Mainland European prices are complex, since producers are not offering lower numbers for Group I grades. Heavier neutrals and high vis grades such as bright stock are becoming scarcer on the world stage, and with Europe becoming almost the last major bastion of Group I production, there may be some profitable times ahead for purveyors of these grades.

Buyers, however, are festooning the market with counters, in the reasoning that with lower crude and feedstock prices, base oil prices must follow. This scenario is not developing yet, although sentiment for Group I prices throughout the market does appear to reflect a weaker trend.

Last weeks FOB levels have not really fallen, with light neutrals at $990-$1050/t. Heavier grades such as SN 500 have held up at $995-$1020/t, with some strength at the lower end. Bright stock remains in demand, although some sellers are being careful not to overcook prices, perhaps hoping that new arbitrages will open up to export this grade to the Middle East and even Far East. The usual markets for this grade in West Africa are taking up whatever is currently being offered out of European refineries at FOB levels of $1185-$1220/t, although there are reports of quantities of very low-priced bright stock (around $1080 FOB offered out of Brazil).

European local markets have restarted with a distinct north-south divide. The northern and eastern European markets appear to be flourishing, whilst demand for restocking and building inventories does not seem to have kick-started in Mediterranean regions, where demand is lacking. A number of blenders in northwestern Europe have commented that they are now continuously evaluating the use of light vis Group II grades in place of conventional Group I light neutrals. Price differentials are narrowing continuously, and with more and more choices for blenders to use non-approved Group II grades, this part of the market is changing. At the other end of the viscosity spectrum, bright stock and heavier cuts such as SN 650 and SN 700 are gaining popularity.

The differential between domestic sales of Group I products and the lower-priced export barrels dipped, due to local buyers being able to negotiate prices lower after summer break. The variance is established at 75-90/t.

Some markets, particularly in the Far East, have shown Group II levels in line with Group I grades, but a respectable differential still exists within European markets, distancing the two base stocks. Perhaps with nearly all Group II grades being imported, it remains simpler for sellers to control market prices, although at this stage, market share appears paramount to all players, not just to those holding Original Equipment Manufacturer approvals. Prices have not altered radically, with levels for light vis grades at $1055-$1080/t along with heavier vis material between $1085/t and $1135/t, basis ex tank sales, Antwerp-Rotterdam-Amsterdam-Germany.

Group III prices have remained relatively static, with only one or two buyers stating that they have been able to discount levels 5-10/t by preordering larger quantities than normal. Volume discounts, along with contracted future sales, appear to yield slightly lower prices, but the mainstay supplies of Group III from indigenous producers and importers alike seem to fall into the price bands reported last week, with both 4 cSt and 6 cSt being offered and sold at 960-975/t. Prices on an ex-rack basis, Antwerp-Rotterdam-Amsterdam-Germany.

Baltic and Black Seas

Baltic activity appears to be returning to some form of normality with offers for September and October supplies of Russian and Belarus base oils being made to a number of traders. There does not appear to be any restrictions on Russian base oils at this point, although a few receivers have declared that they cannot accept these products at this time due to local sanctions. Price levels do not appear to have fallen, which is marginally pricing these supplies out of the market, just as long as mainstream European supplies remain available at current prices. Baltic SN 150 and SN 500 are being quoted in FOB offers at $965-$975/t, along with at least two offers for supplies of SN 900 at $1033-$1038/t.

Black Sea reports are showing Uzbek I-20A material freely available, either FOB Batumi port, at around $925/t, or delivered CIF Gebze at around $945/t in respect of 3,000 ton parcels. This grade has also been offered on basis FCA Fergana at around $685/t, but with complicated and expensive logistics, this is best left to the experts. Other Mediterranean material has been offered into Turkish buyers, taking the place of Russian barrels which are lacking from the Black Sea market. These parcels of SN 150, SN 500 and occasionally bright stock are being shipped to Aliaga or Gebze, with one 3,500 ton parcel being discharged into Izmir.

Turkish traders are claiming to be supplying both base oils and finished lubes to Kurdish and Iraqi buyers, who are unable to procure material from usual sources.

With the ISIL insurrection in Iraq and Syria, the region’s supply chains for base oil have been challenged, with material flowing from Turkmenistan and Iran into Iraq where prices are rumored to be high, yielding large margins for enterprising traders.

Middle East

Middle East Gulf supplies of Iranian Group I base oils have been affected by this trade, with few parcels being available ex the southern Iranian ports of BIK and BA. Iranian producers have been exporting into Iraq, where requirements for base oils and finished lubricants are exceeding supplies at this time. Middle East Gulf traders have been involved in setting up supply routes to cater for demand in regions affected by the civil and military strife.

The situation has had a knock-on effect on supplies of Group I base oils throughout the Middle East Gulf regions, with a number of traders and blenders in the United Arab Emirates expressing how tight the market has suddenly become, with routine supplies being diverted to new receivers. Cargoes of Group I grades have been imported into the region from sources such as Brazil where prices appear to be exceptionally keen for grades such as SN 300, SN 500 and bright stock. Levels reported for bright stock landed into Sharjah port were quoted at around $1165/t.

Local supplies of Group I grades are still available at assessed at $1085-$1120/t for light solvent neutrals -levels which have risen slightly, perhaps due to increasing demand. Some trades are being reversed into this region, with Group I material loading out of storage in Port Klang, making a return voyage to the U.A.E., where this material possibly originated. Prices will be on an in-house basis, and cannot be compared to normal imports. Levels are estimated to be $1060-$1075/t basis landed CIF.

Group II grades may start to make increasingly fast ingress into the Middle East Gulf, although as a couple of buyers commented this week, they will be constrained by the lower viscosities of these grades, the highest of which, 600N, will be welcomed into the regional pool. Levels for October offers of Group II are not yet finalized, but sellers from Far East and the U.S. are extremely interested in offering parcels of 100N through 600N, including some intermediary grades.

Pitches are reckoned to be $1025-$1040/t for material ex U.S. Gulf Coast, some of which has been sold into nearby west coast of India as an alternative market by traders looking for a prompt fixed sale at some $15/t less than these proposed levels. Suppliers from Far East are not so keen to get into this price war, maintaining that they want to offer levels more akin to September, at $1045-$1060/t, but with supplies of these grades building in inventories across the globe, and with further production coming on stream, only turnarounds and reduced production will curb this oversupply scenario.

Africa

East Africa and South Africa markets reveal few new pieces of business this week, with only offers for SN 150 and SN 500 in flexies being discussed. These have been discounted some $210/t to push purchases, but no confirmation had been received. Offers are now $1145/t, and $1120/t, respectively, for SN 500 and SN 150, basis CIF Durban.

West African trade continues with the arrival of a cargo of mixed Group I base oils ex Brazil into Nigeria, which may be followed by other parcels. Prices are deemed to be competitive for these grades, with Brazilian suppliers keen to move these quantities on a prompt basis. However, traders supplying these cargoes appear not to have dropped prices substantially from those pertaining to Baltic and European-loaded parcels. Levels heard this week back this up, with numbers at $1033/t for light neutrals, and heavier SN 500/600 at $1038/t.

A 5,000 ton cargo of European bright stock has been offered at $1197/t to one large consumer of this grade, with another offer for Brazilian product at $1184/t, although the quality of this material is lower in specification.

Prices offered for various specifications of SN 900 from Europe, Baltic and U.S., range from $1058/t to straight run product at around $1110/t, all basis CIF Apapa port, Nigeria.

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.