Buyers have been tempted to delay purchasing in hope that prices might retreat or have “dared” to enter negotiations, hoping there could be scope for markdowns. They did not always succeed as some sellers stuck to levels that they considered sustainable.

Group II supplies remain tight, with many players expressing frustrations at not being able to purchase the quantities they desire. Sellers in this segment are holding on to higher prices for the time being.

Group III base oil supply remains exceptionally tight as distributors and resellers claim to be sold out through September or October. Demand is extremely positive for these grades, and maintenance turnarounds by principal European suppliers is limiting availabilities. Large bridging cargoes are being shipped from production sites to Northwestern Europe for hub stocks to be resold to within the region, where demand for these grades remains firmly positive.

Crude oil prices have firmed since the last report and demand appears to be strong and rising. Even with the tenuous cease-fire in the Middle East, underlying tensions are maintain pressure on crude values.

Dated deliveries of Brent crude rose to $1 since our previous report to $69.40 per barrel, now for August front month settlement. West Texas Intermediate moved higher by some $2 per barrel to $67/bbl, now for July front month.

ICE LS Gas Oil prices are also seen to have risen on the back of the crude movements and are now $8 per metric ton higher than two weeks ago, at $567/t. These prices were obtained from London ICE trading late Monday.

Europe

Prices for Group I exports from Europe are coming under a modicum of downward pressure as availabilities improve after completion of a number of refinery turnarounds opened up more product. This is not to say that the market is collapsing – far from it – but there are signs that sellers are willing to at least talk prices with potential buyers rather than dictating numbers to a captive audience.

Prices are seen to be marginally weaker this week for the lighter-viscosity grades but still firm for the heavier products and bright stock. Prices for solvent neutral 150 have been heard in a range between $1,360 per ton and $1,425/t, whilst SN500 remains at $1,585/t-$1,695/t.

Buyers are postponing some purchases on hopes that prices may start to fall in coming weeks and months, although there are traders and receivers who cannot delay buying cargoes, since end-users are desperate to access material at almost any cost. This scenario is buoying prices around the market and may be creating a false picture of demand.

Bright stock remains extremely tight with values being reported at $2,120/t-$2,155/t.

These prices refer to cargo-sized parcels of at least 2,000 tons, sold on an FOB basis ex mainland European supply points, always subject to availability.

Prices for Group I sales within Europe are also being seen to be levelling off. These markets are still relatively tight as blenders express frustrations at not yet being able to access as much material as they require. Some complain of quantities being diverted to export sales where higher prices have been possible, but this situation is rather cloudy with some sellers preferring to sell into the domestic markets, where they insist that prices are holding firm.

Supply to local markets could start easing the next few weeks as refiners increase production of transportation fuels, thus increasing the quantities of base oil feedstocks . Forecasts are that base oils will gradually become more available over the summer months, and come September or October the market may return to near pre-COVID production levels if European lockdowns end as planned. The differentials between export and intra-regional prices have been re-established, and export prices now €5/t-€20/t lower

Group II base oil prices are unchanged amid reports of continued strong demand. Heavier-vis grades remain tight with some players expressing worries that not all requirements are able to be met. Some say supplies from United States sources have not been coming into Europe in sufficient quantities to meet rising demand, whilst output from the Rotterdam refinery appears to be at almost record levels of around 85,000-90,000 tons per month, close to the nameplate capacity of the unit.

Prices are maintained for this report at $1,420/t-$1,455/t (€1,225/t-€1,275/t) for 100 neutral, 150N and 220N, while 600N continues to command a premium at $1,820/t-$1,865/t (€1,560/t-€1,610/t).

These values apply to a wide range of Group II base oils, including products from Europe and the U.S. with full slates of finished lubricant approvals and some from the Middle East, the Far East and the U.S. with partial slates or no approvals.

Group III supply into the European arena continue to be an issue, with allocations being introduced by a couple of the main suppliers. This has limited the availability, often causing blenders to cut production of finished lubricants.The market continues to look tight with limited or no spot availabilities.

Prices firmed further since the previous report on the back of the limited supplies and are assessed at €1,475/t-€1,520/t for grades with partial slates of approvals. Six and 8 centiStoke are at €1,495/t-€1,520/t, while 4 cSt grades are at €1,475/t-€1,500/t on an FCA basis ex Antwerp-Rotterdam-Amsterdam hubs. Group III oils with full slates of European OEM approvals also rose to €1,520/t-€1,545/t for 4 cSt and €1,575/t-€1,600/t for 6 and 8 cSt.

Baltic and Black Seas

Baltic Sea traders have enjoyed particularly busy time as a number of significant cargoes load for Antwerp-Rotterdam-Amsterdam, the United Kingdom and West Africa. Two parcels of 14,000 tons and 12,000 tons loaded during mid-May for traders selling into Nigeria. Market sources also report cargoes for Antwerp-Rotterdam-Amsterdam coming out of Kaliningrad, Russia, and Riga, Latvia.

Another cargo is planned to load out of Svetly, Russia, with 7,000 tons of Russian export barrels bound for contract receivers in Singapore, whilst a U.K. parcel will load during early June for receivers on the U.K.’s east coast.

Mid-June could see another cargo of around 5,000 tons of Russian barrels load for Nigeria, and whilst this quantity is small for Nigerian receivers, it may reflect restrictions on availability out of Riga following the large quantities loaded during May.

Prices for Russian export barrels rose slightly from the previous report to $1,375/t-$1400/t for SN150. SN500, being in demand for West Africa markets, was offered at $1,575/t-$1,625/t. SN900, making up part of the Nigerian supplies, is thought to have been priced at around $1,665/t.

