29 January 2013 23:59 [Source: ICIS news]
By Carl Roache
LONDON (ICIS)--European Group I base oil export prices have stagnated this week, ensuring producers’ margins remain under pressure, sources said on Tuesday.
Group I European export prices held steady despite talk of a slight improvement in buying interest.
“There is more buying interest. At least people are asking for product with the intention of buying. I think we have reached the bottom,” said a southwest European producer.
Nonetheless, overall demand remains fragile and buyers are still reluctant to commit to actual trades, after the recent price slump.
Offtake is insufficient to support a universal upward price trend at present.
European solvent neutral (SN) 150 export prices were assessed steady this week at $870-905/tonne (€644-670/tonne) FOB (free on board) Europe, by ICIS.
SN500 and brightstock prices were also assessed stable at $930-955/tonne FOB and $980-1,020/tonne FOB, respectively.
European producers’ margins remain squeezed by firm upstream costs and many producers across Europe are at reduced base oil rates because of this.
European SN150 export prices have not increased since September 2012, and are at levels not seen since June 2010.
This is in stark contrast to today, with Brent crude oil priced over $110/bbl and VGO above $800/tonne FOB.
The spread between VGO and base oil sales prices is seen as an indicator of suppliers’ margins.
The narrow spread evident today and the widespread production cuts, illustrate the pressure on producers’ margins.
As such, producers are keen to see much higher base oil values accepted, but market demand remains uncertain.
“There is still lots of resistance from the buyers to accept higher prices,” said a European trader.
European export prices lack a clear direction and have held steady for a second consecutive week.
“I do not see it going much lower, but I do not see it going up either,” said a European buyer/trader.
“It is waiting for a bit of direction.”
A different trader said: “It is pretty quiet. I see some more buyers, but that is it. It is tough out there.”
($1 = €0.74)
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