EMEA Base Oil Price Report
EMEA Base Oil Price Report
BY RAY MASSON • MAY 25, 2016
Base oils across Europe, the Middle East and Africa have been gradually climbing as they continue to catch up with the past weeks’ crude and feedstock price hikes.
Dated deliveries of Brent crude levels currently stand at around $48.40 per barrel, with West Texas Intermediate crude at $48.20 per bbl. ICE L.S. Gas Oil trades around $440 per metric ton in June front month settlement, basically marking time around a similar level as last week.
There are no reported shortages of API Group I grades around Europe this week with prices in respect of the range of light solvent neutrals moving ahead $5/t-$10/t to $510/t-$525/t FOB, whilst the heavier neutrals appear to be more in demand for export deals and as such have sharpened up by $10/t-$20/t to $565/t-$580/t.
Bright stock prices are now $955/t-$975/t, but also show signs of firming this week. There are more than adequate supplies around Europe, but sellers have said that due to higher operating and feedstock costs, they need to push selling levels higher.
Prices above are in respect of large cargo-sized parcels of Group I grades supplied or offered on an FOB basis ex mainland European supply points.
Local or domestic sales of Group I base oils saw prices adjusted from May 1, but now prices are moving upwards prior to month-end, signaling that a number of suppliers and distributors are pushing ex tank levels higher, citing higher prices for incoming replacement stocks. Other suppliers have announced that prices will be raised on June 1 for material delivered or ex tank sales after that date. The worry that the local markets may have experienced shortages as a result of refinery closures does not appear to be a concern for most, with some blenders opting to remain with Group I supplies, from Baltic sellers, for example, with others electing to move to using Group II grades as replacement. In most cases this has been carefully planned over the last few months, ever since announcements of refinery closures were intimated.
The current differential in prices for local ex tank sales over export levels is maintained at €60/t-€75/t.
In the Group II camp, prices are under almost continual pressure from increases being applied at source, notably by producers in the U.S., but also Far East suppliers who import and distribute material within Europe. Although each of the producers’ increments can not really be indentified in local European price rises, the overall effect is in line with those changes.
Prices for the light vis grades 70 neutral through 220N moved again by $15/t-$20/t, to $575/t-$595/t. Heavier vis 500N and 600N grades are $695/t-$750/t. Premiums of €50/t-€120/t may be applied when material is redelivered to secondary storage or sold on a delivered basis.
Buyers confirmed announcements last week of Group III grades moving €15/t-€25/t upwards, and some players said they expect that levels will continue to rise over the next few months should crude numbers be maintained. Some buyers and blenders are worried about their ability to pass on incremental costs to finished lubricant prices, although some said they will move finished lube prices on June 1.
Large major purchasers may not yet have felt the effects of increasing prices since they may not have taken delivery of large parcels of Group III base stocks over the past couple of weeks, but certainly prices will eventually move to these receivers as well as to the smaller ex tank buyers. Prices are €885/t-€895/t in respect of 4 centiStoke and 6 cSt grades, with 8 cSt material around €845/t on basis of sales ex-tank Antwerp-Rotterdam-Amsterdam.
Baltic and Black Sea
Russian exports from the Baltic continue to form an increasingly larger part of Group I grades arriving into Antwerp-Rotterdam-Amsterdam and the United Kingdom. A number of traders are also looking at options to ship material from the Baltic region to Far East destinations where the arbitrage appears to be open to take large slugs of solvent neutral 500 and SN900. Only one cargo has been fixed for Nigeria this week, perhaps showing that some traders are accepting the risks of open-account business into West Africa or that Nigerian receivers have found a way around the foreign currency impasse.
Prices in respect of FOB sales of the grades SN150 and SN500 have moved upwards this week in response to crude and mainstream base oil movements within Europe. Levels are now $495/t-$520/t and $525/t-$545/t for these two grades, respectively. It should be noted that whilst the high end of the spread for SN150 has moved upwards, the lower-end prices remain the same as per last report. SN900 in substantial quantities is indicated between $695/t and $745/t basis FOB, this spread and differential in prices from low to high is very much dependent on quality and quantity being offered.
In the Black Sea, another round of parcels is reportedly being sourced ex Greece for June arrival into Gebze, Turkey, with prices for SN150 and SN500 around $575/t-$625/t. Kavkaz, Russia, avails for Russian exports are still around with quantities of SN500 being priced at around $520/t FOB. The resultant delivered prices will be $555/t-$575/t depending on parcel size and quantity loaded.
