These movements have numbed sellers and buyers, with neither sure which way base oil prices will go. Some refiners say that higher feedstock levels will drive costs to be recovered sooner rather than later. But with slow and weak demand and a raft of purchasing options, buyers are not particularly concerned about prices going upward.

API Group I prices within Europe have virtually stood still within existing FOB ranges. Light solvent neutrals are $1045-$1060/t, with heavier neutrals such as SN 500 between $1055/t and $1085/t. Bright stock is still in demand, supported by a number of enquiries from West Africa, but remains at $1230-$1265/t.

These prices refer to bulk Group I base oils sold or offered ex Europe and North Africa mainstream supply points where available.

Sellers and buyers within domestic Europe are satisfied with margin levels. Demand is slipping, perhaps due to the impending holiday period, but also due to relatively weak offtake within Europe for finished lubes using Group I as base stocks. Not the entire market is affected, however, since trade in areas such as the United Kingdom, Germany and Scandinavia is brisk. However, in regions such as the Mediterranean, markets are still not responding to various stimuli that have been radically applied to kick-start demand.

Where sellers were threatening large increases to delivered prices to cover rising production and transportation costs, most suppliers are now apparently content to keep current levels, some saying that prices will remain unchanged, at least until after summer.

Local sales carry a premium over export at 100-125/t. The premium covers extra costs of handling, storing and delivering these smaller parcels of 20-100 tons, either by road or in some cases by barge.

Sales of Group II grades within Europe are reported as having risen monthly in 2014, with forecasts of further growth for the rest of the year. This is only part of the story, since with the imminent threat of further Group I plant closures, many blenders, large and small, are adjusting their base oil slate to accommodate Group II products in blending operations. Group I grades will survive, albeit from fewer sources.

Prices for the light vis grades are maintained at $1095-$1150/t, with the heavier vis material, 500N and 600N, at $1215-$1325/t, all basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

European Group III prices remain static. Some are attempting to coax the market higher, while buyers resist, saying they have options as to where to source these grades. A number of buyers said that they retain more than one Group III supplier, since if one moves out of line on price they can generally switch to another.

They also commented that with the exception of the grades being produced using gas-to-liquid (GTL) technology, which are not on direct sale within Europe anyway, the two main grades are interchangeable from one supplier to another.

Prices are unchanged, with 4 cSt grades being sold ex tank at 965-975/t, and 6 cSt at 975-980/t. Rumors of attempted price increases being tabled from July 1 remain unconfirmed.

Baltic and Black Seas

The Baltic Sea claims steady selling of Russian and Belarus Group I material, mainly SN 150, SN 500 and SN 900. The light neutral grade SN 150, particularly, and in some cases SN 500, have been tweaked by counter offers from traders with the result that the lows have decreased by $5-$10/t, to $990-$1020/t. SN 900 is offered at $1087 DAF border, substantially higher than prices heard for this grade last week. This may reflect higher specification.

Enquiries for SN 500 and SN 900 from Black Sea buyers remain uncovered, with SN 900 only available in flexies from Baltic or northwestern Europe. Uzbek Fergana material have been offered and sold at $948/t FOB Batumi. Other sources have made offers of the same grade delivered into Gebze at around $988/t CIF. Flexies of Fergana material are offered at $1020-$1025/t basis CIF Black Sea ports, with a $10/t differential for East Mediterranean delivery.

Middle East

Middle East Gulf base oil trade is split into a number of regional markets, each with a different set of circumstances blocking all normal trading and supply of base oils. The northern sector has the insurgent problems within Iraq, bordering the long-standing civil strife in Syria.

These markets are being continually updated, but referencing prices for base oils being delivered into and out of these regions is impossible and does not reflect the normalcy of these regions.

Elsewhere, such as in the southern parts of Middle East Gulf, business continues almost as normal in areas such as United Arab Emirates, Saudi Arabia, Bahrain and Oman. Iranian hopes that international sanctions will at least be softened and perhaps lifted during July are rife at the moment, with this intended action opening up southern ports in Iran to international trade. Should this come about, Iranian producers are poised to export further quantities of base oils, although comments from sources this week implied that large quantities of base oils may start to move into Iraq, plugging the gaps left by unobtainable local Iraqi production.

Prices for Iranian exports and re-exports from U.A.E. had been climbing, but appear to have flattened out amidst lack of demand for Group I base stocks in prime markets such as the west coast of India. Local supplies continue into U.A.E., and prices are estimated at around $1065/t FOB U.A.E. ports. Local U.A.E. prices for higher quality Group I solvent neutrals are pegged at last week’s levels of $1095-$1130/t, along with imported and locally-sourced bright stock at around $1285/t.

Sources within this region commented this week that they expect demand to fall in the coming months, with markets not regaining impetus until September. Additionally, Ramadan, which started last week, will also affect commercial activity in this region.

A number of receivers in U.A.E. are looking for opportunities to purchase large cargoes of Group I from the United States, Brazil, Thailand and Russia, but laying hands on avails which can be shipped to this region are becoming fewer and fewer, with prices from some sources such as Europe ruling out the possibility of arbitrage.

Middle East Gulf Group II offered prices have been lifted by $10-$20/t this week for parcels arriving into U.A.E. during July. However, the picture is somewhat confusing. Some receivers say they are paying slightly more for smaller quantities of light vis grades, whilst paying lower prices for the heavier 500N and 600N grades, which make up most of the cargoes into this region. Apparently sellers have suggested that they are short on light grades in their domestic markets in Far East, whilst being longer in supply terms on the heavier vis grades, hence the different pricing stance.

Grades 60N through 220N are being offered at $1090-$1115/t, with heavier vis 500N/600N at almost the same: $1100-$1135/t, which moved downwards in light of a potential oversupply scene. Another twist is that currently there are few offers from U.S. suppliers, with Far East source suppliers being almost the sole operators.

Africa

Theres news of a new blending operation in Ethiopia, but base oils sources for this plant have not yet been disclosed. Satisfactory blend stocks could originate from Saudi Arabia, or could be transported overland through Kenya, Somalia or Djibouti. Bulk storage in ports such as Mombasa or Dar-es-Salaam could be utilized, since suitable shore storage may not be available in the Ethiopian ports in the Red Sea.

Prices for recycled oils landing into East Africa have risen on the back of increases in the costs of collecting used oil, and the prices being paid for these stocks. Sellers in U.A.E. and Bahrain are offering recycled SN 500 material either in drums or flexies at around $925/t CIF East African ports, whereas virgin base oils are being offered at new levels– around $1135/t in respect of SN 500.

West African news this week is that two large cargoes ex Baltic and European Mediterranean have arrived into Ghana and Nigeria, and agents have confirmed that prices are in line with estimates made on FOB basis plus freight costs. Levels are $1074-$1098/t in respect of Baltic solvent neutrals with SN 900 at $1114-$1165/t, basis CFR Apapa, depending on specification. Bright stock ex mainland Europe is $1308-$1322/t, depending on quantity.

There are other offers for bright stock ex U.S. and possibly Brazil, which have been tabled to buyers at $1265/t and $1285/t, respectively, but these may be positional offers without actual quantities and firm prices to traders.

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.