Crude oil prices stabilized the past few days as dated deliveries of Brent crude rose to $26.70 per barrel, now for July front month settlement. West Texas Intermediate reached $19.95/bbl, still for June front month. ICE LS gas oil prices rallied above $200 per metric ton to $218/t.

These prices were obtained from London ICE trading late Monday.

Europe

European export prices for API Group I oils are unchanged this week on very little trading. Only a few cargoes are moving, and these may have been negotiated before lockdowns in various countries around Europe. Few new pieces of business which have been identified.

FOB levels for solvent neutral 150 remain between $385 per ton and $450/t, while SN500 is at $390/t-$450/t and bright stock at $475/t-$550/t. These prices refer to cargo-sized parcels of at least 2,000 tons sold on an FOB basis from mainland European supply points, always subject to availability.

With some countries easing lockdowns, base oil buyers and sellers are anxious to return to work. Many European blenders had either closed or cut back on manufacturing and are now trying out new work practices. A couple smaller operations have decided not to reopen yet, and there is speculation that they may never do so.

The price differential between sales within Europe and exports is unchanged at $75/t-$100/t, exports being lower.

Group II prices are also maintained this week with some reports that prices for May were being retained at levels similar to those being applied during the last few days of April, having been adjusted downwards prior to the beginning of May. There are few examples or instances of spot purchasing of Group II grades, with mainly contract barrels being delivered or picked up from storage hubs.

The EU import tariff limits are shrouded in mystery, with updates posted on-line bearing little correlation with actual imports which have been corroborated by importers. Direct EU comments have been very difficult to obtain with most of the Tariff Group still not at their desks, remaining in lockdown until further notice.

Prices remain unchanged from last week when they were adjusted downwards for May, just prior to the last days of April however the spreads remain wide due to different attitudes being adopted by various sellers.

Prices are maintained between $425/t-$495/t ( €390/t-€455 ) in respect of the two lighter vis grades (150N and 220N), with higher vis grades (500N and 600N) between $430/t-$520/t ( €395/t-€480 ).

Prices pertain to a wide range of Group II base oils, including European, and U.S. fully approved grades, but also unapproved or partly-approved grades from Middle East, Far East and the U.S.

There is evidence that Group III prices may not have dropped as much as same reports were advocating last week, and that levels have held up, but amidst poor demand and take-up. Sales levels have fallen by a around a reputed 55% of sales prior to the onset of coronavirus in Europe, This was possibly during January before Italy started to experience the disease.

Many buyers who had opted to enter into contracts last year are finding their index linked numbers uncompetitive against spot purchases, with many of these buyers simply not lifting their monthly allocation from their contracted supplier, instead , purchasing spot parcels from those sellers who have the flexibility to adjust prices downwards.

There are some hopes for this sector in the market since a number of car manufacturers have restarted production, with factory fills of automotive lubricants being an important element in the consumption of Group III base oils. However, this may take some time to filter down to purchases of base oils since existing stocks of finished lubricants will have to be employed in the first place.

Prices are updated this week with historical number during April being assessed between €660/t-€710/t in respect of the range of partly-approved Group III base oils. Numbers for May are reported lower and are ranging between €630/t-€640/t in respect of 6 cSt and 8 cSt base oils, with 4 centiStoke grades between €625/t-€635/t. Prices refer to FCA supplies ex northwestern European hubs.

Prices in respect of European OEM fully approved Group III base oils are also realigned with levels now assessed between €625-/t-€720/t in respect of 4 cSt oils, with 6 cSt and 8 cSt grades between €635/t-€740/t. The wide variations and the low ends of the ranges are where some sellers are moving to compete with partly-approved material.

Baltic and Black Seas

Baltic trade is thin, with only a handful of cargoes being worked. They are mainly into Antwerp-Rotterdam-Amsterdam for contracted buyers in mainland Europe, but this trade has slowed due to demand for Russian barrels falling away in northern Europe. Those purchasing API Group I base oils are few. With options to buy mainstream product from alternative Group I supply points, Baltic barrels appear to have lost market share.

