Group II material has also moved upwards in price, though perhaps by smaller percentages than Group I, as suppliers take advantage of the market. Group III markets are steady although there are reports of marginal increases that suggest strength in this segment.

However, with many of the major markets throughout Europe, the Middle East and Africa being negatively affected by the coronavirus, it is difficult to read exactly the relative positions of each of the product groups.

Crude oils have been trading in very narrow ranges over the past few weeks, and levels posted this week are almost identical to those seen one month back. During the last two weeks dated Brent and West Texas Intermediate crude moved up by around $1 per barrel but then retreated. The crack between the two marker crudes remains small, perhaps reflecting that markets are fickle and demand still down from pre-pandemic levels, even in major markets such as China.

Dated deliveries of Brent posted at $41.50/bbl, now for December front month settlement, while WTI is at $39.35/bbl, still for November front month. ICE LS gas oil are also barely changed over the past month, showing at $329 per metric ton for October settlement. These prices were obtained from London ICE trading late Monday.

Europe

Prices for Group I exports from Europe have moved significantly higher over the past two weeks as sellers with availabilities are in very strong position to dictate values. Levels have been hiked to new highs that are moving ever closer to regional Group I prices and also Group II numbers. Availability remains extremely tight, particularly for composite cargoes covering the range from solvent neutral 100 through bright stock. Heavier neutrals and bright stock are most in demand for traditional export markets such as West Africa, the Middle East and India, but with limited availabilities from the main suppliers around Europe, these markets are proving very difficult to cover.

Some majors have been re-positioning cargoes of Group I from Europe to Far East where demand is growing, and with current limited production in those markets there are opportunities for producers with the right slate.

Prices for Group I grades have risen to between $625 per ton and $660/t for SN150 and $645/t-$665/t for SN500, both on an FOB basis. Large cargo-sized parcels of bright stock are extremely rare with prices quoted at $695/t-$725/t. Although the jump in prices would appear to be extraordinarily large since our previous column, these increases have been taking shape over two weeks.

The above prices refer 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 the region have also responded to tighter availabilities, climbing higher since the beginning of October. Comments received this week implied that although demand is not terribly strong, avails are being affected by lack of replacement stocks in resellers and distributors tanks as very little additional product is coming into the Northwestern European market from Baltic sellers. This in turn, has caused demand to increase for local production, which was already been cut back to a bare minimum by refiners early during the pandemic.

Prices are firmer with increases for October sales being imposed by sellers, with some numbers escalating by some $50/t-$70/t over September levels. Buyers’ resistance to these increments has been futile, with many sellers offering on a take-it-or-leave-it basis.

The differential between domestic and export numbers is maintained with large increases applying to both markets The differential is assessed at €45/t-€95/t, regional prices being the higher.

Group II availability is certainly tighter than a couple of weeks ago, with many of the smaller importers deciding against taking material into the European market on the off chance that import duty may have to be paid on quantities coming into the EU. Certainly all imports of Group II coming from non FTA regions incur 3.7% import duty in the first place with reconciliation only occurring some time after bureaucrats have determined whether or not quantities are covered under the import duty waiver, which applies only to the first 200,000 tons of Group II imports during the period between July 1 and Dec. 31.

This financial penalty has discouraged many traders and resellers from becoming involved in the import of Group II grades from sources such as the U.S.

Group II prices have moved upwards although not with such large increases as have been applied to Group I base oils. Levels have moved upwards by some $25/t-$40/t with effect from Oct. 1, with the heavier viscosity grades taking the brunt of the larger increases.

Group II prices are now assessed at levels $795/t-$845pmt (€675/t-€720) for 150 neutral and 220N, while 500N and 600N are at $860/t-$885/t (€735/t-€755). These prices apply to a wide range of Group II base oils, including European and American grades with full slates of finished lubricant approvals along with unapproved or partly-approved grades from the Middle East, East Asia and the U.S.

