European Group I levels are continually softening, with sellers trying to hold current levels in offers from a number of suppliers around mainland Europe. Buyers, however, are countering almost all offers, having seen petroleum products markets dropping in value. The lighter grades, particularly SN 150, are down $10-$15/t from last week to between $960/t and $975/t, with some offers for composite parcels of two grades or more at prices at least $5/t lower. SN 500 has dropped to $970-$980/t, with some suppliers again willing to offer special, one-off discounts depending on quantity and prompt loading. Bright stock remains relatively steady, but some slight negatives on pricing are creeping in to take this grade perhaps some $10/t lower than last reported, to $1168-$1185/t.

These FOB prices refer to bulk cargoes for export ex mainstream production within Europe and North Africa where availabilities allow.

Local European prices have also come under pressure from buyers looking to mark down levels to whats considered acceptable in a weakening market. Some buyers say they are holding back as long as possible before replenishing stocks, since they believe that the market has to adjust further. Some suppliers are maintaining that prices have already moved with weakening crude and feedstock adjustments, and that offers are fair. Since much of domestic business is based on contracted volumes, prices are expected to be brought into line around Oct.1.

Blenders within the EU have expressed wishes to continue evaluating Group I and Group II with some opting to move to Group II particularly for the lighter vis grades. In some cases this has meant carrying increased numbers of grades within stocks, but the advantages are clear, that in a market where Group II grades are becoming available at only a small premium to Group II, the weighted consideration may be for more blending operations to utilize Group II.

Local prices are carrying a premium of 65-85/t over export levels. The differential between the two is now narrowing as traditional Group I suppliers consider realigning numbers for both export and domestic sales to maintain and stimulate offtake of these grades.

Perhaps for the first time within Europe, Group I sellers are under pressure from the rapidly increasing availability of Group II. This is due to several factors, not least of which is the narrowing of prices between these two base oil types, which may not have been intentional, but has certainly promoted Group II to the fore.

With Group II source producers both in the Far East and the U.S. fighting to place their products in a constricted market where production levels are soaring and availability is forecast to outstrip demand sometime during 2016, many are prepared to buy a share of the available market by discounting both approved and non-approved base oils.

Group II prices within Europe have shown a weaker trend, although the rate of change appears to be slower for Group II than that for Group I export prices. Group II prices appear to be more akin to domestic or local base oil changes. Levels for the light vis grade range are $1045-$1060/t along with heavier viscosity grades at $1065-$1110/t. All prices are based on ex tank sales throughout Antwerp-Rotterdam-Amsterdam-Germany.

Group III base oils internationally seem to have come under price pressure from almost all quarters. With abundance of all grades and struggling demand throughout the main user economies, the European scene is no different from the rest of the world. Buyers have acknowledged that most suppliers have granted various price incentives and may be looking to adjust basic prices w.e.f. Oct. 1. Prices have been adjusted to take account of the latest perceived changes with 4 cSt and 6 cSt grades now 935-955/t ex-rack.

Baltic and Black Seas

Baltic availabilities appear to be more forthcoming, with a number of sellers offering a range of grades, including some from Uzbekistan. Bids have been invited for 3,000 tons of an SN 500 variation, which is close to a Fergana I-50A spec. Prices have ranged from $910/t to $928/t basis FOB. Prices for Russian and Belarus base oils are still high compared to mainstream production, particularly after additional freight costs. FOB Russian SN 150 and SN 500 are around $955/t and $960/t, respectively, although there are some unconfirmed prices around $10/t lower.

One trader confirmed the sale of a parcel of SN 900 at around $1013/t basis FOB along with a quantity of SN 500.

Cross Black Sea trade has been slow due to restrictions, although Turkish buyers have completed a number of trades from Mediterranean sources. Base oils from Italy, Greece and Spain have all been offered into Turkey which appears to have a relatively large demand for all types of base oils and indeed, finished lubricants. This is perhaps a function of the needs of the surrounding communities in Iraq, Syria and Kurdistan, where traditional supply lines and routes have been displaced due to war and insurrection in those regions.

A 3,000 ton cargo of SN 150 has been offered ex Batumi at around $925/t basis FOB, but buying interest has been minimal for this lesser quality material, with receivers preferring to pay higher levels for more suitable Group I.

Middle East

Reports from Middle East Gulf regions confirm supplies of Group I grades loading out of Yanbu in Saudi Arabia for discharge in Oman and United Arab Emirates. Prices for these Group I neutrals are considered to follow Mediterranean levels, and are estimated to be landing at $1030-$1035/t CIF. There are also reports on Iranian avails dipping to $985-$990/t in respect of SN 500. SN 150 is also quoted as being available, although in smaller quantities. Iranian producers have confirmed that supplies of base oils are being made cross-border into Iraq, possibly taking up the slack from production missing from the Baiji, Iraq, refinery which has been down since ISIL control in June.

Bright stock is being sourced from different areas, with offers from Europe, which have so far been declined by receivers in U.A.E. as being too high. Offers of around $1235/t CIF/CFR were reported earlier this week, with counters around $1185/t. Buyers are looking at offers loading ex U.S. and also at some Far East options.

Group II prices into Middle East Gulf regions have been reported as exceptionally keen, with one cargo of U.S. material reportedly offered at $985/t in respect of both light 100N and also 600N on the basis of CIF Sharjah port. This level has not been corroborated, and is being denied by other receivers in the region who confirmed low offers of around $1035/t.

Receivers who have been taking Group II supplies from Far East sources have accepted offers for October cargoes at around $1040-$1050/t for the full range of Group II grades, with one parcel close to 8,000 tons loading from South Korea for discharge into Hamriya port in Dubai.

Africa

South African buyers have commented on the new influx of Group II avails which have been able to compete with existing Group I produced locally. Prices are attractive to importers, and with a number now looking to participate in this business, South Africa could be set for a lubricants revolution. Prices are deemed to be $1145-$1190/t in respect of the full viscosity range of Group II products.

West Africa reports are thin this week, perhaps with the Baltic trade having been being off-limits due to uncompetitive FOB prices. Two cargoes out of Europe in the past weeks -one is from northwestern Europe, the other ex Mediterranean, both a combination of Group I grades, including bright stock. SN 900 is in demand by a number of receivers in Nigeria, but with little support material either available or priced attractively, this grade may be difficult to move.

Prices for Group I base oils landed into West Africa ports have not changed yet in offers this week, although with weaker numbers filtering through to FOB levels, these may start to alter over the next weeks. Levels remain $1025-$1045/t for the range of light neutrals, with the heavier cuts SN 500/600 at $1035-$1045/t, basis CFR Apapa port, Nigeria. Bright stock is maintained around $1188/t, basis CFR Apapa. These prices are expected to move slowly downward over the coming days and weeks, reflecting lower FOB numbers which are inevitable.

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.