One major producer within Europe suggested that base oil prices will not be responsive to fluctuations in crude and feedstock levels unless these are sustained at least 4-10 weeks. Others suggest that this may have been the case in the past, but with exact costs fed into pricing data almost continually, this was no longer the case.

API Group I levels within European mainland can be described as stable-to-weak with levels nibbled away by buyers with supply options. With adequate supplies being available, at least for most grades, from many players, spot buyers are able to drive levels downward. For example, prices for light neutrals are now $1010-$1015/t, down some $10/t along with SN 500 now available in offers of $1010-$1030/t. Bright stock continues to remain in demand, but with a widening differential between solvent neutral grades and bright stock, this material has also come under pressure. Offered prices are now $1195-$1230/t, depending on quantity and parcel make-up.

Prices pertain to export cargoes of base oils offered, sold or loaded FOB out of mainstream producers storage located with mainland Europe and North Africa, always where availability of grades allows.

Domestic sales prices have reported few movements since early July. Local sales within the European mainland, on an ex-tank, or ex-rack basis are maintained at 110-130/t over export FOB prices.

Group II selling prices appear to be holding up against weakening Group I levels, but most of these grades are imported from U.S or Far East sources. Prices, although necessarily acknowledging Group I, are perhaps more reflective of source costs, transportation, storage, and marketing within Europe.

Prices are tempered to reflect the overall market with numbers coming off, but only by some $10/t at the top of the ranges this week. Levels are $1095-$1140/t for 150N, along with the heavier 500N and 600N at around $1215-$1315/t, with the higher end covering Group II + imports. All prices are basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III sales and prices remain stable within Europe. Talking with end users of these grades, it would appear that many accept current levels, although many would strive to have discounting in terms of quantity and offtake. Buyers now comment that theyre content with supply arrangements, and almost all predict that Group III usage will rise within Europe.

Prices are maintained, with 4 cSt grades at 965-975/t and 6 cSt at 975-980/t.

Baltic and Black Seas

Sellers in the Baltic are firmly hanging onto last weeks levels, but some buyers bids have been as much as $50/t lower than offers. Clearly there is some middle ground, but its not clear which way prices will go. Looking at weakening mainland numbers doesnt help Baltic sellers maintain levels, but with large parcels being negotiated, including SN 900 material, it may be that traders have few options other than to load other material such as SN 150 and SN 500 from Baltic ports. Offers are $985-$995/t FOB, but some bids have been $940-$945/t.

SN 900 in its purest form is being offered at $1055-$1070/t FCA, whilst other blends of various heavy materials are being offered at $1022-$1045/t on an FOB basis. Some material is being taken to Antwerp-Rotterdam-Amsterdam ports where other grades are blended to yield material with viscosity classifying the base oil as SN 900.

Along with the rest of the market, Black Sea offers have moved down $5-$10/t, mainly for CIF cargoes delivered into Turkish main ports. Uzbek base oils ex Fergana refinery are close to $975-$985/t in offers, with some Turkish buyers looking for levels some $25/t lower for all Fergana grades, including the heavier vis products. A Russian major ex Theodosia is looking to export a large parcel of mainly SN 500, targeting west coast India or United Arab Emirates, but the arbitrage is doubtful, unless a discounted price below $845/t FOB could be achieved.

Smaller parcels of Russian base oil are being loaded ex Black Sea for Syrian ports such as Latakia, renewing the supply chain established prior to the Russian crisis. Other reports of base oils from Iraq have been vague, although a Turkish trader commented that supplies have ceased from the Iraqi source, but hope to be reinstated at an early date. Whether these were going into Kurdistan and/or eastern Turkey is unclear.

Middle East

Middle East Gulf markets are quiet in terms of new business. Red Sea sources continue to put together parcels of base oils from Yanbu and Jeddah, with usual destinations of U.A.E., Oman, and again a cargo of some 4,000 tons to Singapore. With Ramadan and summer exodus, only arrivals of Group I and Group II cargoes which had been previously completed are arriving into U.A.E., Qatar, and Bahrain. The mainstay of business will not return to these areas until early September.

Prices within the region have not moved, with Iranian exports of SN 500 at $1050-$1060/t FOB and re-exported barrels of this product ex U.A.E. another $10-$20/t higher. Local U.A.E. prices for imported and locally produced Group I solvent neutrals are reported slightly lower than last week’s levels, at around $1085-$1120/t in respect of solvent neutrals. Bright stock import prices are varied depending on source from $1185/t to $1285/t CIF U.A.E.

Whilst a great deal of the secondary Group I market in Middle East Gulf regions is met by Iranian barrels of base oil exported from the southern ports, receivers have also been dependent on European, Russian and U.S. imports to supplement requirements. With U.S. Group I supplies becoming less available, and with the European arbitrage being closed for some time, importers have been looking at other sources, such as Brazil, for Group I grades. A new Group I plant say, within U.A.E., would help maintain supplies of these critical grades. Apparently this type of project is being considered by a couple of local U.A.E. companies with a projected start-up around 2020.

Exports of SN 500 in flexies are still be arranged through a number of U.A.E. suppliers to receivers in East and South Africa, and these are being loaded at around $1085/t basis FOB U.A.E. ports along with recycled SN 500, which is being offered at around $865/t in flexies in containers.

Middle East Gulf Group II prices are under pressure from receivers who are aware of a huge oversupply situation gathering in the Far East. Another new plant has just come on stream, injecting some 650,000 tons per annum into the market, and with the bulk of Group II imports coming into this region stemming from Far East sources, prices may be affected sooner rather than later. The good news for suppliers is that most decision makers are missing from their desks at the moment, giving perhaps a brief respite to the situation.

Light grades are offered at $1085-$1020/t with heavier vis 500N/600N at $1190-$1125/t.

Africa

East Africa and South African base oil trade mostly takes place within internal markets spanning out from the refineries in Durban, coupled with imports from U.A.E., Red Sea, Far East and occasionally Yemen, in the case of recycled base oils.

These markets have been performing in line with expectations with the addition of products such as white oils, transformer oils, greases and other specialties, which are imported to supplement the Group I base oils coming out of Durban.

Group II avails are now percolating through the South African market with one major taking storage in Durban to promote the sales and distribution of these grades within that region.

West Africa base oil markets are quiet with a number of large parcels under negotiation ex Baltic, northwestern Europe and Mediterranean. There are no arrivals of cargoes notified this week, but with at least three vessels on the water carrying material for West Africa, there will be arrival activity within the next few weeks.

Prices remain undisturbed for cargoes landing between now and mid-August, but thereafter, it is anticipated that numbers will be lower as a result of weakening FOB levels. Levels are expected to be $1055-$1090/t for Baltic and other European solvent neutrals, with Baltic SN 900 remaining at $1115-$1165/t due to variance on quality and spec. Bright stock ex mainland Europe is estimated to hold firm into Nigeria and Ghana with demand high and FOB levels maintained, although traders have the option to soften bright stock prices against higher margins for other grades in combination cargoes. This grade should be $1285-$1325/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.