Some commented that three or four more Group I base oil sources could close, leaving a void in the market, and the consensus at the conference was that this could easily be filled by Group II and Group III supplies. But the question of whether Group I will survive was possibly answered by outlining that some lubricants either dont require or cannot use Group II and Group III base stocks.

For more in-depth analysis, see the authors next column in LubesnGreases Europe-Middle East- Africa.

Group I European price levels are relatively static, with small variations depending on grade and supply source. In some cases suppliers have offered more attractive prices for certain grades to enable the movement of other products either in tandem or separately. For example, one seller has reduced the prices for SN 500 on the basis that buyers loaded a parcel of SN 150 in the same cargo.

These tweaks and adjustments have affected the spreads for Group I grades, with light solvent neutrals now at $905-$925 per metric ton. Higher viscosity material such as grades SN 500 are being offered around $925-$955/t, with substantial quantities of bright stock between $1045-$1085/t. A commenter said that quantities of around 500 metric tons are being offered and sold at around $1100/t.

These prices refer to FOB export sales and offers for relatively large parcels of Group I base oils being supplied ex mainstream locations within the European mainland and North Africa, depending on avails.

Local or domestic sales within Europe are tightly vacillating, with the low ends of these ranges coming under pressure. Local sales of Group I may be the first casualties of the ingress of Group II material into Europe, with blenders being offered deals to inspire sales of the new range of products. At the same time, European Union legislation and new technology will drive the switch to Group II, with the effect that Group I prices may even dip lower. This is not good for Group II prices, since these grades will be expected to compete on a price and package basis with existing blend stocks. Therefore it is in the interest of Group II suppliers to maintain Group I prices at least at current levels.

Currently, supplies of Group I base oils being made by truck and barge are 70-100/t higher than export levels.

Prices for Group II imports into the European market and sold ex tank from satellite locations are maintained, with light viscosity material, 100N and 220N at $1015-$1065/t along with 600N material at $1095-$1165/t. Some of the low vis products are already being substituted for Group I light solvent neutral grades such as SN 100 and SN 150, with more than one supplier of Group I material looking to close production of light grades.

With some of the major blenders in mainland Europe now setting target dates for the transition from Group I to Group II and Group III, the scene would appear ripe for new suppliers to establish themselves perhaps not in all sectors of the market, but at least in those where Original Equipment Manufacturer (OEM) approvals are not required, such as industrial lubricants.

Group III demand is purportedly running high, with a number of local producers and importers selling all avails of both main grades. Some commented last week that they could look at increasing production to take account of a significant rise in future demand which is being forecast to start during the third quarter of this year, after the summer break.

Although sellers would like to push levels higher, they appeared to be realistic when considering that selling levels within the European markets are substantially higher than in regions such as India and Middle East Gulf. Prices are maintained around last weeks for truck-loaded quantities of the two main grades, 4 cSt and 6 cSt, perhaps with a slight inflection on the lower ends of the ranges, with numbers up another 5/t, at 920-925/t and 925-930/t.

Baltic and Black Seas

Baltic levels for Russian and Belarus supplies remain relatively static with the two main grades SN 150 and SN 500 struggling to move upwards. Enquiries for these grades are healthy, however, and one comment was that if 50 percent of enquiries were converted to firm sales, then prices would rise, and most of the available material would be sold out. Levels are left at $845-$855/t, but some offers last week were at $880-$890/t.

SN 900 is reported as rare with few parcels available for traders to take to West Africa or Middle East Gulf. Prices for available material vary depending on source but are confidently reported between $940/t and $975/t FCA storage in Estonia and Latvia.

Black Sea activity, at least from the Turkish viewpoint, is starting to increase. There are many enquiries for both Uzbek and Russian supplies of SN 150 and SN 500 into Turkey. However, players from that area expressed dismay that the Turkish economy is taking longer than expected to bounce back after recent economic and political problems. Prices for Russian supplies are being kept higher, some say on the basis of higher operating costs in the Black Sea region, with SN 150 and SN 500 now between $930-$950/t basis CIF Gebze port. Suppliers are prepared to work deals for quantity or combined parcels where savings can be achieved on sea freight.

Middle East

With the imminent start-up of Group II production at Yanbu, Saudi Arabian producers meanwhile continue to support the region with supplies of Group I solvent neutrals from both Yanbu and Jeddah. As emphasized previously, much of the material leaving these locations is transported by road rather than by sea, with large quantities travelling many miles to Gulf Cooperation Council locations near the eastern part of Saudi Arabia. At the same time, seaborne cargoes are arriving into Oman and United Arab Emirates to supplement the regional production of Group I products, which still remain the mainstay grades of base oils for these regions.

Middle East Gulf avails of Iranian material continue as U.A.E.-origin material is re-exported from ports such as Jebel Ali and Hamriyah. This material is basically made up of SN 500, a great deal of which is going to India or eastern African receivers. Prices for the Iranian exports are assessed in USD terms at around $915-$925/t basis FOB U.A.E. for the neutrals, with some avails of bright stock around $1075/t. Imported Group I grades are finding their way into receivers in the Gulf at around $990- $1020/t for SN 150 and SN 500.

At the same time, Group II imports and Group III production for local sources is starting to make real inroads into the supply scene in the Middle East Gulf. Where these products were initially brought into these regions for transformer oil, electrical oils and other specialty products, they are now finding their way into mainstream automotive lubricant production, with an increasing market for high-end spec lubes for imported vehicles which are being run in the local climates stressful conditions.

Prices for Group II grades are reasonably stable, reflecting the Far East market movements rather than adopting local selling levels. Two suppliers have indicated intended increases to Group II prices effective March 1, but these increases of around $10/t are being dismissed by buyers, and possibly will be withdrawn before being applied. Levels are currently around $1025-$1065/t for 150N with heavier 500N and 600N at $1090-$1160/t.

Africa

East Africa and South Africa continue to rely on the few oil majors for the supplies of base oil and finished lubricants, with only marginal imports coming from Middle East Gulf in flexies and also recycled oils arriving from Bahrain and Yemen. Baltic-sourced Group I SN 500 and SN 150 material is once again en route for South Africa.

Many West African players were in London last week discussing the next raft of cargoes into Nigeria. Receivers in Cameroon are again looking for avails to be delivered into new storage facilities, rather than rely on supplies by truck from Nigerian resellers.

Ghana supplies into Tema are expected to discharge within the next two weeks with additional cargo destined for receivers in Apapa.

Assessed Group I offers are now $975-$1055/t for solvent neutrals with bright stock around $1095-$1160/t depending on source, specification and quantity. Prices have not materially altered for West Africa receivers in months, given the demise of some Group I production in Europe, lack of avails from the U.S., and Brazil not offering significant supplies.

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.