Although feedstock levels may be steadying, sentiment of the masses seems to be that it will take considerable time for base oil levels to reassert to pricing of nine months ago.

Dated Brent was hovering just below the $59 per barrel mark, with West Texas Intermediate at $49.20 per barrel. Some forecast crude recovering to $70-$80 per barrel, but nowhere near $100 per barrel. ICE gas oil is marginally lower than last week, at $560 per metric ton.

This could bring an extended period of price stability to EMEA base oil markets, which most of the industry would welcome. The rapid changes over the past few months have done little to strengthen relationships, and have put strains on supply avails in addition to creating a very confusing picture on pricing.

Most European mainstream API Group I prices are noted at the same levels as published last week in the absence of any meaningful activity taking place across the markets, but with the guarded comment that changes are happening due to shortages in the Baltic and Black Sea regions, which could prove to be a pivotal point for base oil numbers.

Light solvent neutrals through SN 70 to SN 150 remain at $525-$540/t, with medium to heavy vis grades, up to SN 600, between $520/t and $545/t.

Bright stock, known by some players to be the savior of Group I, due to increasing demand, was $15-$25/t higher than previously noted, at $645-$675/t in offers.

The prices above refer to large parcels of Group I export barrels being sold and offered ex mainstream production facilities in Europe and North Africa, subject to availability.

European mainlands local markets appear to be relatively unfazed by the spike in crude prices, with most buyers and sellers prepared to leave price changes out of the equation at this moment.

Perhaps buyers are wary of possible price rises due to the recent upward crude moves, whilst sellers may be trying to avoid further price erosion. By the same token, reports from last week’s meetings still reflected a market lacking underlying demand, with weak pockets around the regions.

Prices for domestic sales of Group I base stocks around mainland Europe are 45-70/t higher than FOB levels which would apply to exports. This differential is expanding due to the weakening exchange rate of the euro against the dollar.

The Group II base oil market is still disseminating the news announced last week by ExxonMobil that it will commence a 1 million ton per year Group II production facility at their existing fuels refinery in Rotterdam by 2018. This may vastly change Europes Group II market, since it will be the first major plant within Europe to produce this type of base oil, averting the need for importing material from the Far East and the U.S.

However, the firmer Group II levels reported last week appear to have stuck, with prices for the light vis grades being $575-$595/t, along with heavier 500N and 600N between $605/t and $640/t.

Group III trade seems to be buoyant, with healthy demand for 4 cSt and 6 cSt and few upward or downward price pressures. Levels are 855-885/t on the basis of ex tank sales ex satellite storage in northwestern Europe and the Mediterranean.

Baltic and Black Sea

The Baltic market for Russian and Belarus exports is once again making news, and may again be the spark to ignite the market. There are many enquiries, both large and small, that are being declined by sellers due to lack of avails.

There are reports of some small quantities of SN 150 being available, but with prices yet to be confirmed. Limited avails of SN 500 are being offered at prices much higher than last week’s levels, at around $665/t FOB. This level is more than $150/t higher than one week ago. Suddenly there appears to be a hole in the market, and one way to fill it may be with higher prices.

Other grades prices are being held back at the moment, but with few avails for March, prices become irrelevant.

Sanctions against Russia could impinge further on supplies of all Russian exports. Black Sea trade faces a similar problem when it comes to Russian exports, although there are suggestions that a large parcel of SN 500 and SN 900 may become available for loading around end of March or early April at a non-specified anchorage. Apparently this material is already purchased and will be supplied under current rules. Prices for this parcel are undisclosed, with levels discussed last week out of validity and subsequently withdrawn.

Sellers are aware that the Russian situation may restrict supply, creating some upward pressure on prices.Levels are $575-$590/t in respect of SN 150 and SN 500, but these levels may not be repeated for cargoes loading now due to higher FOB prices.

Middle East

Middle East base oil trade has altered enormously since Syria and Iraq problems came to the fore. Suffice to say that base oils are still finding their way into these markets, but getting a handle on supply dynamics and logistics is so difficult that pricing does not even figure.

With the new Group II operations for Luberef at Yanbu coming in May, the market will have another source. Group I production will continue at both Yanbu and Jeddah, will additional capacity for grades such as bright stock being created at the Jeddah refinery.

Group I prices throughout the Gulf Cooperation Council have stood up against the tide of price decreases which have hit almost every other market globally, and have remained relatively higher. Levels for Group I have firmed slightly, with demand increasing and SN 150 and SN 500 now $625-$645/t in respect of Iranian material ex United Arab Emirates. Imports from the U.S. are on the cards again for U.A.E. receivers, with a large parcel being assembled ex U.S. Gulf Coast loading at the end of February. This is comprised of Group I neutrals coupled with bright stock, which is priced at around $745/t basis CFR U.A.E.

The prospect of Russian products making way into the Middle East Gulf appears to be subsiding by the day, due to scant avails and potentially rising prices. The last offer made was for SN 500 and SN 900 at levels of $595/t and $695/t, respectively.

Middle East Gulf Group II offers for March and April supply are coming in higher than previously advised since suppliers appear to be taking the crude and feedstock rises as a signal that levels can be increased. Receivers in the Middle East Gulf have thought otherwise, and have rejected offers which include higher prices than offered during January.

Buyers are adamant that there is little or no scope for increasing prices with the availabilities of Group II running at such high levels. A number of receivers commented that they had options between Far East and U.S Group II base stocks and they were contemplating playing one against the other. Whether this short term plan will be effective or not remains unclear, since both U.S. and Far East sources are pitching $15-$20/t higher levels basis CFR.

Prices offered over the last ten days have been $655/t for the light vis products with the heavier grades at $675-$695/t basis CFR U.A.E. ports.

Most grades of Group I and Group II base oils are being offered for sale in small parcels on an ex tank basis within Middle East Gulf regions, with a $60-$75/t premium added to CFR numbers.

Africa

South African reports are of small parcels of SN 500 being imported through Durban at around $635/t CIF, but with the cessation of Russian avails for this type of supply, other alternatives may become necessary for future supplies. Offers in respect of excellent quality European rerefined SN 150 base oil into South Africa have been recorded. Prices heard were around $510/t CIF Durban for material delivered in flexies in containers.

West African receivers are looking for further supplies to bolster inventories after the possibility of price increases raised its head over the past few weeks. With the problems of avails in Baltic regions, receivers are looking at alternatives such as Black Sea, U.S., and also making enquiries to Brazilians. Some have commented that they may have missed the lowest point of the market, but are convinced that now is the right time to buy.

Delivered prices in offers this week appear to be moving upward, urging buyers to move quickly to secure supplies from either European or U.S sources. Levels for SN 150 and SN 500 are now confirmed in offers this week at $645-$665/t. Bright stock has been noted in one offer at $758/t CFR Apapa.

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