Dated Brent has not moved much, retracting around $1 per barrel to trade just below $107. The differential of West Texas Intermediate and Dated Brent has widened to around $4.5 per barrel. Vacuum gas oil prices remain buoyant on both sides of the Atlantic, reinforcing the need for base oil prices to line up with other petroleum products. ICE gas oil is only slightly down from last weeks highs at $910 per metric ton at close of Tuesday trading in London.

European API Group I base oils prices are weak but not available enough for prompt barrels. Many sellers indicate they cant load until second half August or September.

FOB prices are stagnant with reluctant sellers offering to equally reluctant buyers. Light solvent neutral grades are between $945-$965/t, with heavier neutrals around $965-$980/t. Bright stock prices of $1060-$1075/t remain firm due to buying interest from western Africa for August loading.

There are a number of enquiries for a 2,000 ton parcel from Rotterdam to Mohammedia, and two cargoes out of Livorno, Italy-one 5,800 tons going into Turkey and another 2,750 tons loading for Alexandria. A parcel of 3,000 tons destined for Hull, U.K. is also being worked out of Rotterdam. Another 2,000 ton quantity is loading out of Algeria for the United Arab Emirates – an unusual movement (more details to follow).

The prices documented above relate to FOB offers and sales ex mainstream European mainland and northern Africa supply points.

Prices for material delivered within Europe to local blenders and manufacturers of finished lubes are stable, possibly due to plant closures for holiday maintenance and repair. Those continuing to work during August reported September demand perhaps building.

The differential of prices to export cargoes remains 60-80/t reflecting servicing costs such as extra storage, handling and truck or barge delivery.

Baltic & Black Seas
A couple of large parcels will ship from Baltic to western Africa, probably Nigeria, loading during first half August. One will have options to load in northwestern Europe or Atlantic ports to top off prior to discharge in Lagos. FOB levels for SN 150 and SN 500 are still $940-$950/t, with large quantities of SN 900 around $975-$990/t.

Distributors are bracing themselves for August 1, when increase and in export duty of possibly $25/t will be imposed on Russian exports out of the Baltic and Black Sea.

Black Sea business has witnessed a great deal of enquiries which in most cases only amount to window shopping. One 5,000 ton parcel is being considered from Livorno into Derince, Turkey, loading first week of August, along with a 2,000 ton cargo of Uzbek material from Batumi, Georgia, into Marmara, Turkey. Other notable movements are 5,000 tons out of Theodosia being worked to Hamriyah in U.A.E. and a 3,000 ton parcel loading for Somalia out of an unnamed Black Sea loadport.

Turkish buyers say they will probably return to purchasing base oils after Ramadan but many still have high inventories and are not inclined to re-stock too soon due to interest costs and the exchange rates for the Turkish lira against the dollar.

Prices for both Russian exports and Uzbek material from Fergana remain subdued, at $935-$940/t for Russian SN 150 and SN 500 and around $915-$925/t for Uzbek I-20A, all CIF Turkey.

Middle East
Red Sea activity dropped to almost zero over the past few weeks perhaps due to Ramadan, but a number of cargoes are being lined up. One composed of 10,000 tons is being considered for delivery into Sharjah, while one 3,000 ton cargo and another 1,500 ton cargo are being moved to Singapore. A total of 3,000 tons for two receivers in Mumbai will be loaded after the end of holy month, getting business in Saudi Arabia back to normal.

Other near Middle East activity has been light. Social problems in Egypt are causing doubts as to whether imports of base oil will continue, considering funding for national imports was already under pressure.

Ramadan has also affected Middle East Gulf trade, but a number of cargoes moving in and out of U.A.E. in the next few weeks seem to signify business getting back to normal. U.A.E. is true to form, acting both as exporter and importer of large quantities of base oil.

Exports to Port Kelang, Bangladesh, and Mumbai are also all being planned. With Iranian SN 500 reaching new lows of $840-$855/t basis FOB Iranian ports, opportunities to move Group I are exposed. Blenders in UAE requiring higher spec base oils for certain formulations must import material from locations such as Jeddah and Algeria.

Africa
South African base oil business has been steady according to comments from local blenders who are still looking for acceptable low-priced SN 500 to substitute for the Iranian barrels supplied in flexies from U.A.E.

Offers of Uzbek base oils have been largely unsuccessful even with prices some $100/t lower than U.A.E. material. Offers at $1045/t for SN 150 equivalent have not been taken. Instead, importers are looking for the more difficult SN 500 equivalent.

Prices for local supplies within South Africa have stabilized, with Group I solvent neutrals at $1125-$1180/t delivered and bright stock sold ex truck at $1300-$1330/t.

August may see some large parcels arriving into Nigeria. A mixed grade cargo of 10,000 tons is being planned loading continent, with another parcel of some 5,000-6,000 tons coming out of the same area. A cargo of 5,000-8,000 tons is due for loading out of the Mediterranean, and with Baltic cargoes on top, August/September could see around 40,000 tons of Group I base oils flowing into western Africa regions.

Prices have not changed much although Nigerian importers claim to have negotiated down to levels which are hardly credible: Between $985-$998/t for solvent neutrals and $1075-$1100/t for bright stock.

Realistically imports are between $1025-$1050/t for light and heavy neutrals with bright stock selling at $1125-$1140/t. Reports that SN 900 has been offered into Apapa at $1015/t are difficult to comprehend, but in light of previously landed prices at $1008/t, this may be indeed be possible. All prices are on basis of CFR Nigerian ports.

Group II & Group III
Group II European trade has been thin this week with no announcements of price alterations after U.S. producers increased numbers by the equivalent of some $75/t. These increases are expected to filter through to exported volumes within the next month. Some players have commented that price levels for Group II grades within Europe have already been positioned to take account of these increments, but others believe that prices will rise in dollar and euro terms within the next month or so.

Some say that Group I prices are not connected to Group II values and that each base oil type is going to have to stand alone in the market. This could put further pressure on Group I refiners to consider converting some or all of Group l production to Group II.

Group II prices within Europe remain unaltered from last week, with light vis at $1055-$1100/t and heavier vis at $1130-$1215/t, all on the basis of sales ex tank.

In a similar manner to the Group I trade in the Middle East Gulf regions there have been few reports of any new imports into this area, with prices stable in line with last weeks reported levels, these being $1045-$1095/t for 150N and 220N and between $1135-$1185/t for 500N and 600N.

European Group III suppliers are trying the maintain prices despite increasing supplies. Some reports indicate large discounts offered for contracted volume sales, ensuring that users of these grades are committed to take quantities on an on-going basis. These reports have not been substantiated by sellers, who maintain that Group III is an excellent value for blenders.

The main European grades 4 cSt and 6 cSt remain 905-920/t ex tank.

Middle East Gulf Group III exports to west coast of India appear to be increasing, with another 4,000 ton cargo loading from Sitra in Bahrain.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.