The European base oil market has all but vanished this week, with exceptionally sluggish buying, accompanied by absentee sellers who appear to have gone on holiday for the duration of August.
Suppliers have mostly stated that they are not interested in giving out offers which do not reflect the current market, and which will probably not be accepted by the few buyers who are interested in supplies of base oil at this time. Put this scenario together with the price increases in first 10 days of August, and suppliers are happy to retain stocks until the market moves positively after the holiday season is over.
With Dated Brent crude trading at a recent high of just over $114 per barrel, up some $3 from last week, the pressure is on base oil to respond. ICE gas oil stands at a high of $957.50 per metric ton for September front month trading. Feedstock values have been hiked for base oil production, and although it can take some time for refiners to advise adjusted monthly costs to base oil marketers, suppliers will to try to push numbers higher over the next few weeks should crude and other petroleum products either remain at current levels or increase further.
With a clear and marked emphasis on the relatively little business taking place this week, API Group l base oil prices remained relatively stable, with no new impetus for prices to increase. Although a few offers have been recorded this week, light solvent neutral remain at $965 to $1025/t, with grades such as SN 500 at $975 to $1040/t, and bright stock completing the picture at $1050-1085/t.
All the above prices are based on FOB sales of cargo sized parcels moving out of the mainstream supply points in North West Europe, the Mediterranean and North Africa.
Local prices for truck, rail and barge deliveries of base oils within mainland Europe are holding steady in a very quiet marketplace. Prices remain at 120 above cargo sales, but once again gauging what is happening, or what has happened to these prices with almost zero trade is not representative of the actual market.
Baltics and Black Sea
The Baltic regions have also been quiet with claims that there is no material to sell, and that replenishments will not be coming until the end of August. Some buyers are suggesting that sellers are storing material until the market rises before making offers to supply. Others suggest that with sellers and buyers out of the office, there is little point in canvassing an empty market with unrealistic offers which may have to be adjusted upwards within weeks, if not days.
Prices remain the same as last week, with only one major supply being confirmed towards the end of last week. FOB prices were $965 to $980/t for SN 150 and SN 500 and $1010 for SN 900, suggesting both the reticence of buyers to pay higher numbers, and the efforts of suppliers to lift prices to more acceptable levels.
Suppliers within the Baltics have suggested that future pricing for standard grades will not fall below $1000/t for SN 150 and SN 500 when new offers are released towards the end of the month.
Black Sea suppliers have completed a number of smaller transactions with Turkish buyers for SN 150 and SN 500. A 3,000 ton shipment of SN 500 was delivered CIF to Gebze at $975/t, with other slightly smaller cargoes accepted at similar levels. Sellers have offered $990 to $1020/t, but buyers have negotiated what are termed intermediate cargoes by the suppliers. This term seems to apply to business, which the suppliers want to complete, but have closed at lower levels than targeted.
Middle East
The Middle East Gulf also appears to have gone into seasonal hibernation from the hot summer period and the Ramadan due to end this week. Those who were contacted commented on offers from Far East which were flooding the market, but with no apparent buying interest. This activity covers sales of Group l and ll base oils, which are showing long in their own markets, causing some suppliers to cut production, such as closing one Group ll unit for a month.
Prices for Iranian supplies into UAE are stable at $1045 to $1075/t.
Group ll offers for light vis products in the UAE have been as low as $980/t basis CIF/CFR, but these have not been substantiated by either sellers or buyers.
With Iranian supply not really figuring in UAE or the southern areas of the Middle East Gulf, the market may be undergoing some fundamental changes in supply patterns. The slack at the moment can be taken up by Far East supply, but should China once again begin buying a great deal more base oil, it becomes difficult to see how Middle East Gulf markets will function. A new plant at Abu Dhabi will contribute more Group ll and lll avails into the region, and there may be a move to eradicate Group l reliability altogether.
Africa
East Africa is showing a moderate interest in small quantities of European and Far East material, but with no large scale cargo movements, delivered prices are difficult to assimilate. Prices of $1250 to $1300/t have been reported for Group l neutrals into Mombasa, with bright stock in flexies landing at $1375/t
South Africa news that a major base oil refinery will be closing for turnaround during October may shorten up the availability of material throughout the region. Given that demand for finished lubricants throughout South Africa increases in spring, there may improve opportunities for importers.
Prices are still appealing to external traders, with Group l neutrals selling at $1250 to $1305/t, and bright stock going for around $1375/t. These refer to local prices delivered by truck.
West Africa and Nigeria in particular have gone very quiet. Receivers in Nigeria, who bought at the bottom of the market, appear pleased that base oil has rebounded slightly, taking advantage to replenish their inventories. With no new prices being talked about this week, arriving cargoes are $980 to $1025/t for Group l neutrals. Bright stock is landing CFR at $1125/t. These levels will certainly change within the next round of purchasing, with landed numbers increasing by up to $100 /t.
Group II and III
The Group ll market has gone into limbo following the announced Aug. 1 decreases and then firming after higher feedstock costs. There have been reports that one major importer may experience supply problems after a major fire at production facilities in the United States.
Other importers may be able to cover this eventuality with product being long in the Far East, so the picture for Group ll with the European mainland remains positive.
Prices have not moved this week amidst low market activity, and are reported at the same levels as last week, which are up to $1030/t for the light vis grades. Heavier vis material is coming through at $1045 to $1110/t, all basis ex tank North West Europe and Mediterranean storage locations.
Group lll prices are under the cosh, with levels falling due to low demand. Suppliers are quick to defend the situation, stating that the influx of new Group ll grades has not made any difference to the overall off take of these grades. Demand is accused here, and with falling demand the amount of material available has grown, and prices may have started to falter.
A number of suppliers, importers and local producers have started to chip way at prices by 10 to 25/t to appease buyers, who say prices were overinflated anyway, and the adjustments now taking place were long overdue, and will bring these grades into line with Group l and Group ll base oils.
Prices are now 1150 to 1165/t for 4 cSt grades and 6 cSt material between 1195 to 1210/t, all ex tank.
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.