Group II markets in Europe and the Middle East also remain relatively flat. Demand for such grades is rising as a number of large blenders reportedly are switching from Group I stocks.

Group III prices continue to come under pressure from the sheer quantities of these grades being made available on the market. News of Neste striking a deal for Chevron to produce Group III for Neste in the United States raises the prospect that less of Nestes oils will be drawn to that market from Finland or Bahrain.

Crude levels initially rallied then later fell following OPECs meeting in Vienna on Monday, after an agreement was reached to maintain the production cutbacks for nine more months. Dated deliveries of Brent crude moved ahead to $65.20 per barrel, now for September settlement. West Texas Intermediate crude rose to $59.00/bbl, still for August front month. ICE LS gas oil climbed $5 to $592 per metric ton in July front month trading.

Prices were obtained from London ICE trading late Monday.

Europe

European Group I export values remain unchanged amid suggestions that availabilities for light neutrals are tightening, although most export destinations have only small requirements for the lighter grades. Producers are concerned that margins are under pressure again.

Levels remain between $550 per ton and $575/t for SN150, $575/t-$600/t for SN500 and $700/t-$740/t for bright stock. Theories that bright stock prices are under pressure due to the award of the Egyptian General Petroleum Corp. tender appear to be unfounded, since that supply levels reportedly will be maintained at current levels of 11,000 tons for the third quarter.

The above prices 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 also appear unchanged based on July prices heard this week. Some sellers considered price hikes but postponed them when crude and feedstock costs remained lower. Upward pressure on base oil prices could build again if crude rebounds, but demand typically ebbs in August, and this could cause downward pressure. At the moment, demand is spiking because some blenders, fearing a run-up in crude, have started to build inventories.

The differential between export prices and sales within the region is unchanged, with the former being 65/t-90/t lower.

Group II values are stable as new supply from a large new European source is fueling competition, as evidenced in offers to new buyers. Information from sources close to the European Commission suggested that the duty waiver on Group II imports may be extended after discussions resume in mid-July.

CA prices for Group II base stocks remained at $720/t-$815/t (640/t-730) for 100 neutral, 150N and 220N and $750/t-$825/t (665/t-740) for 500N and 600N. Values at the lower ends of the ranges pertain to smaller quantities imported in flexitanks, which once again are starting to appear from sources in the U.S. and the Far East.

Group III prices are steady, but increasing availability is raising the likelihood of discounts as suppliers seek to hold onto market shares.

The news that Chevrons Richmond, California, plant in the U.S. will begin making Group III for Neste later this year has been received in varying ways by others in the market. Some speculate that Group II+ from the same refinery will compete with the oils made for Neste.

Group III values are maintained for now at 665/t-710/t for 4 centiStoke grades and 675/t-720/t for 6 and 8 cSt. These prices are for oils with partial slates of finished lubricant approvals sold on an FCA basis ex hubs in Northwestern Europe.

Values for Group III oils with full approvals remain unchanged at 710/t-840/t for 4 cSt, 800/t-865/t for 6 cSt and 775/t-835/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic trade is reportedly dull with fewer and fewer cargoes being loaded out of this region. One of the largest operations in Svetly, Kaliningrad, Russia, has not loaded any cargoes this week, an unusual occurrence, but with the supplying refinery just coming out of a maintenance turnaround, an explanation exists.

The underlying dilemma appears to be that traders and resellers in the Baltic region are unable to buy replenishment supplies from Russian refineries at levels that would allow a profit on sales into mainland Europe where prices remain low. There may be a glimmer of hope insofar that some, only some, Russian refiners are now banned from selling into the Ukrainian market, and this might lengthen the supply of material for export.

One 4,500 ton cargo is fixed into Antwerp-Rotterdam-Amsterdam, while another of 4,000 tons is loading for receivers on the U.S. Gulf Coast.

Prices for Russian export grades are unchanged at $475/t-$500/t for SN150 and $485/t-$520/t SN500, both on an FOB basis. Polish bright stock is assessed at $695/t-$725/t.

Another large parcel has been identified being loaded on an STS basis ex Kavkaz, Russia, in the Black Sea. This cargo is bound for Indian receivers and will consist of around 6,000 tons of Russian export grades. STS at Kavkaz remain around $475/t for SN500, $465/t for SN150 and $525/t for SN900.

