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October 25, 2017

Volume 17 Issue 52

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EMEA Base Oil Price Report

Base oil prices in European, Middle Eastern and African markets appear to have flattened out, although some prices are being tugged in both directions within the ranges in this report. There are perhaps a greater number of intra-company movements this week, with a number of majors supporting markets around the globe by bridging stocks of API Group I and Group II base oils to meet local demand where stores of these grades may be depleted or are missing due to recent severe weather and current turnarounds.

Crude oil levels are maintained almost at identical values as posted one week ago, with dated deliveries of Brent crude at $57.40 per barrel in late Tuesday trade, for the December front month. West Texas Intermediate crude is trading around $52 per barrel, also for December, thus narrowing the crack to just over $5 per barrel. Given the relatively large number of geopolitical events circulating around the world, there has been a surprisingly small effect on crude prices over the last few weeks.

ICE LS Gas Oil this week trades at around $523 per metric ton, for November settlement, but the small changes and gas oil trading in a relatively narrow range perhaps indicate some form of stability in the markets.

Europe

European Group I export prices in respect of FOB sales and offers are again maintained this week, and in the same ranges as previously reported. Prices for light solvent neutrals remain between $695/t-$725/t with the heavier neutrals SN500/600 between $765/t-$790/t. Bright stock appears to have relinquished some of its demand, as deep-sea markets such as West Africa start to show signs of slowing down. Levels are maintained between $835/t-$865/t in FOB offers. The prices above refer to large cargo size parcels of Group I base oils supplied or offered FOB ex mainland European supply points.

Local or domestic trade for Group I base stocks within the European arena is also relatively calm, with sellers content with the contracted volumes being delivered to blending operations throughout Europe. Northwestern European, United Kingdom and Scandinavian markets are brisk, and demand for Group I base oils still extremely positive. Prices remain steady with a couple of small discounting actions applying to the heavier neutrals, which may start to lengthen over the next couple of months as the deep-sea markets start to retreat.

The established differential for domestic FCA prices over spot export levels is unchanged at €55/t-€75/t.

Group II news suggests that few supply problems have been encountered within the European regions regarding availabilities. Importers appear to have successfully dealt with all potential shortages for these supplies. Prices are reported as stable, although some buyers are murmuring that heavier vis grades should be trimmed in price. It is interesting that none of these comments were to be heard when there could have been any suggestion of supply allocations.

Prices remain unaltered for the lighter grades at $660/t-$685/t, and 500N and 600N now between $770/t-$810/t. These prices refer to large bulk cargoes landed CIF into Antwerp-Rotterdam-Amsterdam. FCA prices reflecting marketing costs and extra handling and storage are assessed at around €755/t-€790/t for the range of light-vis base oils, with the heavier grades slightly lower this week between €845/t-€880/t.

Group III prices within Europe can be described as steady but not stable, and a number of negative factors could ultimately affect these grades. There are rumors that Russian Group III has been offered into buyers in Eastern Europe. The initial information was that this output would almost totally be utilized within Russian markets, because European sales were described as less than cost effective to produce satisfactory margins for these oils. Something may have changed, although in light of current events it is difficult to figure why the European market would interest new entrants, especially those lacking European OEM approvals.

It would appear that full OEM approval status continues be extremely beneficial to incumbent suppliers, some of whom commented that without these approvals, fully integrated sales of Group III base oils to major users within Europe may be months, if not years away.

Prices are held unchanged this week to lie between $775/t-$810/t CIF northwestern Europe for both 4 centiStoke and 6 cSt grades. Local euro sales are now between €685/t-€705/t FCA northwestern Europe. Fully approved grades sold FCA Antwerp-Rotterdam-Amsterdam are between €780/t-€815/t for 4 cSt and 6 cSt material, with 8 cSt material at around €755/t-€775/t. These prices refer to local truck pick-up or delivered quantities of Group III base stocks, and do not include deliveries to majors and distributors in large bulk cargoes, which may be $75 to $100 less per ton.

Baltic and Black Sea

Baltic action is missing this week with few new enquiries and offers emanating from that region. There are reports of a couple of smaller parcels being looked at for delivery into Antwerp-Rotterdam-Amsterdam, but with no reported large West Africa enquiries, the scene is placid. It is known that a couple of Nigerian enquiries are in the pipeline, but with receivers still encountering monetary and exchange control problems, these deals may take some time to come to fruition. A Turkish enquiry for 4,000 tons of base oils moving from Baltic is still being kicked around.

