EMEA Base Oil Price Report

As Covid-19 has brought Europe and much of the Middle East to a virtual standstill, the only region which appears to be affected less is sub-Saharan Africa, where the pathogen does not appear to be taking such a pronounced hold.

Elsewhere, medically and economically, the regions are in lockdown with no end in sight to the pandemic. There are signs from China that the disease’s spread may be slowing, but in the western parts of the globe the worst is possibly yet to come, with thousands of people being infected with the virus amid a rising death toll.

Buyers are missing from everyday business and many producers have gone into emergency working practices to avert and avoid potential problems with their supply chain.

Apart from the immediate effects of the pandemic, the longer term recovery of markets and systems is also in doubt. The supply of material will have to be re-assessed in terms of transportation, commercial arrangements and working practices, all of which will undergo significant changes. In other words, the marketplace as it was known will be no longer, and may be replaced with another model which all players involved will have to adopt.

Crude oil prices have been hammered again during the past week with levels falling to new recent lows, with dated deliveries of Brent crude currently being recorded at $25.65 per barrel in respect of May front month. West Texas Intermediate crude has crashed to $22.20/bbl, now also for May front month settlement. These two levels for the two marker crudes are lower by some $6-$8 per barrel from last week’s postings.

ICE LS Gas Oil prices have also plummeted to a level of $290 per metric ton, in April front month settlement, although at one point during the last few days this product was seen at a low of $268/t, the lowest level for many years. These prices were obtained from London ICE trading late Monday.

The virus cannot be blamed in its entirety for the crude oil collapse, although global demand has been wrecked by the slowdown in industry in major economies, since the two major producers Saudi Arabia and Russia are still locked in a bitter supply battle, cutting prices to establish market share.

Prices have been maintained throughout, with no evidence of change due to a lack of contact with sources whose input is invaluable to the content of this missive. With many players working or residing at home, normal commercial activity is at an all-time low.

Europe

European Group I export prices are retained as per last with solvent neutral 150 listed between $425/t-$540/t with SN500 at $425/t-$550/t. Bright stock is maintained as last week’s level and remains assessed at $505/t-$625/t. The wide ranges are necessary since literally one or two suppliers are still retaining prices which were set at the beginning of the month, when numbers were at the high ends of the spreads.

These levels refer to cargo-sized parcels of at least 2,000 tons, sold on an FOB basis from European supply points, always subject to availability.

European regional Group I prices are also determined as flat with many blenders shutting down operations or adopting lower production rates of finished lubricants due to demand collapsing. The news that major car manufacturers within Europe and elsewhere have closed down plants will have the effect of cutting the requirements for factory fills, which forms a significant part of the European automotive lubricants market.

Buyers are simply missing from the scene due to restrictive lockdowns in various countries such as France, Italy, Germany and Spain, while the United Kingdom government officials are considering decisions to curtail further movement of people and unnecessary goods.

The price differential between domestic prices and those applying to exports is not reported due to there being no practical market on which to base local prices.

Demand for Group II base stocks has weakened further over the past week with sellers struggling to find buyers willing to accept contracted supplies since they have no requirement for these grades at this time. Many outlets are closed, and with few supplies it has been difficult to locate sources to confirm any movements of material.

The same wide ranging assessments are maintained in view of a lack of fresh evidence of pricing moves at $525/t-$695/t ( €480/t-€635/t) for the two lighter viscosity grades (150N and 220N), with higher viscosity grades (500N and 600N) at $575/t-$685/t (€545/t-€630/t).

These prices apply to Group II oils with full slates of finished lubricant approvals as well as those with partial slates or no approvals.

Group III trade is practically non-existent with very little business being transacted. Prices are retained as per last week’s levels with partly approved Group III base oils at €645/t-€695/t for 4 centiStoke grades, with 6 cSt and 8 cSt base oils at €660/t-€695/t. Prices refer to FCA supplies ex northwestern European hubs.

Prices for European OEM fully approved Group III base oils are assessed at €695/t-€745/t for 4 centiStoke base oils, with 6 cSt grades at €725/t-€765/t and 8 cSt oils at €730/t-€775/t.

Baltic and Black Sea

Baltic traders are still moving cargoes to Antwerp-Rotterdam-Amsterdam and the U.K., but many operations elected to close offices and work where possible from residences. Shipping enquiries remain for large parcels to be moved to West Africa. These may now have to wait until supplies are available in quantity, which is not a certainty at this particular time. One major cargo of 15,000 tons loaded last week for receivers in Apapa, Nigeria, with another two parcels still actively negotiated for the same destination.

It was confirmed that the long running enquiry for Angola was covered and has loaded out of Riga for the supply of 84,000 tons of Russian export grades. The two large parcels are programmed to load around the end of March, although some doubt whether the product will be available to meet shipping dates.

Indications are maintained for prices available FOB, with numbers in respect of SN150 at around $490/t-$510/t with SN500 in a similar range. SN150, SN500 and bright stock out of Gdansk are indicated at around $495/t-$525/t in respect of the neutrals, with bright stock between $595/t-$625/t FOB.

In the Black Sea region Kavkaz, Russia, STS supplies were assessed for an April loading, but there may be suggestions that with a slowdown in trade in United Arab Emirates and Singapore, receivers may opt to delay taking supplies from this source. The cargoes of between 15,000 tons and 18,000 tons planned originally for the end of March may be delayed into April. Sellers are said to offer very low numbers, perhaps between $425/t-$440/t in respect of SN500, with smaller quantities of SN150 at around $420/t.  Prices are suggested as indications only.