Turkish buyers are turning their backs on imported base oils, which are being offered from Russian and Uzbek sources in addition to Mediterranean suppliers. The volatile currency trying economic conditions existing in that country are piling pressure on the local base oil industry, which is almost completely reliant on the refinery at Izmir for supplies of Group I. Smaller quantities of Group II are being supplied from Far East sources as well as by distributors representing the major players.

Prices for offers for Group I base oils from Mediterranean sources are heard to be around $590/t for SN150, $595/t for SN500 and $760/t for bright stock, all on a CIF basis.

Middle East Gulf

After slower-than-usual business last week, Red Sea trade has seen a number of fixtures and inquires this week for cargoes to be loaded out of Yanbual Bahr and Jeddah, Saudi Arabia, with the majority of these parcels going into Indian ports. One large cargo of around 15,000 tons will discharge into two main Indian ports in July.

As the U.S. and Iran continue their war of words, news broke early this week that Iran had exceeded the enriched uranium quota that formed part of the agreement between that country and the U.S., the EU, Russia and China. Sanctions could result, but the exact form is not clear since Iran has given the pool of nations until July 7 to curb the American sanctions currently in place.

This news will have a knock-on effect on the export of petroleum products, including base oils – transactions that have apparently been removed from international view. There are claims that base oil cargoes are still moving out of Iran, although evidence of any trade is scant, but reports from United Arab Emirates still claim that an offer has been received for premium SN500 from Iran at a price equivalent to around $595/t, basis FOB. No other reports or confirmations of movements have been received.

U.A.E. reports describe offers from the Far East competing with cargoes of exports from Kavkaz. Prices for Group I from the Far Eastern source are compatible with levels for the Russian exports and being of superior quality may be preferable. CIF prices at U.A.E. locations for the Black Sea material are $544/t for SN150 and $549/t for SN500, so it may be assumed that Far Eastern oils are on a similar basis.

FOB prices for Group III are unchanged at $685/t-$725/t for all viscosity grades, though 8 cSt grades moving to India and China will be set lower due to lower local selling prices.

After resolution of its dispute with its joint venture partner in Sitra, Bahrain, Neste announced its production agreement with Chevron in the U.S. Implications for the Bahrain facility are unclear, although one source suggested there will be no change in the offtake levels even if some of the current U.S. supplies are being made from the Bahrain source.

The Group III oils marketed by Neste ex Sitra may attain higher FOB levels in markets that attach premiums for approvals. Neste, however, continues to discount some prices within prime European markets, hence FOB levels for these sales are modified this week to$710/t-$875/t for 4, 6 and 8 cSt grades delivered into the European and U.S. markets. Nominal FOB prices on a netback basis are calculated from prices derived from regional selling levels, less marketing, handling and freight costs.

Group II prices within Middle East Gulf regional markets remain in the same ballpark as last reported, with selling prices FCA ex U.A.E. hub storage at $795/t-$900/t for 100N, 150N and 220N and $815/t-$920/t for 500N and 600N.

Africa

In North Africa, trading the EGPC third quarter tender has been awarded to a Swiss-based trader with the arrangement to supply four cargoes of 2,500 tons each and an option for another 1,000 tons to be added to one of these parcels. Whilst prices remain strictly private and confidential, information gleaned from sources would suggest that prices are less competitive than under the last tender, perhaps because fewer parties participated in the bidding process.

Other North African reports describe a 4,000 ton Group I cargo being loaded In Italy this week for discharge into receivers in Morocco. This cargo will comprise of three grades.

The Black Sea inquiry for Nigerian receivers has re-emerged, although exact timing as to when this cargo could be loaded are not clear. It may be that vessels are not easy to charter for this voyage, and that indication freight rates may have rendered the cargo uneconomic.

At the same time another source in the U.S. Gulf Coast is in the frame for a large composite cargo of Group I and Group II grades to be loaded for Nigeria. There may also be scope for a Baltic parcel for consideration to be arranged during July after the restoration of supplies from a major turnaround at a Russian refinery at Perm.

Group I prices for cargoes moving into Nigeria continue to be assessed at the same levels as last reported: $685/t-$700/t for SN150, $700/t-$720/t for SN500 and $885/t-$925/t for bright stock. SN900 is indicated at $725/t-$750/t. All prices are on the basis of CIF/CFR Apapa, Lagos.

The prices above refer to large cargoes of minimum quantity of 10,000 tons in total, 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.