Group II is reportedly stable with ample availability, however there is a meeting within the EU Commission this week to consider extending the waiver of a 3.7 percent duty on imported Group II base oils. Private sources close to the commission have indicated that the waiver will be extended.

Group III values are under pressure due to increasing availabilities from various global supply sources. Within Europe, locally produced stocks continue to come under threat from imports carrying partial slates of finished lubricant approvals.

Crude oil rallied after the reported Iranian assault on a British tanker. Dated deliveries of Brent crude rose around $2.70 to $67 per barrel for September front month delivery. West Texas Intermediate crude has also responded and posts at $60.35 per barrel, now also for September settlement. ICE LS gas oil climbed around $25 to reach $605 per metric ton in August front month trading.

Prices were obtained from London ICE trading late July 15.

Europe

Group I export values were unchanged this week. The market is split on whether it is starting to lean, with sellers suggesting the climate is ripe for markups whilst the buying fraternity claims that prices are stable. Adjustments may not happenuntil the end of July, but at that stage the summer holiday period will have started and the market may go into limbo. There are also regional variations, with Mediterranean offers firmer while Northwestern European suppliers maintain numbers seen throughout July.

Prices remain between $550 per ton and $575/t for solvent neutral 150, $575/t-$600/t for SN500 and $700/t-$740/t for bright stock. These values refer to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always subject to availability.

Values for Group I sales within Europe appear to be firmer due to buying interest from blenders laying inventories down before stopping scaling back operations during August. The situation in Iran poses a threat that crude costs could rise, and base oil buyers are insuring against that risk.

The differential between domestic and export values is maintained with domestic levels assessed 65/t-90/t higher.

Group II values are steady with adequate availability, while importers are assessing the possibility that the duty waiver on these grades may be revoked, suspended or merely maintained by the EU Commission later this week.

FCA levels for Group II base stocks remained between $720/t-$815/t (640/t-730/t) for 100 neutral, 150N and 220N, while 500N and 600N are at $750/t-$825/t (665/t-740/t).

These numbers pertain to all Group II base oils, including those with full slates of finished product approvals and imports in flexitanks from regions such as the Far East, where prices are under pressure due to extensive availability.

Group III demand is positive but values are coming under further pressure from increasing availability. Prices are unchanged at 665/t-710/t for 4 centiStoke grades and 675/t-720/t for 6 and 8 cSt grades of partly-approved grades, sold on an FCA basis ex hubs in Northwestern Europe.

Fully approved Group III oils are also unchanged at 710/t-840/t for 4 cSt oils and 800/t-865/t for 6 cSt and 775/t-835/t for 8 cSt, basis.

Baltic and Black Seas

Baltic trade remains stagnant with few traders or resellers in the area holding large inventories of Russian export grades. Opportunities are limited with traditional outlets either being covered from alternative supply points or Russian export prices plus freight costs making material from the Baltic a less attractive option.

Even outlets such as Scandinavia, the United Kingdom and Antwerp-Rotterdam-Amsterdam are declining options to take material from the Baltic, since options from mainstream European producers are now available at more competitive values.

Should supplies of Group I in Western and Central Europe tighten up, Baltic sources may return to the fore. Currently, however, Russian domestic base oil trade is buoyant, and supplies are being made into Ukraine that possibly yield higher netbacks to Russian producers than Baltic resellers.

Values for Russian export grades remain as last reported with SN150 at $475/t-$500/t and SN500 at $485/t-$520/t on an FOB basis ex Baltic ports. Polish bright stock is indicated at $695/t-$725/t, this grade being largely unaffected by the defining Baltic supplies from ports further to the north.

In Black Sea trading, STS loadings at Kavkaz, Russia, are back in the news with a couple of large parcels being offered to Indian and United Arab Emirates buyers. These values remain low at around $475/t for SN500, $465/t for SN150 and $525/t for SN900.

The Turkish market is quiet, with demand slack, local producers maintaining prices and importers declining to accept offers from Mediterranean sources. Russian exports are not making any inroads into an otherwise dull market. The problems incurred by the Turkish government are spreading through the larger economy, causing what could be called a recession.

Group II and Group III base oils are being supplied from European and Far East sources directly to blenders in flexies, in addition to material available ex tank from distributors representing majors. 866 4087878 ref 0852

Group I offers ex Mediterranean sources are being heard at around $595/t for SN150 and $600/t for SN500, basis CIF Turkey. Bright stock is indicated at $775/t. These levels have been deemed uncompetitive against local purchasing in small lots delivered by truck.

Middle East Gulf

Red Sea trades are confirmed loading out of Yanbual Bahr and Jeddah, Saudi Arabia, for receivers in India and the U.A.E. These cargoes are presumed to consist of Group I and II base oils, whilst Group III grades continue to be imported through Yanbu, supplementing the local production of Group I and Group II.

In the Middle East Gulf the Iranian situation has been further exacerbated by the arrest of an Iranian tanker in Gibraltar, believed to be carrying crude oil for Syria. Being in breach of EU sanctions this activity was perhaps in retaliation for Iran harassing a British tanker making its way through the Straits of Hormuz, an incident that required intervention by a British naval vessel.

Tensions are building as more U.S. sanctions hit Iranian exports, curbing the movement of petroleum products out of Iran. Base oils are reportedly being exported from the southern Iranian ports of Bandar-e Emam Khomeyni, Bandar Bushehr and Bandar Abbas, although reliable information is not possible to glean from sources. Prices remain indicated at around $590/t, or equivalent in local currencies.

The latest indications of prices for base oils loaded ex Kavkaz and sold on a CIF basis in the U.A.E. are $549/t for SN150 and $552/t for SN500.

Even during a planned turnaround, exports of Group III base stocks are due to continue to be loaded and exported from Al Ruwais, U.A.E., meaning that there will be no break in supplies to FOB buyers or supplies to distributors in Europe and the U.S. FOB levels for Group III are unchanged at $685/t-$725/t for all three Group III viscosity grades. Eight cSt moving to India and China will achieve lower contribution levels due to lower local selling prices.

Branded Nexbase Group III base oils bearing full slates of approvals and sold by Neste ex Sitra, Bahrain, carry higher FOB levels due to some premium selling prices in destination markets. However, due to heavy discounting in key markets, FOB levels are reduced here by $5/t-$10/t to $700/t-$865/t for 4, 6 and 8 cSt grades delivered into European and U.S. markets.

Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.

Group II prices within Middle East Gulf regional markets, based on FCA sales from U.A.E. hub storage, are unchanged at $795/t-$900/t for 100N, 150N and 220N, while 500N and 600N are at $815/t-$920/t.

Africa

North African reports contain news of cargoes being supplied into Morocco, Algeria and Egypt from various Mediterranean and Northwestern European supply points. The Egyptian General Petroleum Corp. third quarter supplies are believed to be commencing during the second half of July with a cargo of 2,500 to 3,000 tons of bright stock loading on a prompt basis ex a European refinery.

West Africa Group I prices for material moving into Apapa, Nigeria, continue to be assessed around the same levels as reported last week, at $685/t-$710/t for SN150, $695/t-$720/t for SN500 and $885/t-$925/t for bright stock. SN900 is indicated at $710/t-$720/t.

These ranges cover all specifications of base oils including those guaranteeing a viscosity index of at least 95, which is required by some blenders for SN150 and SN500. Oils meeting that requirement are priced at the higher end of the spreads. All prices are on the basis of CIF/CFR Apapa, Lagos.

The prices above refer to large cargoes of at least 10,000 tons landed into Nigerian 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.