In the shadows, Group II sellers are pleased. Group I price increases are merely adding opportunities to the increasing domestic enquiries for Group II.

Dated Brent is around $107 per barrel in late Tuesday front month trade, with ICE gas oil still at $897 per metric ton.

Group I prices now must be upped to $970-$990/t in respect of the light neutrals, with heavier neutrals SN 500/600 offered in limited quantities at $995-$1030/t, all for prompt supply, with the added rider that April barrels will be higher if supply remains short.

Bright stock, meanwhile, has gone exceptionally tight, with larger parcels almost unavailable for spot trades. Contracted levels remain, except that sellers are complaining that the indices which these products are linked against appear to be too low and not in line with the market.

Spot avails of bright stock are now $1125-$1160/t, with only a few of the majors having any real quantities to offer.

Prices pertain to export sales and offers of Group I base oil on basis FOB mainland Europe or North Africa where avails allow.

Local sales into European domestic markets have risen in line with export numbers, and with most buyers covered by indexed contracted volume sales, there is no panic among blenders to lay hands on Group I supplies. However, many noted that this is a busy season, when finished lube demand tends to peak. Extra volumes of base oils have not been available to take up demand, resulting in prices being redefined after April 1, with further increases possible.

The premium for domestic sales over export prices is not so expansive this week, estimated at 60-85/t.

Group II levels mentioned above have reflected gains as well, but perhaps not by the same relative values as Group I. With target price ideas raised by importers, levels are now assessed at $1065-$1100/t in respect of the light vis grades along with heavier material at $1170-$1255/t, all in ex tank basis.

Interestingly, Far East producers who are also European importers have not imposed the same criteria to the grade mix as at source, where the light ends are scarce and the heavier vis grades are longer. The European market appears to slightly favor heavier grades, although with some sellers adopting Group II light vis grades as a substitute for Group I light solvent neutrals, the balance may swing over time.

European Group III demand is described as healthy. European producers and importers of Group III appear to be closely guarding their market shares whilst trying to increase volumes across the board.

The effects of a tight Group I market may have some longer-term effects on Group III demand, but this may be ill-conceived, according to selling sources. Opinion is that the severity of Group I problems are short lived and that regular production and supply will resume after Russian and Belarus supply sorts itself out, and of course after the turnaround season. Group III sellers also said that domestic uptakes and avails of Group I are not as affected as spot export sales, hence the relaxed attitude.

Prices appear to be stable, with 4 cSt grades at 920 – 925/t and 6 cSt grades between 925 and 930/t, with all sales on a basis of truck loading ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Russian and Belarus sales and stocks appear to have vanished from the market this week, with no avails found within the Baltic for SN 150 and SN 500. There are supplies en route from Russian refineries for April supplies, but prices are said to be much higher than previous delivered-at-the- frontier (DFA) sales. Sales reports indicate levels will be $970-$985/t as and when the material starts to appear into tank for FOB sales. However, this is on the basis of deals done during March and with an escalation possible on the levels of sanctions against Russia by the U.S. and EU, these levels may have to be reviewed in the coming weeks.

What is clear is that Baltic future sales will still have to compete with limited avails ex mainland Europe, although if these levels continue to rise, it will be possible to fit Baltic sales into the slate for April and beyond.

There were no signs of SN 900 availability this week, although with the two main grades loaded on trains, the heavy material will possibly also become available, but at undisclosed levels.

Crimeas vote to return to Russian control last week hampered the normal supply and FOB loading from ports such as Nikalaev and Theodosia. Turkish buyers reported offers from Russian traders for SN 500, but pricing was far from clear, and delivery not yet confirmed. Uzbek and Turkmeni base oil grades are being used by some Turkish importers who cannot find European Mediterranean barrels for relatively prompt supply.

Prices have risen in line with other European moves to $960-$975/t basis CIF Gebze. Small quantities of Mediterranean supplies have been quoted around $1010/tCIF for SN 500, or around $1075/t delivered same basis in flexies.

Middle East

Middle East base oil business, having been turned on its head in areas such as Syria and Ukraine, has responded with resilience, and supplies of various grades of base oil products have found their way into these markets which used to be so clearly defined. Russian supplies are still believed to be finding ways into Syria, and it is believed that the existing supply routes into Ukraine will eventually be restored from Russia and Belarus as well as from Uzbekistan and Turkmenistan.

The Middle East Gulf seems less affected than other regions. Players in United Arab Emirates report business as usual, with Iranian exports still in demand for local blending and re-exports to East Africa and India. The latter region will be holding back on many purchases until after the prolonged elections in April and also the fiscal year-end at the end of March. This may delay some of the exports from Middle East Gulf to India and may cause a slight back-up of supplies.

Remarkably, prices for Group I within this region have not really moved, although traders and blenders who are reliant on supplies from Europe, Russia and Saudi Arabia report that its only a matter of time before prices increase.

Local imports of Group I solvent neutrals may have edged up, with sources reporting numbers around $1095-$1120/t basis CIF Middle East Gulf, with Iranian export SN 500 at around $995-$1020/t FOB BIK, with re-exports at $1030-$1035/t FOB U.A.E.

Bright stock remains short within the Middle East Gulf regions with no reports of any new imports, either from Europe, which is probably now very unlikely, or from the U.S. As noted last week, a Brazilian parcel of Group I –a substantial part of it bright stock — was being offered, but from local reports this has not been finalized. As noted in this publications Asia Base Oil Price Report column, some 2,000 tons of Pakistani-origin material is destined for U.A.E. This is believed to be lower-cost, quality SN 150 and SN 500.

Contracted supplies from Europe are expected to arrive in Oman and Fujairah for supply to the national lubricant producers, along with larger quantities of Group II mainly from Far East, but also from U.S. suppliers. Being short in the Far East markets, Group II imports of light vis grades are coming under pressure, with sellers not predisposed to grant discounted price levels to receivers in the Middle East Gulf when they can deliver more profitably closer to home. However, heavier vis grades are showing signs of being in demand in Middle East Gulf regions, more so than perhaps at source in Far East, hence this may entice suppliers to maintain prices for both light and heavier vis Group II base oils into this region.

Prices upped $5-$10/t as a result of suppliers market perception, but receivers are stating that prices should be maintained. Light vis grades are $1075-$1110/t, with heavier material at $1150-$1225/t, for material delivered CIF to Middle East Gulf.

Africa

East African and South African markets remain steady with no new reported activity other than local supplies of base oil finding their way from South African refineries, although one party did mention that producers are looking at recent exchange rate variances between the South African rand and the dollar, for increases possibly to locally-sourced material from April 1. These increases are not considered to be more than around $20 equivalent, but may tip South African local prices back against imports of SN 500 from U.A.E., and also may increase the likelihood of recycled oils being considered for some applications outside South Africa.

West African receivers are bracing themselves for new offers for material ex European mainstream supply on contracted business, and also Baltic supplies from April onwards, where all traders and resellers have warned receivers regarding the increasing prices which will apply. Without knowing new FOB levels for April, it is difficult to assess what prices may be offered in respect of large Baltic parcels, but against previous levels into Nigeria for example, prices will be substantially higher.

Levels are estimated — with little firm knowledge of new Baltic FOB prices– at $1165-$1185/t for Group I solvent neutrals, along with bright stock from European sources at $1225-$1265/t. These apply to forward supplies from Baltic, along with European mainland-sourced Group I for April loading.

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.