Some receivers are looking to South America for interim relief, but FOB prices have moved upwards, making export sales extremely difficult. With Russian prices escalating due to duty increases and short supply, not even Baltic exports are an option.

Producers who have cut runs to a minimum express no intention of increasing production, especially of Group I, and opt instead to focus on higher-contribution products such as diesel fuels.

Crude has seen the highest levels for some months with Dated Brent upping to over $114 per barrel. This follows gas attacks in Syria last week and protests in Libya, which drive exports down to lows only seen during the Libyan uprising. ICE gas oil front month futures are trading around $963 per metric ton, up some $21/t.

Group I producers in Europe declared that base oil prices will rise commensurate with hikes in crude and other petroleum products, providing the platform for future sales. A take it or leave it scene is evolving for selling whatever is available in tank. Some sellers are making what might be construed as completely off-the-chart offers, but which may be the new reality as crude rises. Citing buyer loyalty and commitment, some are content to sell at lower levels.

Light solvent neutral grades are now pitched between $985-$1030/t whilst heavier grades such as SN 500/600 moved to $1020-$1065/t. Bright stock has also responded to price pressures, climbing to new highs of $1110-$1175/t.

This refers to offered prices heard this week from some, but not all sellers.

FOB prices refer to offers and current sales of base oils supplied ex mainstream sources within Europe and northern Africa, per availability and sellers willingness. There are cases where sellers are prepared to retain material in tank, looking for prices to rise before committing. Some are now asking for confirmation of acceptance within hours rather than days.

European local price moves appear to be lagging behind those applied to export cargo-sized parcels, with many suppliers stating they will apply increments September 1. Some sellers have notified blenders that prices will increase by some 50-85/t next month, with no promises of deliveries other than contracted volumes prior to September 1. Buyers who have been postponing topping up until after the summer may well pay for the delay.

Baltic & Black Seas
Baltic sales of Russian and Belarus base oils have been sporadic. Some distributors have tried to beat the still-unconfirmed Russian export duty increase. Levels are rumored to rise for all petroleum exports by some 5.5 percent w.e.f. September. Buyers and traders all talk about increase but apparently refineries havent received communication from government sources. Notices of duty change are normally posted by the 20^th.

Traders with material in tank have been closely watching European mainstream prices, and are matching offers for SN150, SN 500 and SN 900. Some offers have been posted between $1015-$1040/t for the two main grades, and around $1075/t for SN 900, of which large qualities are in short supply.

Black Sea reports base oils offered out of Turkey, where net imports are the norm. There may be material in tank which could have been designated for uses other than blendstock, hence some traders, having seen prices moving upwards, may be keen to move these supplies out from storage at a margin.

Generally, Russian prices for SN 150 and SN 500 have risen due to increasing supply costs and not because of demand, which remains relatively low. Levels are now over $1000/t basis CIF Turkish ports, with Uzbek SN 150 creeping closer at $970-$980/t CIF. The increases have kept Turkish buyers out of the market, whilst some Turkish blenders may be tempted to look at Group II, which is becoming more available while remaining competitive against Group I.

Middle East
With the situation in Syria impinging on Lebanon and Jordan, and with ongoing civil unrest in Egypt, there is little to report on base oils in this region. With normal trade increasingly difficult, even the sporadic blending activity for finished lubes is threatened.

Red Sea avails are offered for import into Far East where the arbitrage remains open with relatively short Group I supply. Prices are moving upwards in line with Europe, with solvent neutrals loaded FOB between $1015-$1045/t, and bright stock around $1155/t.

Middle East Gulf sources indicate that Iranian exports have receded to almost zero, and any material sold FOB basis is below $800/t equivalent, so low that producers would rather put the material back into the cracker than sell.