Base oil markets are marking time due to the raft of seasonal holidays affecting Europe, Middle East and Africa. Trade has been exceptionally thin – only cargoes fixed some time ago are being loaded.
Crude oil and feedstock values remain relatively dormant, with many traders missing from their desks. Dated Brent and West Texas Intermediate levels were forecasted by many to stay stable until after the New Years, but trading levels have dipped to around $53 per barrel for WTI, with DB falling to $57.50. ICE gas oil has also dipped by around $30 per metric ton, to $532/t for front month settlement.
Downward pressures are still expected to be dominant in the new year, but with few players interested in selling or buying, prices can be described as flat.
There have been no firm grounds on which to alter last weeks numbers. Next week will possibly show much more activity and movements.
European Group I light solvent neutrals are therefore maintained at $720-$730/t FOB. Heavier neutrals SN 500 and SN 600 are $685-$700/t. The one ongoing anomaly is that light neutrals are trading at a premium to heavier material. Bright stock levels, at $975-$1000/t, are perhaps the most vulnerable to changes next week, with a large differential between this grade and heavy neutrals.
These prices refer to export sales of large parcels of base stocks, made available from producers in mainland Europe and African-Mediterranean supply points.
Domestic sales have almost ceased over the last week and it is prudent to avoid speculation as to what course these levels will take early in the new year. When these local sales levels are mixed in with export prices, the market recognizes that there will be a $15-$50/t premium reflecting extra fixed costs such as storage, handling and delivery.
Group II prices are almost certainly poised to fall again after New Years, yet the actual levels are indistinct, with some imported suppliers managing to hang on to premiums for approvals and worldwide supply capabilities for a recognized range of products. Levels remain at $765-$795/t for the range of light grades, with higher vis material such as 600N at $785-$815/t. Lower prices are maintained for the raft of other grades in the market, at $725-$765/t.
Group III news is that some suppliers have agreed to set new tariffs for the two main grades from Jan. 1, 2015, but with no movements advised yet, levels are 775-795/t for material sold ex tank for both 4 cSt and 6 cSt grades.
Baltic & Black Sea
Baltic FCA offers for Russian export barrels in respect of small quantities of SN 150 are believed to be around $730/t, with FCA offers for SN 500 heard last week at below $675/t. Straight cut SN 900 is still being offered at around $790/t for prompt loading.
Black Sea avails of Russian SN 150 and SN 500 are being made ex Novo, again on an FCA basis, with these supplies mainly being geared to loading in flexibags. Bulk supplies can also be arranged at a premium to the FCA levels which have been assessed at around $730/t in respect of the SN 150 avails, and around $680/t for the SN 500 grade. Turkish buying interest has reached an all-time low this week, with most contacts on vacation.
Middle East
Middle East Gulf reports are scarce this week, with Iranian barrels reported at $658/t basis FOB United Arab Emirates. Imported Group I prices are maintained at $760-$775/t CIF for the range of Group I neutrals. Bright stock offers have been left on the table over the holidays with extended validity, suggesting that this grade may not be as scarce as some would have thought, and that sellers are still keen to move parcels of this product. Numbers preserved in offers last week are $1015-$1035/t CFR/CIF.
Group II sales show no records over the past week, but with planned cargoes awaiting final firm prices for January, numbers may already be trading lower. January levels are expected to plunge by perhaps another $50-$100/t, which would be in line with current realignments being made by source producers in the U.S and Far East.
Price levels are expected to come in around $725-$745/t CIF for the range of all Group II grades.
Africa
West African prices remain unchanged with no announcements this week of any shipping fixtures or cargoes having been firmed up.
Both Group I and Group II prices offered remain estimated to come in at $795-$770/t in respect of light and heavy neutrals, respectively, during early January, along with various qualities of bright stock being touted at $925-$1040/t -all basis CFR/CIF Lagos. Straight-cut SN 900 may be pitched around $895/t CFR/CIF West Africa ports.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Contact him directly atpumacrown@email.com.