October 8, 2019
Volume 3 Issue 8
EMEA Base Oil Price Report
Base oil prices appear weaker across Europe, the Middle East and Africa except for the API Group II sector, where suppliers attempted to impose markups of around $10 per metric ton from Oct. 1.
That may seem an interesting move at a season when demand starts to wane, and some buyers are resisting, but sellers maintain that there is more than sufficient demand to justify such a move. Ultimately the market will decide whether these markups stick.
Group I prices have dipped in response to lower demand and steady availabilities of all grades, putting pressure on producers to discount on exports and sales within the region.
Group III supply is growing, and distributors and resellers throughout the EMEA regions are trying to protect market share. Prices are therefore coming under pressure thanks to discounts and other “sweeteners”.
Crude and feedstock values dipped again at the end of last week with dated deliveries of Brent crude now posting at $58.75 per barrel for December front month settlement, more than $2 lower than last week. West Texas Intermediate fell to $53.25/bbl, still for November front month. ICE LS gas oil drifted lower to $583.75/t for October front month, around $10 lower than previously.
These prices were obtained from London ICE trading late Oct. 23.
Weaker crude and feedstock prices have extended a lifeline for many Group I producers. Where margins were being squeezed previously, the downward moves have afforded an acceptable gap between raw material costs and selling prices.
European Group I export prices are trading lower, with discounting from existing levels now prominent throughout the market. Demand is weaker now than at any time previously. Few export destinations are looking for large parcels, and with alternative sources such as Baltic and U.S. Gulf Coast suppliers competing for trades into areas like West Africa, producers are finding it tough to maintain a flow of material through refinery and storage tanks.
Export prices are $10 per ton to $15/t lower this week, with bright stock being mostly affected. Solvent neutral 150 supplies are probably in balance, with SN500 being longer and more available. SN150 is at $565/t-$590/t, while SN500 is a little lower at the top of the range, at $575-590/t, both on an FOB basis. Bright stock dipped to $640/t-$665/t.
These prices refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.
Domestic European prices have also succumbed to over-supply, with blenders requiring less material than forecast at the end of the summer recess. Some blenders in Northwestern Europe are having problems with additive supply after the fire at the Lubrizol plant in Rouen, France, two weeks ago. Despite Lubrizol announcing that they will be able to cover all requirements from alternative sources such as Le Havre, there are still some noises from blenders saying that they are not able to receive full quantities and all the grades required for all blends.
At the same time there has been a general movement to at least some Group II grades creating more length in the Group I sector.
Prices are taken down by around $10/t-$15/t (or euro equivalent, where a weaker euro against the dollar is also causing pricing problems) and levels are adjusted lower. But as with last week’s downward moves from both sets of pricing, the differential between domestic Group I levels and export pricing is maintained with domestic levels remaining at €85/t-€100/t above export levels.
Group II prices throughout Europe have generally been moved higher effective Oct. 1, although some sellers have maintained prices which were valid through September. However it remains to be seen if the notified increments will stick. There is considerable resistance from buyers to a price hike, and with one major producer trying to push numbers higher in the U.S. only to rescind the increase. The same should be happening in Europe, according to a number of influential blenders.
This is also when buying interest recedes due to a seasonal downturn in finished lubricant requirements, and given a situation where Group I (and Group III) prices are currently dropping, raw material costs are lower, hence the lack of rationale behind moving Group II prices higher.
Group II prices are raised this week, perhaps only temporarily, with FCA levels now assessed at $710/t-$820/t (€655/t-€750/t) for the light viscosity grades (100 neutral, 150N and 220N), with 500N and 600N at $780/t-$835/t (€715/t-€765/t).
These prices pertain to the full range of Group II oils, including those with full slates of approvals as well as those with partial or no approvals.
Group III prices remain under pressure due to a number of suppliers competing for market share amid an over-supply situation growing by the week. Those already established with a position in the Group III market are pumping greater quantities into an already saturated arena, while there are countless newer players entering the market. However, no matter how small these inroads are, the effects of lower prices and optional suppliers is making incumbent suppliers respond to maintain their position in the market. One major seller whose supplies of GTL-based Group III and Group III+ go into the company's own base oil slate is now reselling partly approved base oils from the Sitra refinery in Bahrain. This is competing in a different circle from the GTL material.
Prices are mixed with levels for the range of partly approved Group III base oils being heard at €685/t-€735/t for 4 centiStoke grades with the 6 cSt and 8 cSt base oils at €690/t-€730/t. These prices are for FCA sales ex hubs in northwestern Europe.
Fully approved Group III prices are set higher, although some net prices can be almost compared to partly approved numbers. Levels have dropped this week at €775/t-€840/t for 4 cSt base oils, with 6 cSt material at €810/t-€900/t and 8 cSt grades at €780/t-€855/t, FCA Antwerp-Rotterdam-Amsterdam.
Baltic and Black Seas
Baltic trade appears to be steady with distributors and resellers still bidding lower for Russian export barrels having success in meeting requirements for sales out of the Baltic to Antwerp-Rotterdam-Amsterdam, the United Kingdom and Scandinavia. An enquiry for Nigeria may have been replaced by a supply from a Mediterranean source and taken off the table
One cargo of around 3,500 tons has loaded for Antwerp-Rotterdam-Amsterdam from Kaliningrad, Russia, with a further two cargoes for the east coast of the U.K. and the west coast of the U.K. due to arrive at discharge points this week.
Prices are stable with FOB numbers for SN150 remaining at $470/t-$495/t, and SN500 at $475/t-$510/t. Bright stock ex Gdansk, Poland, is assessed lower, aligning more to the Group I European export levels, which have dropped this week yielding prices for bright stock from this source at $640/t-$665/t FOB.