Black Sea and East Mediterranean regions appear to have been in the front line of large supplies of base oil going into Israel. It is unclear whether this is in response to the hostilities in the Gaza Strip. Shipping is being arranged through an STS operation in Cyprus so that vessels from South Korea do not have to call into an Israeli port. A total of 20,000 tons of Korean base oils will be delivered into two Israeli ports along with 4,000 tons of Group III from the Middle East Gulf.

No cargoes were reported loading from Mediterranean sources such as Livorno, Italy, or Aghio, Greece, for Turkish receivers. Local blenders in Turkey are relying on Group I material coming out of the Izmir refinery.

One major oil company operating out of the Mediterranean has delivered a small cargo of 1,000 tons into Aliaga, Turkey. This is thought to be Group I, and the limitation on size is perhaps due to finance restrictions and the high price.

Mediterranean offers remain at around $1,510/t for SN150 and $1725/t for SN500, basis CIF.

Prices for imported Group II and Group III base oils sold ex tank Gebze, Turkey, are unchanged at €1,565/t-€1585/t for low-vis grades but rose to €1,855/t-€1,895/t for SN600. Local buyers have said they cannot buy base oils priced higher than currently offered since they would be unable to pass on the increases to finished lube end-users. Prices for distributor sales of Middle East Gulf Group III exports into Turkey have been confirmed at €1,540/t-€1,585/t for 4 cStand €1,575/t-€1,595/t for 6 and 8 cSt. These values apply to partly and fully approved oils.

Middle East Gulf

Red Sea reports mention a couple of interesting cargoes being loaded out of Yanbu’al Bahr and Jeddah, Saudi Arabia. The first is thought to be 4,000 tons of Group II base oils being discharged into Le Havre, France. This may be a light grade such as 150N, since the producer in France ceased production of Group I SN150 some time ago and introduced Group II 150N as a replacement grade.

The second cargo is a large 19,000 ton parcel bound for the west coast of Iran, which is surprising given the COVID-19 problems that country is currently experiencing. The latter cargo may include Group I and Group II grades.

A Group I cargo of around 5,000 tons loaded towards the beginning of May from an oil major in the Mediterranean and will discharge into Jebel Ali, United Arab Emirates for local receivers. This is the first cargo of its kind for some time, though such shipments were routine for some years previously.

Once again there is little if any news of base oils moving out of Iran. Shipping reports advise of no movements from the southern ports of Bandar-e Emam Khomeyni or Bandar Bushehr, hence it can be assumed that any exports of base oils are being moved by road through Turkey and Syria. No confirmation can be gleaned from sources in Iran, and local U.A.E. players cannot cast any light on the situation. The coronavirus situation in Iran is thought to be desperate because of a slow vaccine roll-out and mounting cases of the disease hitting large towns and cities.

Two interesting potential movements have been reported from local United Arab Emirates sources. The first is a quantity of 8,000-9,000 tons for early June loading out of Sharjah port bound for the U.S. Gulf Coast or the Caribbean. This could be a Group I cargo, although if Iranian then the U.S. would be an unlikely destination. The other parcel is 5,000 tons bound for either the western Mediterranean or Nigeria, again loading out of Sharjah. Presumably this cargo is also Group I, since it seems unlikely that Group III would be imported to Nigeria, so the direction of the shipment is of interest.

Group III cargoes are loading out of Al Ruwais, U.A.E., and Sitra, Bahrain, and there are also reports of enormous quantities – more than 100,000 tons in the past three months – being shipped from Qatar.

One 8,000 ton cargo is currently loading out of Al Ruwais for receivers in China and another parcel of some 4,000 tons is marked down for Israel.

Netback assessments for Group III grades out of Middle East Gulf are maintained for this report as new markups for regional markets such as Europe and the Far East will take effect during June. Prices are $1,465/t-$1,575/t for 4 , 6 and 8 cSt grades with partial approvals. Nexbase-branded oils sold ex Sitra carry full approvals and therefore bring slightly higher netbacks in some markets. These levels may now be $1,500/t-$1,595/t for all three main viscosity grades.

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

Prices for Group II oils imported into the U.A.E. in both bulk containers and flexi-tanks and sold from storage are at $1,575/t-$1,685/t for 100N, 150N and 220N and at $1,845/t-$1,900/t for 500N and 600N. The wide ranges reflect the fact that these oils have arrived from locations ranging from the U.S. to the Far East and the Red Sea as well as variations in parcel size.

Africa

South African shipping sources reported another large cargo loading out of Rotterdam and Fawley, U.K. carrying 15,000 tons of various grades – perhaps Group l, II and III. The parcel will arrive in Durban around the end of June.

At the same time the same major has loaded a smaller quantity of base oils for receivers in Abidjan, Cote d’Ivoire.

In addition to the two confirmed cargoes loading out of the Baltic – totaling 26,000 tons of Russian export barrels, two more cargoes could load for Lagos during June. The first is from Spain’s Mediterranean coast, and the second is from the Baltic. Each is expected to be around 5,000 tons.

Availability, or lack thereof, is badly affecting markets in Nigeria, and with receivers having to pay more than three times as much as earlier this year, the base oil market and associated finished lubricant markets are under extreme pressure to keep functioning. Offer prices for Group I base oils landing into Apapa port in Lagos reflect the latest FOB levels from the Baltic, plus freight and margins. These numbers are assessed to be around $1,540/t for SN150, $1,745/t for SN500, around $1,765/t for premium SN500 and around $1,795/t for SN900 with viscosity index of at least. Bright stock generally remains unavailable, although there may be some smaller quantities on the Baltic cargoes. If so, then landed prices for this material would be in the order of $2,150/t-$2,250/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.