EMEA base oil prices, including Group II and Group III sales which are lower than last week, have softened despite attempts to avoid further erosion.
With Dated Brent just under $107 per barrel, the WTI/Dated Brent crack has widened to around $15/barrel this week, perhaps reflecting lower demand for local crude within the United States and highlighting growing seasonal demand within Europe. ICE gas oil has rebounded for front month trade around $903 per metric ton late Tuesday afternoon.
Levels have fallen around $5-$10/t across the board in the Europe, Middle East and Africa markets. Light solvent neutrals are between $940 and $955/t with few offers from mainstream producers. SN 500 is holding up with small adjustments at $965 –$980/t, but with few players advertising large availabilities, rumors are that the market could be moving short. As predicted, prices are anchored.
Bright stock also shows weakness, with one 4,000 ton parcel from the Mediterranean offered between $1085 — $1095/t, some $20/t lower than gauged last week. This, along with other SN 500/600 material, is offered for sale into western Africa. A small supplier of lower spec bright stock in the Baltic regions has offered between 700 and 1000 tons at higher levels, at $1120 — $1130/t, an offer apparently accepted by buyers. However, bright stock remains relatively tight, with large parcels unavailable from the usual suppliers.
These Group I price levels refer to FOB offers and sales from mainstream suppliers in mainland Europe or North Africa where availability allows.
Rumors are that theres been a small surge in activity for local or domestic sales of base oils within northwest Europe and some parts of Eastern Europe. Sellers report a number of blenders have been actively looking to purchase Group I grades, perhaps in the belief that these avails may go short, particularly if large inventory sales are available for December export.
Whilst this cannot be deemed an about-turn, it does show that Group I is required in local markets, and that continued supply is important for many producers of finished lubes within Europe.
The difference between export numbers and sales of Group I delivered by truck and barge has perhaps widened to reflect the small but increased demand at 65 — 85/t.
Baltic and Black Seas
Baltic sales of Russian and Belarus exports have been quiet this week, with many buyers looking to clear inventories. A number of cargoes are also destined for northwest Europe, United Kingdom, and West Africa. There has been some interest from U.S. importers, but FOB prices may not be quite low enough to allow arbitrage.
Levels for SN 150 and SN 500 remain at $895-$910 in respect of the lighter material, with the heavier vis grades around $920-$930/t, all basis FOB Baltic ports. One buyer said theyve almost finalized a deal for Nigeria for a large parcel of some 11,000-13,000 tons of Baltic grades, but shipping sources have not yet confirmed suitable vessels as fixed for this voyage. Other smaller cargoes for the U.K. and Antwerp-Rotterdam-Amsterdam have been confirmed for December loading. It is assumed these parcels will arrive into storage after years end, thus avoiding inventory status problems.
Various quantities of SN 900 grades are available between $945/t for the lowest offer, to smaller parcels (some of which are being prepared for flexi sales) at between $975-$985/t basis FCA.
Black Sea activity has been slack with few enquiries for Russian and Uzbek imports of SN 150 and SN 500 going into Turkey. Apparently a number of Turkish base oil importers have experienced delays in getting import licenses, which has caused problems when trying to purchase parcels of routine material for blending. This crackdown has possibly come about after the flagrant disregard for the rules regarding fuel dilution using light vis base oils, which now has been almost eradicated by government and customs officials.
Large parcels of mainly SN 500, with some SN 150 top offs, bound for west coast India or Middle East Gulf, are still being approved out of Theodosia for loading later this month or December. But with FOB prices around $925-$930/t, and local numbers in the United Arab Emirates for example some $25-$30/t lower on a CIF basis for comparable Iranian material, FOB levels would have to reach as low as $850/t or less for such a cargo to work.
Prices for a SN 150 parcel of around 1,000 tons into Gebze were set at $948 — $955/t with Russian SN 500 in larger quantities offered CIF Turkish ports at similar levels, taking account of freight saving for these larger parcels.
Middle East
North Africa and Middle East regions remain relatively quiet from a base oil supply viewpoint, with trickles of material finding their way into war-torn regions such as Syria through Turkey and Jordan. Small imports have been recorded going into Tunisia and Libya, but activity in the Maghreb is subdued.
Israel producers have small parcels of Group I for sale, but with price ideas rendering these grades uncompetitive anywhere other than locations such as Cyprus, most will remain local sales.
Red Sea trade from Saudi Arabian ports, Yanbu and Jeddah continues for the supplies of Group I solvent neutral grades, particularly SN 500, which continually finds its way into receivers in Oman, U.A.E. and other Gulf Cooperation Council countries. Singapore buyers have also expressed interest in parcels of SN 500 from these sources, but no confirmed business has been completed.
Middle East Gulf trade has been confined to large imports of Group II with Group I maintaining a presence through Saudi imports for quality base oils, and re-exported Iranian SN 500 used and re-sold out of traders in U.A.E. Iranian prices have dipped again, with few India buyers looking for large-scale imports. FOB offer prices are estimated around $910-$925/t equivalent, but as with mentioned last week, these grades may have to fall further to generate buying interest in India and East Africa.
Africa
West African receivers are procuring large rafts of material from mainland Europe, the Baltic and U.S. Some buyers have already committed to purchases of Baltic grades, and others are looking at a swathe of material loading out of the Mediterranean for Tema, in Ghana, and balance cargoes ending up in Nigeria. Cumulative reports are that as much as 56,000 tons of base oils could arrive into West Africa during December and early January. This will not only replenish stock and inventory levels but may suggest that demand for Group I material is lifted.
Landed prices for base stocks into Nigeria come from a variety of sources, but most prices will gravitate to almost universally accepted levels.
Group I solvent neutrals, mainly SN 500/600, will sell between $1025 and $1040/t, with SN 900 from the Baltic landing at $1070-$1085/t. Bright stock out of Mediterranean and northwest Europe should sell at $1155 — $1175/t, with some of the lower quality U.S. bright stock accompanied by quantities of heavy neutrals between $1055 and $1095/t, all basis either CFR or CIF Nigerian discharge ports.
Group II/III
European Group II marketers and distributors are looking for any angle such as original equipment manufacturer (OEM) approvals, blending and storage savings and competitive pricing to promote products into Europe. Some blenders have acknowledged the future and are anticipating buying increasing quantities of Group I grades during next year. Some said they will not be able to access light vis Group I products in the near future, and that the alternative Group II grades are a positive move both from handling and blending their ranges of finished lubricants, but also that these grades will give added value to their production.
Prices for the Group II grades being mainly imported into the European market are between $1045 and $1065/t for the light grades such as 150N and 220N with the higher viscosity material 500N and 600N grades between $1095 and $1155/t. These grades are available from storage terminals outside Antwerp-Rotterdam-Amsterdam, and a constantly improving distribution network will assist sales of these grades within Europe.
Similarly, Middle East Gulf Group II use appears to be increasing, with at least two large shipments from Korea destined for U.A.E. during December. With large scale selling and a great deal of new production coming on stream during the first half of 2014, oversupply concerns exist.
Prices are softening, with a few players commenting they can achieve their target levels for December without too much negotiation. Levels are between $1020 and $1035/t for the range of light vis grades with heavier material between $1110 and $1135/t. All prices are basis CIF Middle East Gulf main ports.
European Group III continues to come under pressure, but the huge oversupply situation has not developed into a critical scenario as once feared. Quoted prices this week are slightly lower. Many players confirm that 4 cSt levels are around 910/t for the majority of sales, with 6 cSt sold around 920/t on basis of ex-tank sales in Antwerp-Rotterdam-Amsterdam.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.