Russian offers to Turkish buyers for supplies CIF Gebze, Turkey, are said to be competing with local Turkish prices, which had been lowered, with levels heard in Turkish lira at around the equivalent of $430/t in respect of SN500, with SN150 at around $425/t. Like other European markets, Turkish players went into lockdown, with few base oils delivered or collected by buyers from refineries.

Group I grades out of Greece are still offered, but no takers are reported as showing, predictably due to lower demand in the Turkish markets. Indications are suggested in respect of these supplies at around$570/t for quantities of SN150 with SN500 at $590/t basis CIF Derince. SN600 was indicated at the same level, around $590/t.

Group II and Group III grades are available out of tank in the major Turkish ports, but with few buyers interested in increasing inventories at this point in time, few sales have been completed. Local buyers are in lockdown with no end in sight to the problems being caused by the virus spread. Selling levels remain indicated between $695/t-$725/t in respect of the low and high vis Group II grades, with partly-approved Group III base oils between $710/t-$745/t. Buying interest is particularly low.

Middle East

Large cargoes are still loading out of Yanbu and Jeddah moving to India, Pakistan and U.A.E. Red Sea trading appears to be relatively unaffected by the coronavirus at the moment, although it is predicted that supplies will start to wane over the next few weeks as demand dwindles in receiver’s markets in India and U.A.E. The enquiry for Aqaba remains on the table, although options may be taken to delay this cargo.

Supply of a further Kavkaz, Russia, cargo looks likely to be postponed or delayed with receivers in U.A.E. doubtful of requirements due downturn in the local markets. Sellers made an offer, although sources in U.A.E. indicated that they may delay to see how the market evolves. U.A.E. is now experiencing effects from the virus spread, although local business appears to be carrying on as before. Whether this will continue is up for discussion, with many players forecasting that the main centers of Dubai and Abu Dhabi will adopt lockdown procedures similar to that of Europe.

All traffic from U.S. Gulf Group I supplies were taken off the table, with offers either withdrawn by sellers, or turned down by receivers, who indicate that they do not require replenishment stocks of Group I base oil at this time

Reports continue that smaller Iranian vessels are discharging small parcels of SN500 into Hamriyah and Ras al Khaima ports. Prices are not substantiated, but have been heard at around $495/t CFR in respect of SN500.

Group III trade continues to an extent, although the only cargoes moving out of the Middle East Gulf appear to be from Sitra in Bahrain. Parcels for 15,000-18,000 tons are moving to the west coast of and the east coast of India, and also U.A.E.

Exports from Middle East Gulf sources in Al Ruwais and Sitra have notional FOB prices maintained. Within the near future, cargoes for the U.S. and Europe are expected to slow down or completely stop, since these destination markets are closed or closing due to the coronavirus spread.

At the moment levels remain between $630/t-$675/t in respect of the partly-approved range of 4 centiStoke and 6 cSt Group III base oils. Eight cSt grades which are being sold into India and Far East will have slightly lower FOB prices due to discounted selling prices in those regions, although the local prices for 8 cSt material has moved upwards in Far East markets which are still open.

“Nexbase” branded Group III base oils from Sitra, which are marketed by Neste, are also maintained, with notional netbacks between $745/t-$810/t FOB in respect of 4 centiStoke, 6 cSt, and 8 cSt viscosities.

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.

Group II base oils from U.A.E. hub storage have price levels indicated on an FCA basis between $785/t-$920/t in respect of the light vis grades 100N/150N/ 220N with 500N/600N between $810/t-$925/t. Prices are based on FOB numbers from Far East, Red Sea and U.S. Gulf, plus freight, storage and handling, and distributor overheads and margin. Again, this trade is affected by the current virus problems and has slowed, reflecting demand in the local markets.

Africa

Trades completed into North African receivers are possibly the last of completed deals that would have been finalized prior to the imposition of the coronavirus pandemic. Although receivers have honored supply agreements, sources admit that it may be some time before other cargoes are re-ordered. A cargo of some 4,000 tons of Group I grades loaded out of Livorno for an Algerian port, and with this movement, sources acknowledge that there may few cargoes loading during the next few months.

West Africa appears to be least affected at this time by the Covid-19 spread, with Nigerian buyers purchasing the large Baltic cargo and holding open the possibility of another two cargoes from this source in addition to another parcel to be loaded out of Livorno. The quantity for this latter cargo is undetermined, somewhere between 5,000 tons-15,000 tons. It may depend on other West Africa receivers in Cote d’Ivoire and Guinea electing to share the cargo with buyers in Apapa, Nigeria.

A number of issues affect the West Africa markets at this time, the first being concern regarding the ability to fix cargoes out of European sources, and the second being worries about the coronavirus spread into West Africa and the consequences of this happening. The region is no stranger to viral infections, having experienced Ebola spread some years back.

Current prices in respect of API Group I base oils being imported into Nigeria are maintained. Cargoes now sailing to Nigeria and arriving within the next few weeks will have been arranged prior to the oil market collapse. Therefore, there is an assumption that future cargoes will reflect lower FOB prices which may, or may not, be reflected in CFR numbers offered to receivers. Some parties in Nigeria strenuously deny the back trading rumors.

CFR/CIF levels are therefore maintained, with prices indicated between $645/t-$660/t in respect of SN150, SN500 between $650/t-$665/t, and bright stock, where part of the cargo, between $745/t-$760/t. Blended SN900 is indicated between $670/t-$685/t.

Prices are in respect of cargoes of minimum 10,000 tons being delivered into Apapa port, Lagos, Nigeria.