December 10, 2019
Volume 3 Issue 4
EMEA Base Oil Price Report
Throughout Europe, the Middle East and Africa, base oils are under downward pricing pressure, though to varying degrees and for different reasons.
API Group I prices traditionally dip towards year end but supply and demand are closer to balance than usual this year, mainly due to producers cutting back on base oil runs. Prices are relatively weak, but sellers have not had to offer steep discounts.
Group II oils are holding fast thanks to strong demand, and there are no signs of oversupply in this segment. Group III stocks, on the other hand, face mounting pressure due to increasing availabilities. The price spread between Group II and Group III base stocks has narrowed to an all-time low with some Group III prices actually being below Group II corresponding Group II grades.
Crude oil costs rose after an OPEC meeting in Vienna last week where Saudi Arabia committed to restricting its output by another 400,000 barrels per day. Dated deliveries of Brent crude climbed some $3 per barrel in the past week to $64.10/bbl for February front month settlement, while West Texas Intermediate increased to $58.75/bbl, still for January front month. ICE LS gas oil rose around $10 per metric ton to $586/t for December settlement.
These prices were obtained from London ICE trading late Monday.
European Group I exporters have been able to avoid discounts since there are few locations with plentiful material. Most suppliers have sufficient product to cover term commitments and the absence of a firm spot market has eliminated most of the need to stock excess product.
Prices remain between $545/t and $580/t for solvent neutral 150 and $555/t-$580/t for bright stock. Bright stock is assessed slightly weaker at $615/t-$650/t due to a few suppliers having parcels available for December sale.
These values refer to cargo-sized parcels of at least 2,000 tons of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.
Group I trade within Europe has ground almost to a halt, leading some sellers to offer temporary voluntary allowances and other small inducements to move the last vestiges of material out of tank for 2019. But not all suppliers are discounting, as some buyers in France are looking for supplies from alternative sources due to a strike that has disrupted availabilities.
The price differential between Group I sales within Europe and exports has narrowed slightly to 45/t-65/t, with exports being lower.
Group II prices are slightly firmer this week on strong demand. Buyers may be anticipating potential price increases resulting from the imposition of quotas on Group II imports to the European Union. Until now, a 3.7 percent duty has been waived for all Group II imports, but beginning next year, that exemption will only be enjoyed by the first 200,000 t/y to enter the region every six months.
FCA levels are around $745/t-$790/t (675/t-740) for 150 neutral and 220N, and $785/t-$825/t (715/t-750) for 500N and 600N. These values refer to the wide range of all Group II base oils, including oils from European and U.S. sources with full slates of finished lubricant approvals as well as unapproved products from the Middle East Gulf, the Far East and the U.S. Some of the latter are imported in flexi-tanks.
Group III prices continue to weaken in the face of an increasing oversupply and because of the seasonal wane in demand. Inventories are higher than expected, but say they expect demand to pick up after the New Year, based in part on positive developments regarding contractual and term commitments for next year.
Prices for Group III oils with partial slates of approvals are between 650/t-725/t for 4 centiStoke grades and 665/t-740/t for 6 and 8 cSt, basis FCA ex hubs in Northwestern Europe or CIF delivered prices for material in flexies. Prices fully-approved Group IIIs are 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
Baltic activity received a boost after a long-awaited cargo was loaded last week for Nigerian receivers. This cargo was anticipated some time back but is now expected to reach Apapa port in Lagos during last week in December. This 10,000 ton parcel of Russian oils originated from Liepaja, Latvia, before topping-off in Ventspils, Latvia, which is not a common route for base oils. According to sources, prices were particularly keen and fell outside normal ranges.
Some smaller parcels are still anticipated to be loaded during December for the United Kingdom, Scandinavia and Antwerp-Rotterdam-Amsterdam, although there appears to be fewer of these cargoes than before, perhaps due to adequate supplies of Group I grades from mainstream European producers.
Prices are generally unchanged at $465/t-$490/t for SN150 and $470/t-$498/t for SN500. Russian bright stock is indicated around $585/t-$610/t FOB, mainly for quantities in flexi-bags, while bright stock meeting normal specs in bulk ex Gdansk is now at $620/t-$650/t FOB.
The STS facility at Kavkaz, Russia, appears to be bereft of supplies due to the Volga River freezing over and limiting barge traffic into the Black Sea. Russian exports will still be moved to shore facilities using the rail system, which allows for 3,000 ton lots to be moved in one train.
