Prices for API Group I grades have stabilized overall, perhaps because they have little room to decline further. In addition, a more balanced supply-demand picture is emerging as a number of suppliers are showing substantial buying interest for January, lending hope that markets may undergo an upturn during the first quarter. The squeeze on margins has some Group I refiners seriously considering whether to continue producing these grades.

The Group II segment is grappling with the new quota system due to go into effect next month for oils of that grade imported into the European Union. Some lubricant industry associations are advising members to stock up in advance of price increases that could occur when 3.7 percent duties kick in.

In the Middle East Gulf, Group II producers are moving large quantities into markets such as the United Arab Emirates and India, at prices that are sometimes in line with Group I oils, spurring some blenders to switch from Group I.

The Group III supply glut continues with product from all corners of the globe entering European markets. A key European refiner is producing again after successfully completing a maintenance turnaround.

Crude prices firmed on the back of positive economic data from Far East and U.S. markets and signs of a possible softening to the trade war between China and the U.S. Dated deliveries of Brent crude rose to $65.35 per barrel for February settlement, while West Texas Intermediate climbed to $60.25/bbl, now also for February front month. ICE LS gas oil topped the $600 per metric ton mark to reach $606/t, now for January settlement.

These prices were obtained from London ICE trading late Monday.

Europe

Group I export prices in Europe are reportedly stable, although sources said there is very little extra material kicking around the markets, unlike previous years. Traditionally, at this time, sellers look to move inventory to clear stocks prior to year end, but availabilities are tighter this year.

Values are unchanged with solvent neutral 150 between $545/t and $580/t and SN500 at $555/t-$580/t. Bright stock is also stable this week at $615/t-$650/t. These levels apply to cargo-sized parcels of at least 2,000 tons of Group I base oils, sold on an FOB basis ex mainland European supply points, always subject to availability.

Prices for Group I sales within Europe are also static on low volumes. Many traders and resellers are looking forward to next year to place stocks and cargoes that are anticipated to arrive into storage over the next few weeks.

News on contractual supplies for Group I grades is not at all clear as some blenders had planned to shift from Group I to Group II but are now reconsidering in view of the new Group II quota.

The price differential between Group I exports and sales within the region is unchanged at 45/t-65/t less for exports.

European Group II markets have been spooked by reactions to the tariff, which continue to evolve. As mentioned above, some trade associations are advising buyers to stock up before the applications of duties, which will now kick in after importation of the first 200,000 tons in every six-month period. The tax will not apply to Group II purchased from European refiners, and sources said importers have said they will absorb the charge for existing customers or reimburse them.

The new rule, approved last month, included a provision that legislators review it after six months, and some observers predict it will be revised.

FCA levels remain at $745/t-$790pmt (675/t-740) for 150 neutral and 220N, while 500N and 600N are at $785/t-$825/t (715/t-750). These prices apply to the wide range of Group II oils in the market – grades from European and U.S. refiners with full slates of finished product approvals and those with partial or no approvals from Middle East Gulf, Far East and the U.S. suppliers, some of which are imported in flexitanks.

Group III prices are still under downward pressure but unchangedat 650/t-725/t for 4 centiStoke grades and 665/t-740/t for 6 and 8 cSt, basis FCA ex hubs in Northwestern Europe. Prices for grades with full slates of approvals remain at 740/t-810/t for 4 cSt, 770/t-840/t for 6 cSt and 755/t-820/t for 8 cSt.

Baltic and Black Seas

Baltic reports are that another large parcel of around 15,000 tons of Group I base oils has been loaded for Nigerian receivers. The cargo consisted of bright stock and SN500 loaded out of Gdansk, Poland, along with quantities of Russian export grades assembled and dispatched out of Riga, Lativa.

Other parcels have been loaded for the United Kingdom and Antwerp-Rotterdam-Amsterdam, with a number of other cargoes being negotiated for U.K. arrival prior to the end of January, when the U.K. will leave the EU customs union. The U.K. departure will not affect customs tariffs in the first instance with continuance of existing arrangements being the immediate plan followed in due course by new trade agreements.

Baltic prices remain unchanged with FOB levels for SN150 at $465/t-$490/t and SN500 at $470/t-$498/t. Bright stock ex Gdansk is indicated at $620/t-$650/t on an FOB basis.

In the Black Sea region, another couple large cargoes are to be loaded at the Kavkaz, Russia, STS facility for regular receivers in Greece and the Far East, in addition to a cargo being offered to the United Arab Emirates. Some 20,000 tons of material is expected to be loaded in the next few weeks, confirming that this operation remains functional during the winter months, when delivery of material from a Russian refinery becomes more intricate due to ice on the river Volga.

Russian export STS prices remain around $455/t for SN500 and around $435/t for SN150.

Offers of Group I from Mediterranean sources continue to be made to Turkish receivers, although buying interest has declined towards the end of the year. Turkish blending activity is weak as local prices remain buoyant.

Mediterranean Group I prices are firming at $578/t for SN150 and $586/t for SN500, basis CIF Gebze, Turkey. SN600 is offered at around $595/t, while bright stock is down to around $668/t, CIF.

Group II and Group III base oils ex-tank from Turkish distribution points are between $735/t-$755/t for Group II grades and $770/t-$800/t for Group III oils with partial slates of approvals.

Middle East Gulf

Red Sea shipping sources report a number of large cargoes loading out of Yanbual Bahr and Jeddah, Saudi Arabia – perhaps up to 60,000 tons between now and the end of the year.

Iranian Group I exports have reappeared in disguise with Group I cargoes being arranged from the port of Hamriyah at Sharjah, U.A.E., for destinations in India and Pakistan. FOB or FCA prices for Iranian premium SN500 are indicated from U.A.E. sources at around $525/t-$540/t, FCA.

Group I suppliers from the U.S. Gulf Coast and the Black Sea reportedly offered Group I to U.A.E. receivers at $589/t for SN500, CIF U.A.E. ports. SN150 is indicated at around $579/t and bright stock around $666/t, CIF Hamriyah.

Prices for partly approved Group III base oils ex Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged at $650/t-$690/t for all viscosity grades sold into Europe, the U.S., India and the Far East except that 8t cSt into India and Far East will contribute less, due to lower local selling prices.

Fully approved Group III base oils from Sitra may achieve higher notional netbacks – $760/t-$855/t for 4, 6 and 8 cSt grades delivered into Western 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 in Middle East Gulf regions are unchanged, although local refiners are offering competitive prices. Values are assessed at $745/t-$900/t for 100N, 150N and 220N, while 500N and 600N are at $755/t-$910/t.

Africa

Group I sales into West Africa have moved total imports into this region to new highs with news that two more cargoes have been fixed out of the Baltic for Nigeria.

Group I prices for material arriving into Nigerian ports are unchanged at $630/t-$645/t for SN150, $640/t-$655/t for SN500 and $720/t-$745/t for bright stock. Blended SN900 is indicated at $650/t-$675/t. These prices apply to cargoes of at least 10,000 tons delivered into Apapa port in Lagos, Nigeria.

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