Dated Brent has moved up by some $3 per barrel to just below $109 in Tuesday trade for front month settlement. West Texas Intermediate has returned to trade at above $100 per barrel, perhaps reflecting that these price markers will subsist even against rising shale oil and gas production in the U.S.

European ICE gas oil has also strengthened by some $20 per metric ton over last week with levels advancing to around $918/t.

European Group I base oil prices remain unchanged from last reported levels of $910-$930/t in respect of the light viscosity grades. Medium-to-high-viscosity material such as SN 500/600 is available in a range from $930-$965/t, with bright stock being offered at $1045-$1085/t.

Some suppliers commented that even with the market and prices somewhat depressed, quantities of all Group I grades are not universally available with some producers being long on some grades and extremely short on others.

The prices above refer to cargo sized parcels of Group I base stocks, as available ex European mainland and North African supply points.

Domestic sales within Europe appear to be stronger, with a number of large blenders increasing offtake above contracted supplies. Commenters said that there were a number of large finished lube tenders which were required to be filled over the next couple of months, and which were dependent on additional quantities of Group I base oils.

The premium attached to local sales in trucks and barges, expressed as a differential over export levels above, is now assessed at 60-85/t. This delta has expanded over the last ten days due to demand picking up for Group I grades.

Baltic and Black Seas

Baltic trade is reported thin this week, with few sellers keen to supply cargoes at levels which have become difficult to live with. Margins are being squeezed further with one FOB offer being made for a large prompt parcel of SN 150 and SN 500 at $845/t and $855/t, respectively. The total cargo is around 3,000 tons. Prices in this region may soon get a lift from the raft of enquiries from West Africa receivers and traders with replenishment requirements.

Other offers have been heard at higher numbers, but those have attracted little interest from buyers, who have countered at levels around $850/t. SN 900 still appears to be lacking from the region with a number of enquiries from traders looking to move cargoes to West Africa. Prices for this grade are nebulous at best with one offer at $1055/t, whilst other unconfirmed prices are heard around at $925-$945/t FCA. The lower levels are more in line with other available product prices.

Black Sea sales have started to rekindle in a modest manner with a few enquiries from Turkish buyers looking to replenish inventories with quantities of Russian SN 500, and some smaller requirements for SN 150. Prices are being offered higher than Baltic levels with SN 500 typically being around $915-$925/t delivered CIF Gebze or other nearby ports. Some imports of higher spec material have been filtering into Turkey from Mediterranean suppliers, but with no dramatic import program, this region remains subdued.

Middle East

Syria problems are having a direct effect on Turkish trade throughout the region. Although there are pockets of activity for base oils going into war-torn Syria, most of the regions commerce remains on hold.

Egypt has begun another round of bright stock imports into Alexandria which will be supplied by central Mediterranean producers.

Red Sea trade remains constant with a couple of enquiries or fixtures loading out of Yanbu / Jeddah with Group I solvent neutrals, mainly SN 500/600.

Middle East Gulf Group I supplies are once again almost dominated by Iranian exports of SN 500, which are available FOB ex BIK at around $905-$920/t. The search for heavier Group I grades continues with a couple of importers approaching Group I producers in the U.S. to evaluate any possibility to supply from that quarter. Other options including Uzbekistan and Russian sources do not seem able to supply the quantities and grades required.

Buyers are targeting imports of these heavy grades at around $960-$985/t basis CIF UAE ports. Whether this is possible remains to be seen.

Other Middle East Gulf trades for Group I grades remain positive, with this region producing further quantities of finished lubes for both internal consumption in the Middle East Gulf, and also regional exports to a raft of eastern African receivers located from the Red Sea to Mozambique.

With a drive to cut out bogus finished lubes throughout East Africa, the use of recycled base oils continues to be a problem. The issue is not with recycled base stocks, but with blending this material with the correct and compatible additives.

Recycled oils are available from a number of suppliers in Middle East Gulf and other parts of the Arabian Peninsula such as Bahrain, U.A.E. and Yemen, and can save up to 50 percent of the cost of using virgin base stocks. However, import authorities and blenders have the ultimate responsibility to make sure that products are up to standard and can be used for definitive purposes.

Africa

West African receivers are back in the market looking for a number of parcels of Group I base oils to replenish inventories following the year end influx. This phenomenon appears to take place every December and January when European and other suppliers are looking to minimize inventories, and when product can be sold at attractive prices on a one-off basis. The problem is that inventories are full for a couple of months, but require replenishment during March and April.

Baltic sellers are still offering at low points but this enquiry surge may propel levels back to more acceptable tariffs within a few weeks if buying interest is real. Levels for imported grades are assessed at $975-$1020/t for supplies of Group I solvent neutrals with bright stock around $1095-$1150/t.

These levels may start to creep upwards by some $10-$25/t over the next week or two due to demand starting to rise in the Baltic and northwestern European markets. A large demand for SN 900 is anticipated with receivers looking for high vis equivalent grades to bright stock wherever these grades can be used in formulations.

Group II/III

Group II levels in Europe are certainly under pressure, but sellers and distributors are defending discounts and decreases, due mainly to suggestions that prices may be starting to rise at sources in Far East. With U.S producers having just undergone cuts in some prices for Group II grades within their own markets, it would appear that these decreases may not be applied to the European scene which may be deemed strong enough to absorb slightly higher numbers. If Group I numbers start to increase from their low points this will also give added impetus for Group II prices to remain at current levels.

At the moment levels for European Group II grades remain between $1015 and $1065/t in respect of light vis grades, with heavier vis material at $1095-$1165/t. There is anticipated to be a growing demand for light vis grades, with the demise of a number of production units for light vis Group I grades.

Middle East Gulf prices for Group II base oils are set to move up by some $10-$25/t due to the source markets in Far East reporting short stock positions and only contracted quantities being delivered during March and April. Coupled with growing demand in Middle East Gulf markets, sellers are looking to move numbers up sooner rather than later.

Levels are now assessed at $1025-$1065/t for lower viscosity products with the heavier 500N and 600N between $1090 and $1160/t.

Group III prices are starting to firm, according to some producers and sellers in the European market, but evidence to date is that there may be moves yet to come. Again, Far East and Middle East source producers are calling a shortening market in their own backyards. Local demand is increasing, but a great deal of new production is still looking for receivers.

Ex tank sales prices are maintained at 915-925/t for the 4 cSt grades and 920-930/t for 6 cSt material.

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.