Group III prices are firmer although sellers state that the opportunities to increase prices have not been as flexible as for Group I and Group II base stocks. There are limitations as to what price rise are possible since there is sufficient availability in the European markets to cover all requirements for fully-approved and partly-approved Group III base oils. The potential second wave of coronavirus has affected demand to the extent that buyers are taking smaller quantities on a monthly basis at the moment, this trend perhaps continuing through the end of this year and into the first part of 2021. Replenishment cargoes are reported from Malaysia and United Arab Emirates, in addition to European production from Finland and Spain. These cargoes move material into hubs in Antwerp-Rotterdam-Amsterdam for distributors to sell on an ex tank basis.

As noted prices are rising with levels moving ahead to between €710/t-€735/t for the range of partly-approved Group III base oils. Prices are assessed between €715/t-€735/t for 6 and 8 centiStoke grades, while 3 and 4 cSt are at €710/t-€725/t, all on an FCA basis ex Northwestern European hubs.

Prices for Group III base oils holding the full range of European OEM approvals have also moved upwards to €760/t-€785/t for 4 cSt and €785/t-€805/t for 6 and 8 cSt.

Baltic and Black Seas

Base oil trades from the Baltic remain elusive, with hardly any supplies of material coming through from Russian refineries to traders and resellers based in the Baltic ports. Russian refiners still appear able to supply into markets such as Ukraine, where prices are elevated, making keenly priced supplies into the Baltic market unattractive.

The recent rises in Group I prices across the European mainland may start to allow traders to raise offers for Russian export barrels. These parties are being extremely cautious regarding taking positions on cargo quantities and may only respond to export buyers on the basis of firm bids against future indications for availabilities up to the year’s end.

Nigerian buyers are looking for coverage for a quantity of some 10,000 tons of three API Group I base oil grades. Indication numbers for FOB sales were seen for these types of sales, with SN150 priced around $590 per metric ton, SN500 around $600/t and BS 150 at $640/t. These levels are in line with European mainland levels less freight. Conditions on availabilities suggest that these quantities may not be available ex-tank until sometime during December, or even into January next year.

SN150, SN500, and quantities of bright stock out of Gdansk may be aligned with mainstream European prices, rising over the last few weeks to $620/t-$655/t for the neutrals, with bright stock at around $685/t-$715/t FOB.

In the Turkish market Izmir refinery appears to be fully operational once again, with buyers taking Group I material from this. However, demand is said to be very poor, with many blenders in Turkey working a short-time basis. Finished lubricant demand fell dramatically, with both automotive and industrial sectors of the economy suffering from the overall effects of the COVID-19 spread. Political and economic problems appear to be inexplicably entwined, with tensions mounting between Turkey and Greece. 

Mediterranean sellers from Greece have confirmed one 4,500 ton cargo of Group I grades discharging into Derince around now. No other movements were confirmed, and with Livorno refinery moving into turnaround, this may affect availabilities of spot cargoes from that source.

Indications for the Greek cargo are that prices may have been agreed prior to the latest hike with levels around $578/t for SN150, with SN500 at around $590/t basis CIF Derince. Prices for future offers are expected to be higher, in line with mainstream European Group I numbers plus freight.

Relatively speaking, a smaller sized cargo was announced out of the STS facility at Kavkaz, Russia, with 5,000 tons of Russian export SN500 loaded at the end of September. This cargo will move to Antwerp-Rotterdam-Amsterdam, possibly for trans-shipment to Caribs or Mexico.

Indications for Kavkaz, Russia, STS prices were nudged higher, with levels now assessed at $495/t-$525/t at SN500, with quantities of SN150 at $485/t-$500/t. These levels rose by some $100/t over the last few weeks, due to the general increases to both Russian and mainland European Group I levels.

Group II and Group III base oils from storage in Gebze, Turkey, see prices moving upwards to levels at €750/t-€825/t for the low and high vis Group II grades, with partly-approved Group III base oils also higher to levels at €735/t-€775/t. Fully approved Group III material is available ex-tank at levels of €785/t-€825/t.

