Prices for API Group I base oils within Europe are under pressure, with many sources in Far East and the United States reducing prices to encourage buying interest amidst potential oversupply of Groups I, II and III.

Group I FOB levels have weakened, perhaps reflecting a cumulative effect of most players returning from the holiday period. Light neutrals are realigned at $975-$988/t, with the heavier grades SN 500 and SN 600 down to $985-$998/t. Bright stock remains buoyant, with prices contained in two offers of $1178/t and $1185/t, which are considerably lower than previously noted, although in combination with other grades, these levels may be construed as an enticement to move combination parcels on a prompt basis.

Prices above refer to cargoes of Group I base stocks which can be made available ex mainland European and North African refineries.

Local or domestic markets are quiet, which is unusual for this time of year. Buyers seem to be playing a waiting game, believing that with crude and feedstock levels falling, it can only be a matter of time before sellers adjust prices downward. This is probably true, but it may take some time for all adjustments to filter through to actual prices, whilst in the meantime, inventories are low with most blenders running on almost zero stocks. Many blenders are now looking for a variety of different grades substituting some Group II base oils particularly for light vis Group I grades. Most are not keen to increase the absolute numbers of different grades being stocked, but the market is changing from certain Group I to Group II material instead.

Domestic sale prices are being pitched at a premium of 85-110/t to export levels, the slight increase this week taking account of drifting export numbers, whilst local prices appear to have remained relatively static.

Group II prices are under scrutiny by a large number of European buyers who are witnessing source producers cutting prices, and these receivers are ever more aware of the globalization for these products, if for no other reason than the lack of any real local or indigenous production. Some suggested that whatever occurs to prices at source should be passed on to buyers in an import market such as Europe.

With Group I levels weakening, the price differential between these grades and Group II products is being largely maintained, although Group II levels have shown a greater downside than comparable Group I grades.

Levels for light vis 70N through 220N are $1050-$1070/t with the heavier range between $1075/t and $1115/t. The heavier end of the grade range appears to be more susceptible to discounting. Prices are based on ex tank sales from various storage complexes throughout Antwerp-Rotterdam-Amsterdam-Germany.

Group III levels have also come under the hammer, with buyers demanding price decreases for further supplies of the two main grades during the remainder of September. Instead of waiting for Oct. 1, buyers have reacted more decisively and faster than perhaps normal, looking for downward movements of 10-25/t for both grades. Some are requesting retrospective discounts to apply w.e.f from supplies taken after Sep 1., but sellers are resisting. Prices have been adjusted to take account of the new perceived levels, with both 4 cSt and 6 cSt at 945-965/t on an ex-rack basis.

Baltic and Black Seas

Sales of Russian and Belarus base oils ex Baltic ports have been stable, with no further talks of sanctions or reprisals for exports coming out of Russian refineries. Most distributors and suppliers have some stock available, although more than one party has expressed worries regarding ongoing prices being demanded by refineries for sales on an ex-gate or FCA basis. Some say that the Russian producers are pricing themselves out of the market, with local suppliers in the Baltic unable to lower levels enough to entice traders.

SN 150 and SN 500 are offered FOB between $955/t and $960/t, with SN 900 being quoted around $1028/t. Although levels appear competitive, with freight premiums of $30-$40/t, they still require some attention.

Black Sea players report that its business as usual, even with Russian and Ukraine on one side and ISIL in Iraq and Syria on the other. A parcel of 3,000 tons of Uzbek I-20A is still haunting the market, with few takers for this product in that quantity. Prices have dipped in bids, with last levels heard at around $915/t basis FOB Batumi port. Mediterranean material from Greece and Italy has been offered into Gebze, with one cargo of 2,700 tons made up of three Group I grades being considered this week. CIF Levels for SN 150, SN 500/600 and bright stock are assessed at $1115-$1125/t.

The logistics of supplies going into war zones are confusing. For example, with Iranian products moving cross-border into Iraq, Turkish production going into Kurdistan and Russian supplies are still finding routes into Syria.

Prices are impossible to detect, let alone confirm, but some sellers have commented that options to supply these markets are worthwhile in monetary terms, and although the routine or normal means of supply and payment are not being adhered to, traders in these regions remain committed to supply whatever base oils are required into these difficult areas.

Middle East

Middle East Gulf regions appear to be faring better than the rest of the EMEA, with demand for finished lubricants rising within United Arab Emirates and the Gulf Cooperation Council countries. Base oil demand is also relatively high when compared to Europe and parts of Africa, with a number of receivers in the Middle East Gulf looking for Group I and Group II base stocks.

Group I imports from Europe may start to rise as arbitrage to Middle East Gulf regions could open. With limitations on quantities available of Iranian Group I grades, prices should have started to rise, but the global edicts which state that no base oils can increase in price at the moment are also being applied to this market. Levels for SN 500 on an FOB basis are $1010-$1015/t. On basis FOB U.A.E. ports this material is being offered, where available, at $1025-$1035/t.

Local Group l grades are still available at $1070-$1110/t. With reverse trades into this region continuing, Group I loading ex Malaysia may be discharging in Sharjah, from whence it first loaded.

Group II grades into Middle East Gulf are being very competitively priced by U.S. suppliers, looking to gain a slice of the market which may be one of the regions only expanding markets during the next few years. New announced levels for October have started to come on to the market and it would appear that levels have been decreased $20-$30/t across all grades. 500N and 600N grades are of particular interest to blenders in Middle East Gulf regions. Due to their higher viscosity, they can take the place of some Group I base oils plus additives.

Prices are now $1020-$1035/t for U.S. material. Far East sources are having to compete, at $1040-$1055/t.

Africa

East Africa and South Africa markets offers for SN 150 and SN 500 in flexies had prices withdrawn by sellers only to be reoffered at lower numbers. Offers are $1135/t and $1110/t respectively, for SN 500 and SN 150, basis CIF Durban.

West Africa receivers have now denied taking material from Brazil, and instead have issued confirmation that a parcel of Group I grades came from U.S. sources. This has not been confirmed by local agents, with subsequently no price indications. Brazilians report that they are not currently working any base oil cargoes for this region, or anywhere else for that matter. Prices offered on the basis of Baltic/European supplies are $1030-$1045/t in respect of Group I light neutrals, with heavier SN 500/600 between $1035/t and $1045/t, basis CFR Apapa port, Nigeria. Bright stock, where offered, is around $1188 CFR Apapa.

SN 900 in various forms ex Europe, Baltic and the U.S. ranges from $1004/t to $1085/t, all basis CFR/CIF Apapa.

Ghana supplies under the annual tender continue ex Mediterranean producers, with further quantities over the contracted 5,000 ton loaded for either other Ghana receivers, or more likely, discharging into 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.