Rumors around the market also suggest that storage facilities may be close to tank-tops, with no ullage available to discharge any further large number of cargoes.

Supplies from Russian refineries are getting through, but the trade delivered at the frontier is much lower than what could be considered the norm. A lack of inquiries was noted from buyers in Antwerp-Rotterdam-Amsterdam, the United Kingdom and Scandinavia, where other than Sweden, lockdowns have taken their toll of the base oil markets.

Indication prices are maintained in light of the poor levels of business being reported. FOB prices for the two main grades SN150 and SN500 are put at around $375/t-$440 per metric ton. SN150, SN500 and bright stock from Gdansk also remain unchanged. They are indicated in line with mainland European levels at around $385/t-$450/t for solvent neutrals, with bright stock at $475/t-$550/t FOB.

Black Sea base oil markets are extremely dull, with little new activity being reported. Only one major event transpired during the last few days, with another large cargo loaded at the Kavkaz, Russia, STS facility, with 10,000 tons of Group I base oils sold into Greece and Antwerp-Rotterdam-Amsterdam. Only around 2,000 tons is destined for the Greek importer, with the balance shipped to Rotterdam, possibly for onward shipment to the Caribbean.

This possibly rules out the intention to load a large parcel out of Kavkaz, Russia, for Nigeria, with this supply taking up most of the available barrels out of the STS facility. It is possible that another cargo could be arranged because very few other markets are open for supplies from this location. Other potential receivers are based in Singapore, covered with a cargo loading out of the Baltic as an alternative.

Since the supplier is the same for the Baltic and the Black Sea supplies, the logistics of these operations are fascinating. That’s because it could have been considered simpler and more economical to supply the Antwerp-Rotterdam-Amsterdam destination with barrels from Kaliningrad and the Far Eastern destination from the Black Sea, assuming that the grades are identical.

Prices from Kavkaz, Russia, are assessed at $365/t-$390/t for SN500, with smaller quantities of SN150 at $355/t.

Offers of Group I supplies from Greek and Italian sources are in the market, although demand in Turkey waned. Sources suggest that prices are attractive, with indications around $465/t for quantities of SN150 with SN500 at $475/t basis CIF Marmara in lots of 2,500 tons-3,000 tons per cargo. These prices are very competitive against local supplies.

The news last week indicated that the local refinery at Izmir is offering existing stocks of base oil on a prompt basis. That is also on the premise that when stocks are exhausted, no further availability of base oils will be possible until at least sometime in July. This supplier has no SN100 available, which was priced at 3,569 Turkish lira per ton ($500), but can sell SN150 at TL 3,529/t ($494), SN500 at TL 3,599/t ($ 504), and bright stock at TL 4,189/t ($586.50). It is not clear what quantities of each grade are available.

Truck pick ups are subject to a loading charge of around TL 31/t, and sea-borne cargoes moving into Marmaras ports are subject to a freight rate of $25/t.

The refinery will cease production of base oils from now until July 1, due to demand being non-existent. There was no indication as to when base oils would become available from this source in the future.

Group II and Group III base oils out-of-tank from Gebze, Turkey, are reported available from Turkish traders with substantial inventories in tank. Sellers have little flexibility to discount these supplies since they had been bought and prices agreed prior to the coronavirus and the crude meltdown. Prices are heard at $620/t-$650/t for the low and high vis Group II grades, with partly-approved Group III base oils at $640/t-$675/t.

Middle East Gulf

Red Sea suppliers were limited by the various lockdowns and closures of available markets for selling production out of Yanbu and Jeddah refineries. China and other Far East destinations are only just coming out of the clutches of the coronavirus, and India still immersed in problems with the pandemic. Only contracted receivers in United Arab Emirates and of course the continuing supply of bright stock to Egyptian General Petroleum Corp. in Alexandria are filling the cargoes coming out of Saudi Arabia. Inventories in India and Far East are reported to be high, with storage limited, thus stalling even further the possibility to supply cargoes out of Yanbu.

