European Group I FOB levels remain in last week’s ranges, with light solvent neutrals at $1035-$1065/t, and heavier neutrals at $1035-$1065/t. Bright stock, however, appears to have become less available once again, perhaps with receivers in West Africa and Middle East Gulf realizing that alternative supplies from outside Europe were just not forthcoming, and that European bright stock was the only option for many. Prices appear to have moved up by $20-$30/t, reflecting FOB levels at $1240-$1255/t. Alternatives to mainstream bright stock are available but no longer at substantially lower prices, with variations on SN 900 and other heavier neutrals coming ever closer to bright stock levels.

Prices pertain to FOB offers and sales of bulk Group I base oils ex mainstream supply points within the European mainland and North African Mediterranean, where avails allow.

Within Europe, Group I base stocks delivered by truck and barge moved slightly higher. Domestic prices took some time to lift off after the initial surge in export numbers some six weeks ago and appear to have kept moving forward, perhaps reflecting the past weeks tight avails. With this situation apparently easing on the export side, it can be expected that the same will happen in local markets, with prices starting to flatten out in the next few days and weeks.

With the reappearance of some Russian Group I barrels from Baltic traders, some blenders have this choice and others from Eastern European suppliers to fall back on (depending on quality required) should prolific majors run into depleted availabilities.

The differential between local prices and export levels has now climbed to 90-120/t.

Group II activity within Europe has been steady but quiet this week, with no price change announcements from Far East or United States suppliers. There are talks of the market moving towards some grade shortages with one major still looking to import a spot cargo of around 5,000 tons of 600N from within their own system ex Korea. Other suppliers have said that they are concentrating on retaining European market share in anticipation of new U.S. imports.

Group II grades remain between $1085-$1125/t for light vis and $1195-$1285/t for the heavier 500N and 600N, all on the basis of sales ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III trade appears to be brisk, with new demand throughout Europe. Sellers claim that had all European economies been running at full strength, they would have struggled to supply all Group III requirements, but with many countries still experiencing downturns, the market has been slower to grow.

Prices remain attractive within European markets, with exchange rates being one of the only negatives for importers. Levels are 955-960/t in respect of the 4 cSt grades and 965-975/t for 6 cSt grades, all basis ex tank sales.

Baltic and Black Seas

Baltic sales of Russian and Belarus base oils are starting to return to what they were prior to the Ukraine situation. With the agricultural season in full swing, though, material is not as available for exports as at other times of the year. Thus, limited supplies of base oils have been flowing through, and distributors and traders have found outages in many Baltic delivery locations.

SN 150 and SN 500 are now available for early June loading although many parcels are being allocated to serious term buyers, who regularly lift these oils for northwestern Europe, United Kingdom and West Africa. Prices are as per last week, at $1000-$1020/t for SN 150 and $1035-$1040/t for SN 500 on basis FOB Baltic load ports. Where some buyers are prepared to accept lower quality material such as I-40A in place of SN 500, prices can be as much as $40/t lower.

SN 900 is still in demand and various blends of different high viscosity base stocks have been concocted to satisfy these requirements. Prices vary enormously depending on quality– from around $1065/t to $1135/t.

Black Sea reports are that local buyers are taking parcels of Uzbek material on a regular basis, whilst Russian SN 500 has not been evident in the market. Prices from Fergana production have been assessed slightly higher, at around $995/t for the light vis grades, up to $1050/t, all basis CIF Gebze port in Turkey.

Turkmeni SN 180 and SN 350 appear to be scarce this week, with one seller commenting that they would not have this material in stock until mid-June at the earliest.

Group I parcels of SN 150 and SN 500 have been sold from Red Sea sources into Aqaba, Jordan, with the hint that some would find its way overland into Syria, where civil strife continues to blight all finished lubricant production. Blended lubes from Turkey and Greece have been imported into Syria and Lebanon, due to blending at Homs being extremely limited.

A number of parcels of Group I base oils have been sold into Somalia and Eritrea in flexies, loading out of United Arab Emirates and Saudi Arabia. Prices are reported to be high due to costs and handling, with SN 150 and SN 500 pitched at around $1300/t CIF.

Middle East

Middle East Gulf Group I imports range widely depending on source and quality. For example, at one end is Iranian-exported material, which is now around $1010/t (dollar equivalent in local currency) and is being re-exported from U.A.E. ports at $1020-$1030/t, basis FOB sales. At the other end of the scale are products from local Group I production in U.A.E. and imports from Saudi Arabia. Solvent neutral grades oils are $1075-$1095/t basis CIF.

Pakistan exports have been offered this week, with neutrals at $1085/t and small quantities of bright stock at $1270/t. These are combined sales, thus with bright stock in U.A.E. currently tight, buyers may be inclined to pay the relatively higher prices for neutrals.

Group I imports are finally running out from Brazil and U.S. sources, and given snug European supply, it is becoming more difficult for blenders in Middle East Gulf regions to purchase spot quantities of Group I. With demand in the Far East buoyant, Group I may be approaching a critical period, particularly for the heavier vis grades such as bright stock.

Several approaches have been made to Indian refiners to supply quality Group I base stocks into this region, thus reversing the traditional trading flow of Middle East Gulf cargoes being imported through western India.

Buyers in the U.A.E. are making further enquiries for large parcels of bright stock, and with few offers forthcoming, prices look set to rise for any available cargoes. Offers have been heard at $1275-$1290/t, with one trader offering a parcel of some 5,000 tons of lower quality bright stock at just above $1300/t.

The Takreer Al Ruwais plant start-up will be further delayed, perhaps until 2015. This plant will ultimately produce Group II and Group III grades. The Group III supply scene within the region is forecast to move to oversupply when this unit comes on stream. Group II, traditionally coming from Far East and some smaller imports from the U.S. will also be somewhat affected.

Reports on prices for Group II imports into Middle East Gulf ports have been mixed, with some suppliers offering higher prices for June cargoes. These levels are $20-$25/t over current landed prices, and are being fiercely resisted by buyers. The outcome of negotiations will not become clear until next week, so until then prices remain at $1085-$1120/t in respect of light vis grades with heavy grades at $1110-$1145/t, basis CIF/CFR Middle East Gulf ports.

Africa

East Africa and South Africa sources report a number of enquiries for Group II to supplement local Group I production. One blender said that it was becoming necessary to utilize these grades to formulate new automotive lubricants required in southern and eastern Africa. Offers for these grades have been made for flexi delivery, but with one major Group II supplier now operating a satellite supply hub out of Durban, this market may be the next to adopt Group II base stocks. Prices are blurred but estimated levels ex tank have been suggested as $1155-$1180/t for the light vis grades, and the heavier material at $1220-$1265/t.

Some receivers in West Africa are reportedly capitulating to accept that price levels are not moving downwards in the foreseeable future. The hopes that more material, and hence lower prices, would become available out of the Baltic and other European sources appear to have been dampened.

Levels for Group I solvent neutrals loading out of northwestern Europe and/or Baltic ports are now assessed at $1125-$1165/t, with European mainstream bright stock around $1310/t. SN 900 and other heavier Group I material is being offered at $1185-$1275/t depending on spec and source.

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.