Despite global rumors of crude oil downturns, both key indicators have been flat — Dated Brent at $108.70 per barrel and ICE gas at around $906 per metric ton.

With few significant transactions between mainstream suppliers and buyers, Group I business has been difficult to evaluate. Light solvent neutral grades are in demand, but with few suppliers having large parcels available, levels remain at $1035-$1065/t. Had they had availability, prices would have been marked up by $25-$30/t, sellers said.

With slightly more availability for heavier neutrals SN 500 and SN 600, prices remain at $1040-$1070/t. Large quantities are still not widely available, but 3,000-4,000 ton parcels have been offered within this range.

Bright stock, meanwhile, is now available in large parcels from at least three sources within Europe. With slight buyer pressure, levels are $1215-$1230/t — some $5/t less than previously reported.

These prices relate to bulk parcels of Group I base stocks sourced from mainstream producers in Europe and North Africa where availability allows.

European prices for supplies delivered by road and barge are rising via the withdrawal of TVAs and other discounts that were applied over previous weeks to allow gradual price increases.

With Baltic supplies still limited to storage in Antwerp-Rotterdam-Amsterdam-Gent and the United Kingdom, spot sellers have pushed some offers higher still. Prices have moved 5-10/t for the range of Group I, producing a premium over export prices of 75-90/t, which reflects the extra costs of handling, storing and delivering smaller parcels throughout mainland Europe, Scandinavia and the U.K.

With Group I producers ceasing runs for light solvent neutrals and announcing more possible closures, the market would appear to be almost at the mercy” of Group II supplies. However, this is not so. Although Group II holds some answers for new 5W and 10W automotive grades, higher viscosity blends such as some marine and process oils will continue to use higher vis Group I products.

Prices for Group II imports have risen, both as a result of Europes overall base oil increases, and also due to higher feedstock prices and operating costs at Far East and U.S. refineries. Levels within Europe for light grades such as 100N and 150N have increased $10-$15/t (7-10) to offers of $1085-$1125/t. Heavier vis grades from the U.S. have increased by the same amount, whilst imports from Far East producers appear maintained at $1195-$1285/t ex tank sales from Antwerp-Rotterdam-Amsterdam.

European Group III prices are reported as stable. There would appear to be adequate stocks of 4 cSt and 6 cSt within Europe, with news that a number of buyers may look to increase offtake over the next few months. Prices are still 955-960/t for 4 cSt grades and 965-975 for 6 cSt.

Baltic and Black Seas

There have been many Baltic enquires but few trades reported this week as the region slowly returns to normal. Russian and Belarus stocks are flowing again, with many trains en route to Latvian and Kaliningrad borders. Sources within Russia report that recent export duties will not significantly affect base oils, but that FCA levels for the two main grades, SN 150 and SN 500 have been hiked by producers looking for acceptable margins. Levels have increased by 300-500 roubles/t, (approximately $10-$15) which will be passed on to final buyers. Rail transport costs appear to have also increased, perhaps because of exchange rates, by $20-$25/t on an DAF basis.

With offers of $1000-$1025/t, the lower end of this range can be expected to rise to around $1020/t, with the higher end perhaps being supressed by buyer expectation to about $1040/t. These numbers will refer to FOB prices ex Baltic loadports. With freight costs of around $45/t applied to Baltic levels, FOB levels may seem to be on the high side. However, if European production remains tight, or supply goes shorter, then these levels may be achievable.

One large parcel of SN 900 has been reported as under negotiation for loading during the second half of May. Prices have not been disclosed but assessments are that this parcel will be sold at around $1070/t FOB.

Black Sea trade has been thin with few reports of any significant deals. Uzbek and Turkmeni exports appear to be available and not significantly affected by Ukraines situation. Some of the Ukrainian ports have been unavailable for base oil storage and re-export, but other Black Sea ports such as Batumi are being used instead. Large Russian exports ex Theodosia have been disrupted by the Crimean action, but one trader implied that quantities which would have been loaded through this port could be temporarily re-routed via the Baltic and could still be delivered into the Middle East Gulf and/or the west coast of India at competitive prices.

Prices for Uzbek light grades are around $995-$1000/t basis CIF Gebze port, with quantities of Turkmeni SN 180 and SN 350 offered around $5/t higher.

Middle East

Middle East Gulf doesnt seem to be short, with two cargoes of bright stock, one from Europe and the other possibly ex Brazil. Prices were described as competitive, with estimates of landed levels around $1275/t being touted by local sources. Group I local production and imports from Saudi Arabia appear to cover all premium base oil requirements, and with prices of $1065-$1080/t for the range of solvent neutrals, these levels rule out any arbitrage supply from Europe.

Iranian SN 150 has been in demand since the Middle East Gulf markets reported it was tight, with a number of enquiries being floated for two parcels: one 3,000 tons and one 4,000 tons. Prices for Iranian SN 150 have climbed $10-$15/t to around $1040/t. SN 500 remains competitive with a couple of transfer cargoes being sold CFR Mumbai anchorage at around $1045/t, yielding FOB numbers at around $1000/t.

Group II receivers are looking for multiple cargoes for June arrival. Two U.S. suppliers and one from Korea have declined to offer for these parcels due to tight local markets. This may prompt price hikes for available light neutrals by $20-30$/t and slightly lower for heavier vis grades, which have both been notoriously difficult to move up in the past months due to abundance. United Arab Emirates importers received an offer for a 3,000 ton parcel of Group II for $1085/t in respect of 100N and 220N grades and $1145/t CIF for 1500 tons of 600N.

Levels are amended this week for current and future offers to $1075-$1100/t for light vis material with heavy grades at $1110-$1145/t CIF, all basis southern Middle Eastern Gulf ports.

U.A.E. offers for Group l SN 150 and SN 500 in flexies have been made to buyers in various ports in East Africa, with a number reporting increases to landed prices compared to deliveries received in March. Levels appear to have risen some $50/t. Its not clear whether this is due to FOB levels for flexies moving upwards, or increasing freight charges for containers, or perhaps just sellers trying to close out deals at higher margins.

SN 500 levels have now breached $1200/t, at $1195-$1220/t, depending on destination and number of containers.

A 5,000 – 6,000 ton parcel of SN 500 is being considered for import into Durban, South Africa by traders who apparently have a local associated company who will act as importer. This material will be the subject of a break-bulk operation and will be distributed throughout the South Africa region. The parcel is of Russian origin, and may be loaded for arrival during July. Prices are estimated at around $1150/t CIF, basis FOB plus freight economics.

Africa

West Africa buyers are looking for large quantities of Group I base stocks for June and July. Demand for finished lubricants, and hence base oils, decreases during the rainy season, which has already brought heavy downpours to the south of the continent. Sources say that parcels of base oils arriving between now and August will provide sufficient blendstocks until the dry season starts in October.

Reports are that local inventories are low, and many traders are looking to stock up, since they believe that prices may escalate further with more production shortages and tighter Group I supply. Another school of thought is that crude prices will crash, and that feedstocks and base oils will follow.

Prices are set to move up again for renewed offers, perhaps by $25-$30/t in the short term, reflecting tight supply in Europe and the U.S. and the uncertainty of Russian material out of the Baltic. Therefore levels are now $1125-$1155/t in respect of Group I solvent neutrals along with bright stock discharging into Nigerian ports at around $1310/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.