Europe

Prices throughout Europe for exports of API Group I base stocks remain firm although some players report that spot trading diminished the past couple weeks, with some traders and receivers outside the region declining to accept increased offered prices. The supply-demand balance has not changed radically, but a few traders confirmed that greater availability appears to be showing through from producers and resellers looking to move stocks out of inventory.

Offers for light and heavy solvent neutrals appear to have risen by $10/t to $20/t, but there was no word of deals being completed at those levels. Light neutrals are being offered between $765/t and $785/t, while heavier grades are at $835/t-$860/t.

Bright stock has remained relatively stable, with some suggesting that suppliers of this grade may face downward pricing pressure for large export sales due to competition from alternative sources. The U.S. Gulf Coast, for example, has an open arbitrage at the moment for exports to markets such as West Africa, the Middle East Gulf and India. In Europe, bright stocks are being pitched at $925/t-$965/t, with final levels fluctuating depending on the volumes of other grades contained in shipments.

The levels above pertain to large, cargo-sized parcels of Group I offered or sold on an FOB basis from mainland European supply points.

Prices for sales within Europe rose from Feb. 1, but some increases are now being questioned by buyers postulating that values have moved too high and do not reflect current supply-demand balances, nor the increased costs for feedstocks. Some buyers are calling for price reviews during February to take account of any weakness in the market. Availabilities certainly are not an issue at this time. Sellers say they are merely passing on increases imposed by refiners.

With FCA sales within Europe and spot export levels both rising this week, the differential between the two (export prices are lower) widened to 80/t-95/t.

European importers of Group II sometimes encounter difficulty passing on markups from producers in source markets, but the upward pressure seems especially acute after two rounds of significant hikes in source markets. Those increases could total more than 100/t, and although European values have risen, they still lag behind markups in source markets. Regional factors, such as differences between Group I rates, can also have an effect.

FCA prices available from Group II distributors are up this week to 885/t-9010/t for light-viscosity oils and 955/t-985/t for heavier grades.

Group III oils are also on a generally upward trend. European imported prices remain at $880/t-$910/t on a CIF basis for 4 centiStoke and 6 cSt oils landed into northwestern Europe, but local FCA sales have risen from Feb. 1, with account of increments being applied to future CIF deliveries of Group III base oils. Four and 6 cSt oils without full slates of finished lubricant approvals are now 845/t-860/t, FCA northwestern Europe. Grades with full slates of approvals, FCA Antwerp-Rotterdam-Amsterdam, are at 880/t-895/t for 4 and 6 cSt grades and 855/t-870/t for 8 cSt.

The latter prices refer to FCA or truck-delivered quantities of Group III base oils sold to local blenders and do not apply to material delivered in bulk cargoes to large users of these grades such as major blenders or additive manufacturers.

Baltic and Black Seas

Shipments to the United Kingdom and Antwerp-Rotterdam-Amsterdam continue to take pride of place from the Baltic, with more than 10,000 tons being loaded in the past week for these short sea routes. FOB prices appear to have risen again the past few days, but buyers reactions will determine how far they can escalate. A couple offers are on the table for material to move to West Africa, and negotiations are under way for oil to be delivered into U.K. ports.

SN150 is assessed at $750/t-$765/t and SN500 at $795/t-$825/t. SN900 appears to be available in bulk quantities at $860/t-$875/t, FOB, while bright stock from southern Baltic sources remains $895/t-$945/t, depending on quantity.

Market sources report Russian suppliers shipping SN150 and SN500 from Azov to Turkish receivers in Gebze, Turkey. There were also unconfirmed reports of Turkish buyers moving to trade with foreign suppliers in local currencies, including euros. This seems plausible, since the Turkish lira has risen in value relative to U.S. dollars. Another small cargo has been fixed STS from Kavkaz, Russia, for buyers in the eastern Mediterranean.

Greek sources have supplied a number of cargoes into western Turkey ports such as Derince and Gebze. Prices for Mediterranean-sourced Group I are being delivered at $825/t-$840/t for light neutrals, while SN600 has risen to $890/t-$915/t, basis CIF. Buyers in Turkey are reportedly seeking discounts for future sales of Group I imports.

