Group III activity remains strong in all markets, with a number of large cargoes moving from European and Middle East Gulf production hubs, reflecting increasing demand for these products. Supply remains relatively tight, with no reports of unused capacity. One aspect that has changed over the past few days is that crude and petroleum product prices are heading south, and analysts predict they will weaken through the winter months.

Dated deliveries of Brent crude fell from recent highs to $81.05 per barrel, some $3.50 lower than last reported, still for January front month settlement. West Texas Intermediate dropped back below $80 to $79.75/bbl.

ICE low-sulfur gas oil has decreased markedly by around $40 per metric ton $685/t, not for December settlement. These prices were obtained from London ICE trading late Monday.

Europe

Prices for Group I exports from Europe have fallen again, according to buyers although sellers maintain that they have not and that they reflect run-ups in crude and feedstock costs that peaked in early November. Of course purchasers contend that feedstock values are now falling and that base oil offers should follow suit.

Prices for solvent neutral 150 have dipped by $20-$25 per ton since the previous report and are now between $785/t and $825/t, reflecting growing availability. SN500 also weakened slightly $1,075/t-$1,120/t. Bright stock dipped to $1,295/t-$1,355/t on slowing demand and more than adequate stocks.

Group I sales within Europe are also showing lower numbers for the second half of November. Sellers appear keen to move large quantities of Group I base oils into this sector before the end of November, probably because it is anticipated that December will be a very slow month as blenders and stockists push to lower inventories for year-end accounting.

Since prices for exports and intra-regional sales declined at the same pace, the differential between the two remains at €75/t–€125/t, exports being lower.

European Group II prices have dipped the past couple of weeks. Some players said this was inevitable given that the market had peaked during the summer. Supply and demand for these grades appears balanced. Values are now at $1,365/t-$1,395/t (€1,175/t–€1,220/t) for 100 neutral, 150N and 220N, while 600N is at $1,720/t-$1,795/t (€1,475/t–€1,520/t).

These prices apply to a range of Group II base oils, including products from Europe and the United States with full slates of finished lubricant approvals and small volumes of imports from the Middle East Gulf.

Group III markets continue in a positive vein with demand even for this late part of the year showing plus signs throughout Europe. There are a number of replenishment cargoes being planned from supply points in the European mainland and also from Middle East Gulf and Asia-Pacific. These parcels will ensure continuous supply ingress to the main European hubs with more and more blending operations dependent on Group III grades to achieve latest finished product formulations.

Prices, however, are described as stable to firm. Six and 8 centiStoke grades with partial slates of approvals or no approvals are at €1,770/t–€1,795/t, while 4 cSt is at €1,750/t–€1,780/t, all on an FCA basis ex Antwerp-Rotterdam-Amsterdam hubs. Group III oils with full slates of European OEM approvals are pitched higher at €1,785/t–€1,820/t for 4 cSt and €1,800/t–€1,830/t for 6 and 8 cSt.

Baltic and Black Seas

Baltic regional reports suggest that Russian export base oils may have firmed a little on the back of higher feedstock costs at producing refineries. These increments have not detracted from the keen prices associated with this region over the past few months. Arbitrages opportunities remain open with cargoes being planned for delivery into destinations such as Israel and the U.S. Gulf.

Baltic prices still maintain a differential between European mainstream levels and with reasonable availabilities the Baltic remains an attractive source for many export destinations,

Closer to home, short sea-trade cargoes have been nominated into Antwerp-Rotterdam-Amsterdam and the east coast of the United Kingdom.

The inquiry for the two port load out of Hamburg and Gdansk for 10,000 tons of various base oils remains at an inquiry stage. This may be an example, as suggested in the last report, where a heavy naphthenic grade may be substituted for a more traditional heavy API Group I base oil.

Baltic fob levels are nudged slightly higher with prices in respect of SN150 estimated at $875-$895 per metric ton with the heavier grade SN500 offered at $995-$1,040/t. Quantities of SN900 are to be priced around $1,075/t.

