocks into the region. South African blenders reported that base oil prices were raised across the board, with some cases of $100/t increases. Prices are hard to align since duties, local taxes and bridging costs from shore storage to blending plant can all be included, making a reliable comparison with imported levels impossible.

West Africa appears to be entering one of its quiet periods when few if any new cargoes are in play. The Ghana tender will have another 5,000 to 6,000 ton cargo arriving in the next few weeks, and buyers in Ivory Coast and Guinea confirmed that they have issued letters of credit for Group I oils for March or April.

Nigeria has a couple inquiries out at the moment, one for supply out of the Baltic and another from a U.S. Gulf Coast source. Receivers in Lagos latched on to falling crude oil prices and have declared that base oil prices will now fall almost immediately. One operator predicted that prices would fall over the next month and vowed to postpone large purchases until then.

Sellers stated that prices are actually still increasing for Group I grades going into Apapa and that prices may not retreat for some time if at all. An impasse is forecast.

Interest for rerefined base stocks continues, with a number of parties looking to import these grades. Prices vary depending on characteristics and specifications, but there was a report of an SN150 oil priced around $770/t, basis CIF Lagos. These grades are being offered for delivery in flexi-tanks.

Prices for new offers for Group I base stocks to be delivered into Nigeria are still moving forward, and based on one current offer are $915/t-$940/t for SN150, $965/t-$990/t for SN500, $988/t for SN900 and $1065/t-$1090/t for bright stock, all FOB.

These levels apply to CIF/CFR offers for material delivered from sources in the U.S. Gulf and the Baltic. They refer to API Group I base oils delivered on a CIF/CFR basis to Apapa, Lagos, in minimum parcel sizes of 6,000 tons.

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.