OVERVIEW
Baltic and Black Sea FOB prices continue to slide as ample supply meets low demand in key markets. This has seen a substantial differential between FOB NWE export and FOB Russian export numbers emerge. There are suggestions this might narrow in the coming weeks if more buyers opt for competitively prices Russian exports, forcing European sellers to re-consider offers.
The buyer/seller standoff continues in the Group I northwest Europe domestic market, with prices range bound and sluggish seasonal demand evident. Group III base oils are achieving higher prices this week, due to limited supply for these grades.
DOMESTIC MARKETS
The northwest European Group I market remains quiet and largely in balance. Producers are comfortably positioned for the time being, but buyers anticipate prices will weaken imminently. This has seen the buyer/seller stalemate continue this week.
Traders say FOB offers are yet to fall, despite mounting expectation among buyers that prices should be lower. Weaker US dollar values have seen some local prices fall despite FOB prices remaining static.
One buyer in northwest Europe talked of a slight easing on its SN150 price in August from one of its suppliers, but conceded this was a minority occurrence and could have been based on exchange rate differentials.
Group III prices are higher this week, with imbalanced supply/demand the main cause. One seller reported a deal for 100 tonnes of 6 cSt at €1,440/tonne FCA for August delivery. The seller reports being subsequently sold out until the end of August with steady offtake from markets like France, the UK, Spain and Germany.
Buyers also talk of higher Group III prices because of the tight supply. One NWE buyer reported spot offers upward of €1,400/tonne FCA for 6 cSt adding that demand for Group III was the most robust in its particular market.
GROUP I EXPORTS
Traders continue to bemoan the lack of opportunity to sell European product east through Suez, due to high FOB prices relative to local levels. Accordingly, some market participants expect a downward price correction going forward. As yet, however, FOB prices remain stable within existing published ranges.
Europe has entered into the holiday season and export activity is thin. Moreover, several major import markets are quiet. For example, Ramadan has seen lower activity in the Middle East and several Asian markets. However, Chinese buying is expected to improve later this month as importers look to secure cargoes for arrival September through to November.
One European producer talked of targeting higher premiums of plus $50/tonne (for SN150 and SN500) and plus $90/tonne (Brightstock) as of September, with demand in South America and west Africa robust. It was yet to confirm these levels in new business.
A Russian producer questioned the current variance between European FOB export prices and FOB Russian prices, which it viewed as unsustainable. Assuming buyers switched to more competitively priced Russian exports, it expected this gap could be narrowed soon by falling European prices.
In Turkey, an importer talked of negotiating 5,000 tonnes of Med origin SN150 at a price around $1,310/tonne CIF, for prompt loading, with freight estimated at $18-19/tonne. This deal is unconfirmed. It also talked of Russian origin product being offered ex-Black Sea at lower prices.
RUSSIA
FOB export prices remain under pressure with further reductions registered this week. Sluggish import demand is evident in Europe, Africa and Latin America, according to sellers.
Traders bemoan the incompatibility of current FOB Baltic levels and Nigerian importers price ideas, which are substantially lower due to current local pricing. Certain traders say FOB export prices would need to be $50/tonne lower than the previously published ranges to be workable into Nigeria. Moreover, the USA remains largely absent for imports at present due to the holiday season.
A trader reported booking a 3,500 tonne combined cargo of high quality Russian SN150 and SN500, at prices within to slightly above previous reported ranges. However, it also booked another combined cargo from a different seller at a price below $1,300/tonne FOB Baltic.
Activity in Turkey, a key market for the Black Sea, is being impacted by Ramadan and will also be affected by the subsequent holiday period at the end of the month. This low Turkish demand has seen Black Sea prices remain under pressure and lower prices are being talked. Traders report buying ideas in Turkey around $1,270/tonne CIF for SN150 and $1,250/tonne CIF for SN500, which would suggest Black Sea FOB prices nearer $1,240/tonne FOB and $1,220/tonne FOB respectively. However, deals at this level are yet to be heard.
Lukoil’s 345,000 tonne/year Nizhny Novogrod and its 480,000 tonne/year Perm units are now expected to go down for 20 days of maintenance work as of early September. While not creating scarcity of product, the shutdowns are likely to bring this region in to a more balanced supply/demand position.
RELATED PRICES
Nymex WTI crude values extended losses on Tuesday after a report indicated slowing manufacturing activity in the US which overshadowed the agreement to raise the self-imposed debt ceiling in the US.
September Brent was trading at $117.46/bbl late on Tuesday, compared to $118.52/bbl last week.
($1 = €0.70)
SHIPPING
FIXTURES:
2,500 tonnes baseoil Augusta / Greece + Cyprus early August $160,000lps (failed)
ENQUIRIES:
2,500 tonnes base oil Algeciras / Alexandria 30 July- 3 August
3,000 tonnes base oil Livorno / Gebze 25-30 July
4,000 tonnes base oil Reni / Lagos August dates
2,000 tonnes base oils Gdansk / Hamburg 10-12 August
7,000-8,000 tonnes lube oils Liepaja / Lagos 14-20 August
6,100 tonnes lubes Augusta / Gemlik + Aliaga + Kocaeli 1-3 August
5,000 tonnes lubes Augusta / Alexandria 29-31 July
2,250 tonnes lubes Augusta / Skaramanga + Larnaca 6-8 August
3,000 tonnes lubes Augusta / Berre 5-7 August
2,500 tonnes lubes Dunkerque / Durban 3-18 August
7,000-8,000 tonnes lubes Liepaja / Lagos 8 August onwards
5,000 tonnes lubes Mohammedia / Port Suakin 1-7 August
This week on ICIS ( www.icis.com):
02/08/2011 13:59 Northwest Europe jet fuel supply unaffected by Lukoil shutdown
02/08/2011 13:32 Asia IX, PX fall on weaker crude futures as Formosa faces shutdowns
02/08/2011 11:18 Crude falls on worries over US weak manufacturing data