Prices remain as quoted previously with Russian export barrels maintained between $695/t-$725/t FOB in respect of SN150, and SN500 between $765/t-$780/t. Supplies of SN900 in bulk are assessed between $865/t-$880/t, with bright stock from the southern Baltic and also from some Russian producers priced between $895/t-$945/t, depending on spec and quality.

Black Sea sources report prices for Russian export SN500 at around $785/t-$805/t delivered CIF into Turkish or Bulgarian ports, but this week sees another incidence of large parcels being assembled on STS basis out of Kavkaz, Russia, for Rotterdam and also for Middle East Gulf. One 5,000 ton cargo is being primed for United Arab Emirates receivers, whilst around 8,000 tons of Russian export base oils will load for bridging into Rotterdam and thence in larger cargo lots to South American receivers. Prices for these large parcels are difficult to pin down, but may be much lower than standard Black Sea trade.

There are a number of the usual contract Mediterranean cargoes including two possible Greek supplies into Derince and Izmit. Prices are assessed at around $750/t-$775/t for SN150 and around $795/t-$825/t for SN600, CIF. Cargoes of Group III base oils ex Cartagena are maintained by local sources in Marmara to be between $785/t-$800/t delivered CIF Gebze, Turkey. That’s for the 4 cSt and 6 cSt; no information is available for the 8 cSt grade.

Middle East Gulf

From the dynamic new export region – the only way now to describe the Middle East Gulf – base oils of all types other than Group II continue to flow around the globe. Iranian exports are moving to the west coast of India and U.A.E. with SN500+ being loaded out of B.B. FOB levels are as last reported with SN500+ around $755/t-$765/t, basis FOB.

However, as noted above, cargoes of Russian export grades SN500 and SN900 still are being considered for import into U.A.E. receivers in spite of the availability of Iranian SN500+. Prices of these cargoes are expected to be particularly keen, to compete with local supplies.

Group III exports remain very much to the fore with a couple of large 6,000 and 12,000 ton parcels moving into Mumbai anchorage from Al Ruwais. These grades are reportedly being employed in transformer oils (TO), due to more competitive prices and easier avails giving Group III base stocks preference over more traditional Group II. This could be a lifeline for new Group III production since TO demand is forecast to grow with rates above 7 percent per annum. And with a great deal of TO production being based in India and U.A.E., having “local” supplies of base oils which can be converted into TOs may be a real advantage.

Prices are left unchanged with notional FOB levels netted back using CIF/CFR prices, which suggest FOB numbers around $675/t-$695/t for 4 cSt and 6 cSt grades loading out of Al Ruwais. Grades marketed by Neste ex Sitra, Bahrain, may achieve higher levels due to holding global OEM approvals; the 4 cSt and 6 cSt are estimated at around $745/t and 8 cSt material around $725/t-$735/t. These notional FOB levels refer to material which has been delivered on a CIF basis in large cargoes and parcels to major buyers or appointed distributors.

The ICIS Middle East Base Oils Conference in Dubai two weeks ago heard that December or perhaps January may see delivery of Group II grades from Luberef’s upgraded Yanbu facility. With imported base stocks from Far East being assessed at around $640/t-$655/t for the light-vis cuts, and $835/t-$860/t for 500N, CIF Middle East Gulf ports, these levels are expected to ease as the new production hits the markets, particularly the high-vis 500N and 600N.

Group II from Far East and U.S. sources is available out of storage in U.A.E. on an FCA or delivered basis. Estimates are around $785/t-$845/t in respect of 100N/150N and 220N cuts, with 500N/600N between $855/t-$925/t, delivered Middle East Gulf locations and varying by quantity and distance from primary storage.

Africa

Northwestern Europe and Mediterranean sourced Group I cargoes going into North African ports are sparse this week, with industry suggesting that most of this market’s requirements have been covered until December, when buyers will be looking for any yearend sales from suppliers wishing to decrease inventories.

West Africa and Nigeria in particular are quiet this week, although one or two smaller cargoes are still being worked for multiple receivers, which may now be delivered during December. Some of these enquiries originated around June, and have taken longer than envisaged to complete. Although base oil levels have not varied greatly over that period, validities and prices had to be re-offered and re-stated time and time again, to where some suppliers opted to walk away from this type of business as unsustainable.

Current offered prices from Baltic sources have Russian export barrels delivered into Nigeria at CIF/CFR levels confirmed at $860/t-$875/t for quantities of SN150, with SN500 at $895/t. Russian SN900 in bulk is now revised upwards to between $990/t-$999/t, with bright stock remaining between $1025/t-$1055/t. Prices reported are for Group I base oils delivered CIF/CFR Apapa, Lagos or Port Harcourt.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly at pumacrown@email.com.