Traders are looking at moving Russian export grades out of the Black Sea to the Far East, since like Baltic grades, the arbitrage is open for this trade at this time due to scarce avails of Group I heavy neutrals in Far East markets. CIF prices being indicated are estimated to be around $595/t in respect of SN500, with SN900 at around $785/t. These keen numbers are presumably due to low freight costs in respect of large quantities between 5,000 and 6,000 tons of each grade.
Red Sea trading has confirmed that a cargo out of northwestern Europe has loaded for receivers in Aqaba in Jordan. Prices in respect of this cargo are not yet available nor are the respective quantities of each grade, although it is confirmed that Group I products are involved. The parcel is expected to comprise of SN150, SN500 and bright stock.
Middle East Gulf
In Middle East Gulf regions, Iranian SN500 is back to the forefront with a number of cargoes being assembled and offered to receivers in the United Arab Emirates, the west coast of India, Pakistan and China. Availability of large quantities of SN500 is confirmed ex Bandar-e Emam Khomeyni (BIK) and Bandar Bushehr with smaller quantities of around 4,000 tons ex Bander Abbas. FOB prices continue to move forwards with offers for delivered quantities netting back to around $525/t FOB. Offers for basic Iranian SN500 into China or Singapore are quoted at $575/t CIF. Offers for the premium SN500 grade are on the table at $590/t.
The cargo ex U.S. Gulf Coast identified last week has opted for discharge into the west coast of India and will not come into the United Arab Emirates as could have been expected. This parcel is around 4,000 tons of bright stock which will be shared between three receivers.
There have been a few smaller Group II transactions out of storage in the U.A.E. to buyers in other parts of the Middle East Gulf, but there is little buying activity from principals in Qatar, Bahrain or Kuwait.
Abu Dhabi Oil Refining Co.’s Al Ruwais refinery reportedly started production of 120,000 tons per year of Group II grades, but information is still being sought as to how these products will be marketed. It’s possible that it may all be for internal use at a new 100,000 t/y blending plant at Khalifa Industrial Zone, scheduled to open by 2022 with capacity set to double in the future.
Prices for Group II grades contained increased levels with indications for the range of lower vis grades between $585/t and $610/t, with the heavier 500N and 600N material between $725/t and $755/t basis CIF/CFR. Sales of smaller parcels by sea and also by truck have been heard at $45/t-$70/t higher than the bulk import prices referred to above.
On the African continent, East African receivers have confirmed arrival of a number of containers of Iranian grades which have been loaded into flexies in the U.A.E. and resold to blenders in Kenya and Tanzania.
Further information on this cargo is being sought about the South Africa import of 4,000 tons loaded out of the U.K. last week.
Cross-Mediterranean supplies of Group I base oils between various ports in Spain and Italy, and deliveries into North Africa, make up the bulk of this “local” trade. Prices remain as they were last week, with SN150 and SN500 between $575/t and $620/t and bright stock at $1000/t-$1025/t CIF.
In West Africa, normality rules in markets such as Ghana, Coted’Ivoire, Guinea and Senegal, but Nigeria is still in the midst of the problems caused by lack of access to foreign currency. Aside from the base oil scene, there are associated problems regarding the importation of fuels into Nigeria, coupled now with crude production problems which will only exacerbate the lack of hard foreign currency in the form of U.S. dollars.
There are rumors of cross-border trade using base oils, which have been discharged into Benin and are now being delivered to Nigerian receivers. How this trade is actually performed is rather cloudy, with only relatively small quantities of base stocks being made available ex limited storage in Benin.
On a brighter note, Baltic reports are that one large parcel of around 11,000 tons has loaded and is primed for discharge into Apapa, Nigeria, during June. A further cargo presumed to be on behalf of a major is being considered ex Mediterranean for delivery next month.
Whilst prices have risen over the last few weeks, they are largely notional and are only seen contained in offers which are almost continually being withdrawn and re-indicated.
Both Baltic and other mainstream European supplies are indicated at the same levels as reported last week, since with no new imports, new price levels will only surface after shipping is confirmed and parcels are completed as fixed and firm cargoes.
Meanwhile, levels are maintained between $575/t and $655/t for the range of solvent neutrals, with SN900 ex Baltic pitched at around $815/t CIF/CFR. Bright stock is indicated around $1065/t-$1080/t CFR.
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.