Europe, Baltics and Black Sea base oils export prices fall as pessimism reigns

LONDON (ICIS)–European, Baltics and Black Sea export base oils prices all slid in the week to Tuesday as low demand and lower offers persisted.

Weakness is partly fuelled by uncertainty over unstable feedstock pricing in the wake of dramatic US WTI crude oil crashes and falling Brent prices amid the coronavirus lockdown measures within Europe and in key export destinations.

TRADING THIN, DISCOUNTS CONTINUE
Europe export prices fell as discounted offers continue, with ranges down $40/tonne for SN150, SN500 and brightstock to $440-495/tonne, $485-520/tonne and $530-570/tonne respectively.

These are on a FOB (free on board) Europe Export basis.

SN150 and SN500 are mainly in balanced supply, though longer in some places such as Poland.

Mixed views exist on Brightstock supply, with availability varying from refinery. One view is that it’s the only grade that is longer for supply but on the other hand, there’s the view it has smaller discounts.

Discounts of minus $70/tonne to the low for brightstock were quoted but were an outlier and not included in the range.

Europe export base oils vs VGO, $/tonne

Trading activity is thin – despite refiners and traders getting enquiries as buyers test the water for price levels – since consumers are hesitant to take volumes.

For export markets such as west Africa (WAF), difficulty securing funding is another factor hindering deals.

Demand is muted, with some suggestion that two or three cargoes headed to WAF in April mean that market should be well supplied.

There is also dispute about competition for that market between European, Russian and US exporters.

Bulk purchases are a challenge due to the lack of demand, and flexibags may be a more palatable option for some traders since they can be sold in smaller volumes with less risk.

BALTIC SEA DIPS, SUPPLY TO RISE
Baltic Sea export ranges fell as weaker offers persisted, with good supply for the coming weeks and soft demand.

The mood is either pessimistic or hesitant.

“Everyone complains about weak demand, loaded terminals in the Baltic,” said one seller.

Another trader said they had “never seen [a] week worse [than the] current one” in the base oils market.

Prices for SN150, SN500 and SN900 fell $40/tonne on the low and $30/tonne on the high to $370-450/tonne, $385-465/tonne and $410-490/tonne respectively, on a FOB Baltics basis.

Trading is thin as volatile, rapidly moving upstream markets and uncertainty regarding how long the coronavirus will impact demand are creating a wait-and-see attitude.

Weaker pricing from refiners is evident in some cases, though in other cases prices are cited at similar levels to March which a majority of trading sources said are unworkable.

Russian availability is balanced or on the long side, with tenders from one refiner while Naftan’s Belarus plant is offering more to the market though it may have limited volumes for export in May, possibly due to scheduled maintenance in May-June.

Supply is expected to increase as the country takes on lockdown measures, limiting internal demand.

BLACK SEA WEAK AS DEMAND ‘DEAD’
Black Sea export ranges are assessed down in line with Baltic Sea ranges, amid thin trading, weak demand and low bids.

SN150 and SN500 dropped $40/tonne on the low and $30/tonne on the high to $350-420/tonne and $375-44/tonne FOB Black Sea.

There is some buying interest in Turkey for May, dependent on price levels, with one market player noting offers are not competitive enough because of the slow down in market conditions.

Lockdown measures in key Black Sea export markets such UAE, Greece, India and Turkey are dampening purchasing ability.

Baltic Sea, Black export base oils vs VGO, $/tonne

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Front page picture: A refinery in Russia
Source: Dmitry Beliakov/Shutterstock

Focus article by Vicky Ellis