Black Sea trades and cargoes moving into Turkey are again missing off the radar with few instances of materials moving from Italy and Greece into the local Turkish market. From local sources there are reports that the refinery at Izmir continues to supply local blenders with Group I material in local currency.

Mediterranean offers are still indicated with CIF prices for SN150 at around $885/t and quantities of SN500 and 600 at around $1,125/t. These levels have returned downwards after briefly increasing at the end of October.

A cargo of around 2,000 tons loaded from a Red Sea source for discharge into Gebze, Turkey. The size of this cargo would imply an import of Group II base oils which will be sold on an ex-tank basis to Turkish blenders. Prices for imported Group II grades that are resold on this basis are assessed at €1,400-€1,445/t for the three lower vis products with higher vis 600N at €1,755-€1,795/t. These prices were discounted on the basis of slightly lower fob Group II levels.

Group III base oils resold on the same basis ex-tank in Gebze, Turkey, now have FCA levels estimated at €1,750-€1,775/t for partly approved grades, with fully approved Group III grades at €1,775-€1,795/t.

Middle East

Red Sea activity shows large cargoes once again primed for delivery into the west coast of India, Pakistan and United Arab Emirates. These cargoes at 12,000 tons-18,000 tons continue to be loaded from both Yanbu and Jeddah ports.

The Middle East Gulf reports a large cargo loaded with almost 13,000 tons of a single base oil grade moving out of an Iranian port to Hazira in the west coast of India. Local sources commented that this cargo is comprised of a large quantity of SN500+ from Sepahan refinery. This is the largest parcel which has been moved out of Iran for some considerable time with U.A.E. sources commenting that further cargoes may be expected.

Group III activity in Middle East Gulf regarding exports from the three regular sources – Al Ruwais in U.A.E., Sitra Bahrain and Ras Laffan in Qatar – appears to be reaching a year end peak, with one cargo of 35,000 tons exported from Qatar into a relatively local hub in the U.A.E. Potential quantities of up to 40,000 tons were identified in four or five shipping movements out of Al Ruwais. Destinations include northwestern Europe, India and mainland China.

Notional netbacks for Group III base oils exported from Al Ruwais and Sitra are tweaked higher due to higher resale prices in various international markets. This move takes account of higher feedstock costs, and netback levels are assessed at $1,895-$1,940/t for 4 centiStoke, 6 cSt and 8 cSt partly-approved Group III base oils. These Nexbase-branded grades will be handled by Chevron, following the takeover of Neste’s base oil production in the next few months. The grades will netback higher at $1,925-$1,975/t for the full range of products.

Notional netback levels are based on prices derived and informally assessed from regional selling levels, less marketing, handling and estimated freight costs.

Group II imports into Middle East Gulf that are resold on an FCA and delivered basis have prices assessed at $1,545-$1,655/t for light vis grades, with heavier 500N and 600N at $1,835-$1,855/t.

Africa

African trades show a small cargo moving from Antwerp-Rotterdam-Amsterdam to Mohammedia in Morocco. This being the first cargo identified for some time moving from northwestern Europe may reflect the inclusion of Group II base oils in the blending slate.

In West Africa, apart from the cargo being considered from Gdansk and Hamburg, there are now confirmed reports of 6,000 tons of three grades of Group I base oils loaded from Singapore for discharge into Apapa. Thereafter the balance is discharged into Antwerp-Rotterdam-Amsterdam. It is not clear the quantity delivered into either destination. This parcel was originally considered ex Singapore on a direct basis to West Africa, while at the same time a second cargo of same 6,000 tons was flagged up to load Singapore and discharge Antwerp-Rotterdam-Amsterdam. It is not apparent whether these two parcels were in part combined.

Nigeria appears to be moving once again, with a number of offers made by regular traders and suppliers going into this region. CFR/ CIF prices for Group I base oils discharged into Lagos are maintained.

Levels remain at indications of $1,050/t for the small quantities of SN150. Larger quantities of SN500 are indicated at $1,150/t, with SN900 priced at around $1,200/t.

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

Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.

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