The Middle East Gulf and other Muslim nations are immersed in the Holy Month of Ramadan, with populations observing daylight fasting until Iftar in the evening. This act in itself slows down normal working practices, and during this month activities are less and the markets are quieter than they otherwise would be. This year is rather exceptional of course, with the added impact of the coronavirus pandemic affecting all and everything in the region. 

Iran has struggled. It is thought by many in neighboring countries that Iran has suffered worse than any other nation, and the-after effects of exposure to this virus could be extensive and long lasting. Whilst other countries have started to emerge from the Covid-19 outbreak, it is said that Iran is still in a bad way and is suffering both economically and health wise.

No Iranian cargoes are reported, and with the lockdowns operating in India and U.A.E., possibilities for Iranian base oil cargoes are severely limited. Sources claim, however, that prices remain in the market for Iranian base oils, with reports that prices maintained as per last with indications at $400/t-$445/t CFR for SN500+.

Only the one reported Group I cargo out of the Mediterranean is reported for receivers in the United Arab Emirates.

Group III exports from Bahrain and Abu Dhabi are down, although there two possible shipping inquiries for material may move out of Sitra for the west coast of India and also China. However, these may just be market checks, since neither of these receiving countries is in a position to accept imports.

In terms of notional netbacks, levels are estimated at $495/t-$535/t for the partly-approved range of 4 centiStoke, 6 cSt and now 8 cSt partly-approved Group III base oils. The differential between 8 cSt grades and the other two main grades has diminished, and this grade can now be included.

‘Group III base oils from Sitra in Bahrain, shipped and marketed by Neste, are assessed higher having notional netbacks at $625/t-$680/t FOB for three Group III grades: 4 centiStoke, 6 cSt, and 8 cSt viscosities.

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

No more was heard on the large cargo offer of Group II base oils from Korea into the U.A.E. The 18,000 tons parcel was not seen in the local market. Prices were exceptionally low, amid suggestions that prices at $495/t-$550/t are possible.

Base oil supplies from U.A.E. hub storage are quiet, with Ramadan and the virus stemming trade for the moment. A few buyers are taking quantities presently. Numbers are maintained as per last week, with indications on an FCA basis assessed at $600/t-$690/t for light vis grades 100N, 150N and 220N, with 500N/600N at $620/t-$700/t.

Africa

Mediterranean cargoes are missing from the radar, with few exports from Spain, Italy or Greece moving to North African receivers. Trade is again slow, with few offers on the table for any North African receivers. Reports from North Africa are mixed about the effects of the coronavirus, whilst at the same time markets are quiet due to Ramadan.

West African reports confirm that the northwestern European cargo from a major supplier will supply Group I base oils into three ports: Conakry in Guinea, then Abidjan in Cote d’Ivoire and finally Tema in Ghana.

Nigerian sources reported that the coronavirus spread is worsening and is affecting trade across the region. The confirmed cargo booked from the east coast of the United States with 16,000 tons of Group I grades – SN150, SN500 and SN900 – arriving into Apapa this month. The possibility for a parcel to load from the Black Sea out of the STS facility at Kavkaz, Russia, appears to be on hold for the moment, with the shipping enquiry withdrawn. The other parcel loading out of the West Mediterranean was completed, and the vessel sailed for Lagos.

Current prices for Group I base oils imported into Nigeria are revised this week, with CFR/CIF levels dipping from existing numbers. CFR/CIF levels are now assessed at $520/t-$530/t for SN150, with SN500 at $540/t-$555/t, and bright stock, where forming part of the cargo, at $640/t-$660/t. SN900 is now indicated at $560/t-$575/t. These are revised on the basis of lower FOB numbers from all sources.

It is also rumored that one receiver in Nigeria is holding an offer with prices which appear to be up to $100/t lower than the levels above. Prices are for cargoes of a minimum of 10,000 tons delivered into Apapa port, Lagos, Nigeria.

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.