However, feeder vessels will be necessary to supply the STS mother ship, or alternatively this vessel can make the voyage into port to load from shore tank and then return to anchorage. The logistics of this operation are not known or disclosed, but these options appear viable.
STS prices are still around $455/t for SN500 and $435/t for SN150.
Group I offers from Mediterranean sources are being made to Turkish receivers, although buying interest is minimal at this time. In addition to the seasonal slowdown, Turkish trade is thin at least in part because of the weak economy. With local prices remaining relatively high, there have been openings for Group I imports to find their way into the Turkish arena, but offers still outnumber completed deals.
Mediterranean Group I prices remain firm at $559/t for SN150 and $568/t for SN500, basis CIF Gebze, Turkey. SN600 is offered at around $580/t, and bright stock prices have dipped to $685/t, also CIF.
Group II and Group III base oils are offered ex-tank in the main Turkish ports at $745/t-$765/t for Group II grades and $775/t-$810/t for partly-approved Group III oils. There are numerous sources for both types, with some Group II material being imported from the Red Sea and the Far East, whilst Group III is going into Turkey from Middle East Gulf sources. Group II is also being imported in bulk from European production and in both in flexies and bulk from U.S. sources.
Middle East Gulf
Red Sea shipping sources report a large number of substantial base oil cargoes loading out of Yanbual Bahr and Jeddah, Saudi Arabia, between now and the end of the year. Most movements include cargoes into India, Oman, Pakistan and the United Arab Emirates, with presumably large quantities of both Group I and Group II base oils.
In Middle East Gulf circles, Iranian Group I exports have diminished again with no reported traffic moving out of the southern Iranian ports of Bandar-e Emam Khomeyni and Bandar Bushehr. SN500 and SN150 continues to be produced in Iranian refineries, hence it must be assumed that either all of it is being utilized within the domestic market or that some is finding its way through Iraq to Turkey and Syria. FOB or FCA prices for premium Iranian SN500 continue to be indicated by U.A.E. sources at $525/t-$540/t FCA, although no FOB comparisons are currently available.
In addition to Group I base oils being supplied from Red Sea sources, other offers have been heard for material to move from U.S. Gulf Coast supply points for discharge into U.A.E. receivers. Indications for SN500 were heard, although not confirmed, at around $584/t, CIF U.A.E. ports. SN150 is indicated at $576/t and bright stock at $666/t, CIF Hamriyah port, U.A.E.
Prices for partially approved Group III base oils from Al Ruwais, U.A.E., and Sitra, Bahrain, continue to face downward pressure in Europe but FOB prices at origin are unchanged this week at $650/t-$690/t for 4, 6 and 8 cSt. Eight cSt grades bound for India and Far East will contribute less, due to lower local selling prices.
Fully approved Group III base oils marketed by Neste from the Sitra refinery are at $760/t-$855/t for all three grades for shipments delivered into Western markets. Nominal FOB prices on a netback basis are calculated using prices derived from regional selling levels, less marketing, handling and freight costs.
Group II prices in Middle East Gulf regions have stabilized, although sources intimate that large quantities of Group II products have been offered from Saudi Arabia at very competitive prices. FCA values ex U.A.E. hub storage remain unchanged at $745/t-$900/t for 100N, 150N and 220N, while 500N and 600N are at $755/t-$910/t.
The Egyptian General Petroleum Corp. tender has closed, but a number of regular participants declined to participate on this occasion. Some said the tender quantity was too large this time, and there was also uncertainty cited about bright stock availabilities following refinery changes being made as a result of IMO 2020 marine fuels regulations, which take effect Jan. 1.
No further word has been heard regarding the El Mex refinery in Alexandria, so startup may be some way off if such a project is even in the works.
In West Africa, news that a December cargo has been fixed out of the Baltic for Nigeria has perhaps paved the way for another parcel to be loaded out of the U.S. Gulf Coast, but it may not arrive until January. The Baltic cargo has a voyage time of 18 to 21 days, weather and safe navigation permitting, so it should arrive into Apapa around the last week in December.
Another cargo is being assessed for discharge into Cote d'Ivoire and Guinea. Sometimes this delivery is combined with supply in Ghana under a tender arrangement, but on this occasion it appears that the Ghana requirement is being supplied as a partial cargo on a vessel loaded out of the Mediterranean and ultimately sailing onto Durban, South Africa, to deliver Group l, Group II and perhaps Group III base oils.
Information about the Baltic parcel has not yet been gleaned, but prices for Group I oils arriving into Nigerian ports are unchanged this weekat $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.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at firstname.lastname@example.org.