Other than some isolated downward plunges, European Group I prices must are almost exactly where they were last week. For the record, light solvent neutrals are $930-$945/t, with heavier products such as SN 500 between $955 and $970/t. Bright stock is $1060-$1085/t, but parcels have been sold both above the highs, and at index-linked prices for January and February, which would be some $20/t below the lows, should prices be maintained during the lifting period.

Prices refer to cargo-sized parcels of Group I from mainstream production in mainland Europe and North Africa where available.

Domestic or local European sales reflect a similar picture, with poor demand percolating through a somewhat depressed market. Many players thought blenders throughout Europe would seek replenishment stocks in January, but even with veiled threats from suppliers that prices might start to rise, buyers do not appear to be coaxed into procuring material.

Sources indicate that buyers believe prices will not rise for Group I products in the near future. Low demand and industry downturn is obviously playing its part, coupled with the general economic scene throughout Europe, which is still recovering from 2008. More importantly, there appears to be increasingly belief that a large move to Group II and Group III base oils may be around the corner, and that Group I, whilst still playing a part, will become less of a force over the next few years.

Group I is assessed with a differential of 80 to 100/t of local sales over FOB export levels.

Baltic and Black Seas

Baltic Sea trade has been thin, with a number of distributors and sellers running down stocks prior to New Years and awaiting replenishment. Some indicate prices for second half January and February, with levels around $860-$870/t for SN 150 and SN 500. Bulk quantities of SN 900 appear to be in short supply, and have been offered in the past at around $920/t, while flexies are priced around $1025/t.

Turkish buyers in Black Sea regions have been quiet, with few small cargoes of Russian SN 500 reported. A quantity of Turkmeni SN 350 is being brought through Batumi port, and the first 3,000-ton parcel is ready for loading in February. Price indication gleaned from sellers is $865/t FOB Batumi, or around $900/t delivered CIF Gebze. This material apparently has excellent specs with a Viscosity Index of 103.

Middle East

Russian supplies of base oils have been reaching Syrian buyers, but with a commercial embargo and a war declaration for ports such as Lattakia, Banias and Tartous, it is extremely difficult to consider delivering base oils into these areas. Supplies from Turkey and Jordan have been made overland, with some small quantities coming across the Iraqi border. Sources for these products are indistinct, but local blenders are just glad to get hands on any material which can be used to manufacture finished lubricants.

Egypt and Maghreb are quiet with no hint about the Egyptian General Petroleum Corporation bright stock tender. Reports are that Morocco has some material for sale, but whether this is a full product tender or just one grade is unclear. Moroccans have been in the market for both Group I and Group II base oils through Mohammedia.

Red Sea regions are reserved with South Sudan problems spilling over into neighboring countries and affecting crude export and base oils imports, which have traditionally been supplied through Red Sea ports or by ground through Kenya.

The Middle East Gulf appears to be in full flow, with many blenders looking for Group I to supplement local avails. With Iranian sanctions soon to be diluted more, possibilities for resuming exports are gaining pace. There are parcels available now ex BIK, but banking limitations are still holding back these exports to local transactions which of course can be supplied for export elsewhere, but at a cost.

Prices for Iranian SN 500 for re-export from the United Arab Emirates are around $900/t FOB, plus a small premium for storage and handling. Offers for a cargo of some 4,000 tons of SN 500 were heard at around $955/t basis CIF west coast India, netting around $910/t FOB U.A.E. ports.

One major finished lube producer will take up the baton on behalf of ExxonMobil for their distribution of Group I base stocks throughout the region. With a high proportion of grades such as marine produced in this region, the market acknowledges that Group I is here to stay, and whilst Group II and III products may dominate the automotive sector in years to come, no substitute for high-vis Group I has yet been found.

Saudi Arabian suppliers continue to service Oman and U.A.E. with high-spec Group I solvent neutrals supplementing the local production of Group I grades.

U.S. and Brazil importers are investigating bright stock cargoes, with a number of interested receivers prepared to share large parcels, which may have to be the norm to limit freight and handling costs. Estimates are that some lower-spec bright stock is being offered into the Middle East Gulf at around $1120/t. Last weeks figure of $1085/t has been vehemently denied by both receivers and sellers who have reviewed the estimated offer.

Africa

After publicity surrounding the increase in East Africas lube business, the actual number of enquiries and delivered parcels in flexies appears to have dropped. Buyers are saying that the time of year has affected their markets, with buyers just now replenishing stocks. Offers for SN 500 in flexies are around $1085-$1125/t. Once again it appears that many blenders in these areas are using recycled base oils which are some $100/t lower in price than offered virgin material.

South Africa importers are looking for another cargo from Baltic or European mainland, since this arbitrage appears to be open. If the difficulty of handling large quantities of base oil through the Durban port and the subsequent distribution to local blenders can be overcome, the timing may be perfect for a large slug of SN 500 to load ex Baltic and find its way to Durban.

Prices could be around $1050-$1085/t delivered South Africa which would be attractive for importers and blenders.

West Africa is receiving the last of the year-end cargoes ex Baltic, northwestern Europe and Mediterranean, with the next round of purchasing possibly not under way until second half February when many West African receivers and traders will be in London for International Petroleum Week.

With few new loadings, and very little change in FOB numbers, delivered levels are considered to remain between $965-$1040/t for Group I solvent neutrals and $1145-$1175/t for European bright stock. Baltic SN 900 ranges from sub-$1000/t up to $1035/t for normal biz. The only prices outside these ranges will be the Ghana tender, which is based on index-linked levels plus a premium. Prices are all based on CIF or CFR sales into West Africa.

Group II/III

Group II prices within Europe have not and probably will not move until after Feb. 1. January will give importers and the few local producers time to consider how and where to pitch.

Light-vis products are still $1065-$1090/t with heavy 500N and 600N selling ex tank Antwerp-Rotterdam-Amsterdam at $1125-$1185/t.

Middle East Gulf Group II supplies appear to be on the up, with more material flowing from Far East. This is amid rumors that suppliers are trying to tweak prices upwards for February arrivals, but staunch buyers have asked where these sources expect to place overproduction of material. The answer lies in maintaining levels or considering discounting. Prices are between $1030-$1045/t for 150N and 220N, with heavier 500N and 600N at $1120-$1145/t. Prices are all basis CIF U.A.E. Other parts of Middle East Gulf with higher freight costs may have premiums attached.

Group III buyers seem to have returned to the fold — looking to replenish stocks, but for lower prices. Importers and European producers say levels cannot go lower, since they would be looking at negative contributions. One large Group III buyer replied that the seller should look at reallocating costs to achieve the necessary return.

Tongue-in-cheek perhaps, but its certainly a buyers market at the moment. Prices remain unaltered, but with February numbers forthcoming, change may be in the air. Ex-tank supplies of 4 cSt are still 910/t and 6 cSt still 920/t.

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