Middle East Gulf

Its interesting to observe base oil trading patterns in the Middle East Gulf, which see Group I base oils moving into and out of the region. Asked why local blenders would choose material exported from the Black Sea over Iranian oils, sources said prices appear nearly even but that buyers worry that economic sanctions could be re-imposed against Iran.

However, Group I Iranian material is still available and is moving to United Arab Emirates and the west coast of India, although the latter has established a major supply chain between Indian receivers and suppliers trading out of U.S. Gulf ports.

Quantities of Iranian Group I SN500 are available, with current prices having moved upwards again to $840/t-$855/t FOB in respect of the SN500+ grade.

To reinforce the requirements for higher-quality Group I base oils moving into Middle East Gulf receivers, Saudi Arabian suppliers are looking at moving material from Yanbu and/or Jeddah into U.A.E. during February. This is in addition to a contracted 4,000-5,000 tons of Group I from the Mediterranean into Jebel Ali.

A 20,000-ton cargo of Group III base oils has been identified as moving out of Al Ruwais into the west coast of India, which is only one of many others moving out of Qatar and Bahrain. Large cargoes are also moving along the coast from Al Ruwais into Sharjah port, in addition to another cargo moving to northwestern Europe.

Netback levels for Group III grades are considered to have moved upwards again in light of declarations of landed prices into various destinations. These levels have been aggregated to establish nominal FOB levels. Material ex Al Ruwais is now $835/t-$850/t FOB in respect of the 4 centiStoke and 6 cSt grades.

Bapco material ex Sitra is estimated on a similar basis, given comparative production costs and freight – although in the case of larger shipments from Al Ruwais, lower freight will bolster FOB prices. Fully-approved material from Sitra will netback at higher levels, with indications between $875/t and $895/t basis FOB.

The market still awaits news from Saudi Arabian producers regarding the start-up of Group II production from Yanbu refinery. Availability of the new production of Group II base oils will have far-reaching effects on the use and availability of Group II base oils throughout the Middle East Gulf.

Prices for other Group II out of the Far East and U.S. have been amended in current offers to around $765/t in respect of 100N and 150N, with 500N and 600N between $875/t and $890/t CIF Middle East Gulf. Prices for local sales in U.A.E. for Group II base oils on FCA or delivered basis are also assessed higher, with numbers moving up to $875/t-$895/t in respect of the grades 100N/150N/ 220N, and 500N/600N remaining between $995/t and $1040/t.

Africa

South African receivers have reported another parcel of some 7,000 tons of base oils loaded out of mainland European ports to be discharged into Durban around mid March.

The supply scene into West Africa appears to have radically changed at this time, with only one identified cargo of Group I coming out of Europe. The anomaly in the proceedings appears to be that Group I material ex mainland Europe is being lined up for discharge into U.S. Gulf ports, along with other European supplies to Central and South America. Traders said they are unable to obtain the ideal grade mix from European sources at the prices they require, hence are reliant on Group I exports ex U.S. Gulf Coast.

Some Nigerian receivers have been readily accepting rerefined or recycled base stocks for specific industrial oils and process applications. There has been a great deal of interest shown in these products due in no small part to their relatively low prices versus virgin Group I base oils. Also, these rerefined base stocks are being supplied in flexies, which gives receivers an advantage in that bulk storage and double handing are not required.

Sources confirmed that prices for these products in flexies ex Europe on a CIF basis may be $200/t-$230/t below the current market levels for virgin SN150.

Prices for Group I base stocks into Nigeria have moved upwards based on current FOB prices which will apply to new cargoes being loaded during February and March. Offers are $895/t-$925/t in respect of SN150. SN500 is now at $955/t-$970/t, and bright stock is $1050/t-$1080/t, having moved upwards less than the neutrals. SN900 ex Baltic is being indicated at around $995/t, but no firm offers were made for this material this week.

These levels are in respect of CIF/CFR offers for material delivered from the U.S. Gulf, Europe, and also the Baltic Sea region, where increased freight costs bring levels in line.

The prices above refer to quantities of Group I base oils delivered CIF/CFR Apapa, Lagos, in minimum parcel sizes of 6,000 tons.

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