Middle East Gulf

Red Sea reports contain bulletins that suggest that the Saudi Arabian producer out of Yanbu’al Bahr and Jeddah refineries will move more than 75,000 tons of total base oil grades between mid-September and the end of October. Destinations are wide and varied, with much of the material, Group I and Group II, finding its way into the west coast of India, Pakistan and United Arab Emirates. A cargo of 4,000 tons of Group II light grade will move to northwestern Europe. No news is heard on the supply present or future to Egyptian General Petroleum Corp. for the coverage of the fourth quarter tender to supply bright stock into Alexandria.

In Middle East Gulf trade, a large cargo loaded out of the U.S. Gulf, containing both Group I and Group II base oils for receivers both in Mumbai and the U.A.E. The cargo to be loaded was 20,000 tons of mixed grades, with around 10,000 tons of Group I material landing in Jebel Ali. Arrival of this cargo will possibly be scheduled around the end of October into the U.A.E.

At the same time another inquiry for a cargo of 5,000 tons of Group I grades was issued by traders for supply out of Livorno, moving into a U.A.E. port. The receivers are based in Dubai and have storage in Hamriyah in Sharjah.

Iranian exports appear to have dried up, with no new announcements for material moving into the U.A.E. or the west coast of India. There are suggestions that a cargo moving out of Hamriyah into Pakistan could be formed of iranian export grades, although no supporting documents were made available to check on the certificate of origin of the said material. Since the U.A.E. does not produce Group I base oils, it may be assumed that this is an Iranian re-export.

From sources in U.A.E., the latest indications for Iranian SN500 are put higher than previously reported at around $585/t-$600/t CFR U.A.E., although no updates on Iranian export prices were received since Oct. 1. That was when price revisions may have taken place. SN150 is now indicated at $565/t-$580/t.

Group III cargoes from the three Middle East Gulf sources in Bahrain, Qatar and U.A.E. continue to show movements into China, India and Europe. A large 15,000 tons cargo loaded out of Al Ruwais for European distributors in Dordrecht. Parcels of Group III base stocks are also planned out of Sitra for restocking facilities in U.A.E., in addition to landing a large quantity of between 6,000 and 8,000 tons into mainland China. 

Netbacks for Group III base oils from Al Ruwais and Sitra are pushed higher, having re-assessed new selling levels in export markets. Levels are at $680/t-$740/t for the range of 4 centiStoke, 6 cSt and 8 cSt partly-approved Group III base oils. Fully approved base oils, marketed by Neste, are assessed to netback at $760/t-$820/t for 4 centiStoke, 6 cSt, and 8 cSt Group III base oils.

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

Group II base stocks ex-tank U.A.E. will have prices moving upwards, with FCA indications at $710/t-$785/t for light vis grades 100N, 150N and 220N, with heavier 500N and 600N at $745/t-$825/t. Prices relate to various quantities with differing contract terms and selling conditions.

Africa

West African reports contain the news that cargoes are discharging into Conakry and Abidjan, whilst within a couple of weeks a separate parcel will discharge into Tema in Ghana. These supplies are carried out by a major that apparently was awarded the continuing supply into Ghana.

In Nigeria problems exist in obtaining some grades for supply into this market. Traders have indicated that both bright stock and SN900 are scarce and difficult to source either from U.S. Gulf or from alternative European locations. Local prices certainly started to rise in Nigeria as a result of much higher FOB numbers being touted to traders.

An inquiry for a cargo of 10,000 tons of Group I grades remains in the market, although Baltic suppliers provided indications for a potential supply of this cargo around December.

Prices for Group I base oils sold into Nigeria adapted to higher FOB numbers from sources, with selling levels moving steeply upwards.

CFR/CIF offers are confirmed higher this week, and are now at $770/t-$790/t for quantities of SN150. SN500 is at $790/t-$810/t, and although there are still no reported offers for SN900, indications are that selling levels would be at $825/t-$840/t should any material become available. Bright stock was indicated at around $865/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.