No reported activity in the Black Sea from the Kavkaz, Russia, STS facility, which has not loaded any further cargoes after those large quantities sold during September. There are talks of further parcels loading for the west coast of Indian receivers but nothing definite has been heard. Prices for Kavkaz, Russia, supplies and other Russian exports are still at extremely low levels, around $455/t for SN500 with SN150 suggested as low as $435/t.
Mediterranean offers for Group I cargoes are more aggressive this week after prices had been discounted from September levels to try to tempt Turkish buyers into taking cargoes of around 3,000-4,000 tons from Greek and Italian sources. These do not appear to be popular within the Turkish market which remains dull and lackluster in base oil terms. Even with the local refinery still in turnaround, imported material remains of little interest to Turkish resellers and large blenders.
There is further news of troubles between government and the Central Bank. The economy is on a knife-edge and could implode.
Mediterranean Group I prices are now indicated lower at $558/t for SN150 with SN500 at $564/t. SN600 is reckoned to be around $575/t, sometimes with parcels of bright stock at around $710/t CIF.
Group II and Group III base oils are available ex-tank in Turkish ports with small cargoes of Group III base oils from Spanish sources. Resellers are offering Group II base oils from major producers, and additionally in flextanks from Far East and U.S. sources.
Prices for Group II base oils ex-tank are higher this week, following the European moves, at around $800/t-$840/t, with partly approved Group III grades advised to be in a range of $775/t-$825/t, depending on terms and quantities lifted.
Middle East Gulf
Red Sea sources confirmed two late September loadings – one of some 14,000 tons of Group I and II grades for the West Coast of India and the other of 3,000 tons moving into Northwestern Europe. This latter cargo is deemed to consist of Group II base oils.
There is also another shipping inquiry for a large parcel of around 18,000 tons to be discharged into one port in the United Arab Emirates and two locations in India. This cargo was to load at the end of September, but appears to remain at inquiry stage.
Middle East Gulf sources said there are still cargoes of Iranian SN500 and SN150 moving out of the southern Iranian ports of Bandar-e Emam Khomeyni and Bandar Bushehr, although no shipping information is available for any of these parcels. Sources maintain that base oils are still being delivered into local U.A.E. receivers with prices for Iranian premium SN500 at around $525/t FOB, lower than previously established. Supply of Russian export barrels through the Black Sea ir reportedly moving into Iran, although it is not feasible that Western operators would offer vessels to make this voyage, fearing reprisals from the the effects of U.S. sanctions.
An offer for a Russian Group I cargo ex Kavkaz, discharging in the U.A.E., has been heard at around $544/t for SN500 with $525/t for smaller quantities of SN150. These levels could compete with Iranian material.
Prices for Group III oils from Al Ruwais, U.A.E., and Sitra, Bahrain, fell this week, as Group III is once again facing a global over-supply. With global demand falling and production increasing, the writing is on the wall. Prices for grades with partial slates of approvals slid to $670/t-$710/t for the three Group III viscosity grades, though 8 cSt grades going into India and Far East locations will produce lower contribution levels by around $100/t due to lower local selling prices. These oils are being sold on an FOB basis through Adnoc and both on an FOB and CIF basis by Bapco.
Neste markets oils from the Sitra refinery with full slates of approvals, and prices for them are adjusted this week to $780/t-$885/t for 4, 6 and 8 cSt grades. Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.
In line with other markets, prices climbed this week for Group II base oils going into Middle East Gulf from the U.S., the Far East, Saudi Arabia and Europe. Values for FCA sales ex U.A.E. hub storage are at $795/t-$910/t for 100N, 150N and 220N, while 500N and 600N are at $810/t-$925/t. As with other Group II prices this does not apply to all sources, and material from Saudi Arabia and from U.S. may not carry these increases to the extent that some other suppliers have imposed.
North African trade slowed this week, with only a small cargo from the U.S. Gulf Coast moving into the Mediterranean for Israel. Whilst this is not strictly speaking North African trade, this country may become a regular importer of Group l, Group II and Group III base oils after the closure of the local facility at Haifa last year. One inquiry for a bright stock parcel to move from Livorno to Alexandria may suggest the retention of the EGPC tender by the incumbent supplier, rather than as suggested last week that a major may have landed the supply.
Two cargoes have been in the news for Nigeria this week. One of around 8,000 tons of Group I grades is being sourced out of the U.S. Gulf as suggested last week, whilst the other is also to load Group I grades ex Livorno. This cargo may be a substitute for the Baltic inquiry that appears to have been dropped by traders acting on behalf of Nigerian buyers. Other cargoes previously loaded out of the Baltic and Antwerp-Rotterdam-Amsterdam have arrived into Apapa port in Lagos, Nigeria.
The enigma of the smaller cargo of around 4,000 tons ex Baltic identified through shipping reports over the past couple of weeks appears to have been solved. The vessel had loaded primarily at Gdansk, where it may be assumed that bright stock and perhaps some heavy neutrals were loaded. Some of this cargo was subsequently discharged at Riga. The additional 4,000 tons of Russian export grades was then loaded and the combined total, believed to be around 8,000 tons, then sailed for Lagos.
Prices assessed for Group I base oils are adjusted lower due to FOB levels moving downwards. Prices are now at $675/t-$695/t for SN150, $665/t-$685/t for SN500 and $725/t-$760/t for bright stock. SN900 is being indicated at $675/t-$695/t. These values pertain to cargoes of at least 7,000 tons being delivered into Apapa.
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.