April 16, 2019
Volume 2 Issue 16
EMEA Base Oil Price Report
Base oil markets around Europe, the Middle East and Africa appeared to stabilize the past few days, but a sentiment of underlying weakness persists. Group I prices showed signs of leveling off, but Group II sellers are aggressively protecting or seeking to expand their market shares while the Group III segment shows signs of tightening for the moment but looks like a buyers’ market long term.
Recent run-ups in crude and feedstock costs have only created further problems for base oil producers, who have talked for some time of trimming output. Some are now considering heavy discounts to move stocks out of tank. The media has seized on renewed fighting in Libya as critical to future crude prices, but in reality the country’s current output is too small to make it a significant factor.
Dated deliveries of Brent crude rose a bit the past week to $71.20 per barrel for June front month delivery, but West Texas Intermediate crude drifted slightly lower to $63.40/bbl for May settlement. ICE LS gas oil was little changed at $631 per metric ton for May front month. These prices were ICE London trading late Monday.
There are rumors this week that at least one large European refiner has excess stock to move and prepared to offer discounts to accomplish that. Information about offers is eagerly awaited, but the segment appears stable so prices here are unchanged for now. Light solvent neutrals remain between $550 per ton and $575/t, while SN500 is at $575/t-$600/t. Bright stock is still under a little pressure but seems to be holding firm at $745/t-$785/t.
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.
Prices for Group I sales within Europe are also flat after adjustments around the beginning of April. Buyers are still looking for lower levels, and some finished lubricant blenders are considering whether to switch to Group II oils, although most big companies in the region are already using some. Many expect the region’s uptake of Group II will continue growing over the next few months but Group I is also expected to remain a primary blend stock.
With prices static, the differential between intra-regional sales and exports remains unchanged with the former €85/t-€120/t higher.
Group II prices are also unchanged this week, with an air of stability wafting in. The price erosion that was occurring may pause because of importers imposing hikes in source markets. Escalating feedstock costs are exerting upward pressure. European Group II prices remain at $745/t-$855/t (€660/t-€760) for 110 neutral, 150N and 220N and $775/t-$895/t (€685/t-€795) for 500N and 600N, all on an FCA basis. The spread for Group II grades remains unusually wide because of very low values being offered for some new production.
These numbers cover the full range of Group II including volumes supplied in flexitanks, by vessel and barge, those with full slates of finished lubricant approvals and those with no or partial slates of approvals.
Group III prices were expected to come under further downward pressure due to increased availability, but some sellers claimed supply is tightening due to maintenance shutdowns and higher than expected sales. Replenishment shipments have yet to reach storage hubs, and this may allow current prices to be defended, at least temporarily.
Prices for Group III grades with partial approvals remain at €700/t-€755/t for 4 centiStoke grades and €710/t-€765/t for 6 and 8 cSt, all on an FCA basis from hubs in Northwestern Europe. Values for fully approved Group III are adjusted upward to take account of some reported moves in the market, although there are also reports of one large supplier lowering prices. Four cSt grades are now assessed at €820/t-€890/t, 6 cSt at €845/t-€895/t and 8 cSt at €825/t-€885/t, basis FCA Antwerp-Rotterdam-Amsterdam.
The prices above do not reflect prices for material delivered in bulk cargoes to large buyers, which may be lower.
Baltic and Black Seas
Reports from the Baltic region are muted, with some sellers suggesting they do not have large quantities of material for sale, while others have large stacks in tank. Demand for Russian exports normally peaks during spring, but orders remain sluggish at the moment due to large availabilities of mainstream European material being available at attractive prices.
Parcels sailing to Antwerp-Rotterdam-Amsterdam, Scandinavia and the United Kingdom are missing from the scene although a large part cargo of Russian export grades is being loaded on a prompt basis for Nigeria. Sources said this cargo will top off in Gdansk, Poland, with a large quantity of bright stock en route to West Africa.
FOB prices cannot fall much further due to refinery production prices and transportation costs. SN150 is at $475/t-$500/t and SN500 at $485/t-$520/t, while bright stock from the southern part of the region is assessed at $760/t-$785/t.
In the Black Sea and Eastern Mediterranean, Turkish trade remains dull as buyers in Turkey are relying on locally produced base oils rather than imports from Russia or Mediterranean sources. The country has renewed economic woes that are affecting trade within its borders and exports of finished lubricants. The local currency depreciated again following March 31 elections, making imported base oils more expensive.
This has further weakened the market in Turkey, where many sellers have been trying to gain a foothold, so that the heat has lessened for promotion of Group II and Group III base oils there.
Mediterranean offers for sales on a CIF basis into Gebze and Derince are still being heard at around $525/t for SN150 and $535/t for SN600, but even at these exceptionally low levels few buyers are responding. Prices cargoes loading on an STS basis ex Kavkaz, Russia, are still assessed at $465/t-$485/t for SN150 and 480/t-$495/t for SN500.
Middle East Gulf
Sources report more cargoes being loaded at Yanbu’ al Bahr, suggesting that the production glitch that hit this unit may have been solved, or that large stocks of both Group I and Group II had been stored and are now being drawn down to supply regular buyers in India, Oman and the United Arab Emirates.
Iranian Group I oils are still flowing out of the country according to sources based in that region and in the U.A.E. There is no hard evidence of these movements in terms of shipping reports or loading schedules, but quantities of SN500 have been landed into Hamriyah and then bridged to India and Pakistan.
U.A.E. receivers are currently assessing offers of large quantities of Russian Group I exports from the Black Sea, with decisions to be made on a sizeable cargo within the next few days. Prices for SN500 ex Kavkaz are being suggested at $538/t on a CIF basis U.A.E.
FOB prices for partly-approved Group III grades from Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged this week at $715/t-$755/t for 4, 6 and 8 cSt. Eight cSt grades bound for India and the Far East will have lower FOB prices due to local selling prices.
Approved Group III oils marketed by Neste ex Sitra are assessed on an FOB basis at $875/t-$925/t for 4, 6 and 8 cSt grades that are delivered to European and U.S. markets. The FOB numbers in this case refer to netted back prices established from regional selling prices, less handing and freight costs.
Middle East Gulf Group II prices are unchanged, with oils sourced from the Far East and the U.S. being sold on an FCA basis ex U.A.E. hub storage at $885/t-$925/t for 100N, 150N and 220N and $895/t-$935/t for 500N and 600N.
These prices apply to small quantities of less than 25,000 tons per load, delivered around the Middle East Gulf. Prices may vary with destination and distance from hub supplies.
South African receivers are in the market to purchase smaller quantities of Group I base oils for delivery in flexies, Sources in the Baltic normally participate in offering for this trade, but it was heard that material may be sourced out of the U.S, Gulf in this case.
Trade in West Africa and more specifically Nigeria has been quiet in recent weeks, although with one cargo loaded out of the U.S. Gulf and another from the Baltic during the second part of April. The Baltic cargo identified last week is now confirmed to load out of Riga, Latvia, and also possibly Gdansk, with quantities of Russian heavy neutrals and also bright stock. The cargo is estimated to be around 12,000 tons in total.
Group I prices landed into Nigeria are unchanged again at $670/t-$680/t for SN150 and $680/t-$690/t for SN500. Bright stock is assessed at $900/t-$945/t, and SN900 is estimated to land at $700/t-$720/t, both basis CIF/CFR.
The prices above refer to large cargoes of at least 10,000 tons, landed into Nigerian ports such as Apapa, Lagos.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at email@example.com.