Crude prices dipped again, with Dated Brent at around $94.75 per barrel and West Texas Intermediate at $91.25 per barrel, the smallest differential between the two in over a year. Some claim Dated Brent will fall below $90 per barrel soon. The risk of disruption in the Middle East influences these levels, but is offset by abundant supply and weak demand. ICE gas oil futures were $802 per metric ton late Tuesday.

API Group I prices within the European mainland have come under sustained pressure with light grades showing the greatest changes, with SN 100 and SN 150 at $925-$940/t. Offers for heavier cuts such as SN 500 are $945-$965/t. Bright stock also slipped downward to $1125-$1140/t.

These prices refer to cargo-sized export offers and sales of base oils made available ex mainland European and North African sources.

European domestic levels have retreated in varying degrees depending on where and when new purchases are being made. Many suppliers are trying to hang on until Oct. 1, although some sales over the last few weeks have been retrospectively credited with discounts to bring prices into line. Whilst recognition is given to a premium for the supply of base oils either ex rack or delivered by road or barge, buyers are keen to bring price levels into line with exports.

The premium being paid for locally supplied Group I base oils is 65-85/t over export levels, although this could be upped some 25/t in the short term due to delays in the responses to altered prices.

Group II prices in Europe have also dipped, taking account of comprehensive source reductions seen from U.S. to Far East, according to some suppliers. Levels are also heavily influenced by Group I movements, since suppliers of Group II grades are treading a fine line between maximizing prices and trying to gain market share from Group I. With the overall finished lubricant market in Europe contracting, and the ingress of Group II and Group III products, Group I usage will tail off significantly over the next five or six years.

Group II may become the primary base oil for blending within Europe. New production from the SK/Repsol plant at Cartagena, Spain, represents the first major indigenous production of Group II in Europe.

Prices have been difficult to gauge with many suppliers issuing new numbers from Oct. 1, but consensus is that levels have retracted $20-$30/t to $1025-$1040/t for the light vis grades with heavier viscosity grades 500N and 600N at $1045-$1085/t, all basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III prices also look susceptible to erosion, but changes have not actually gone through. Sellers may move levels down marginally on Oct. 1. Buyers are anticipating larger decreases, in line with Group I and Group II numbers. Chances are that they will meet somewhere in the middle, and from conversations with both parties this week, it would appear that around 15-25/t will be deducted from current levels of 935-955/t ex-rack.

Baltic and Black Seas

Baltic prices for Russian and Belarus grades have dropped, with SN 150 and SN 500 now $825-$850/t and $860-$910/t, although these prices, whilst being used as the basis for offers, are carrying premiums. Published offers are showing $25-$40/t premiums, indicating that these ranges should be that much higher. However, sellers said that they would be unable to purchase material on an FCA basis from Russian refineries and offer FOB prices at these levels.

SN 900 in its purest form has been heard at $945-$955/t FOB, but with this grade in high demand, not many sellers can supply required quantities. One seller has around 1,800 tons of this material available whilst demand is approaching almost 12,000 tons with two or more buyers requiring large slugs. There are other forms of SN 900 available ex northwestern Europe, but these parcels carry lower specifications and poorer characteristics.

Black Sea trade has not really recovered from the ongoing situation in Ukraine, although there is talk of avails reappearing out of Theodosia. This will possibly be supplies of Russian SN 500 in the main with perhaps SN 150. Turkish importers are opting to take cargoes from the Mediterranean, since these have been more reliable recently, with competitive prices and higher specs. Prices for material landed into ports such as Gebze are $960-$985/t in respect of Group I SN 150 and SN 500. Bright stock is also in demand into Turkey with most parcels being loaded as composite cargoes along with other grades, at $1155-$1170/t CIF.

Middle East

Egypt continues to issue tenders for the supply of bright stock into Alexandria, with the incumbent supplier being awarded the supply continuously. Inside information has pitched the supply of the cargoes of around 2,500 tons of bright stock at around the high of published prices plus some $80/t to cover freight and other ancillary costs.

Middle East Gulf regions report brisk business for the supply of Group I parcels into this area. Group I solvent neutral grades are loading out of Yanbu and Jeddah, and following European pricing, these grades are estimated to be landed during October at $980-$1000/t CIF for SN 150 and SN 500. Iranian barrels are relatively short with much of this material crossing Iran/Iraq borders to supplement requirements in that region. However, for the remaining avails in the southern Iranian ports, prices have dropped, and SN 500 is now $925-$940/t FOB. Smaller parcels of SN 150 are also available for slightly lower than SN 500.

Receivers in United Arab Emirates are looking for replenishment barrels from various sources, including Europe and Baltic. Traders are looking at Baltic-loaded cargoes of 10,000-12,000 tons, quantities which could prove economically sound, even with freight costs. Prices could land into U.A.E. at $890-$900/t for the two main grades if Baltic published prices are possible.

Bright stock is also in demand, with a number of options for sourcing of this grade. With Far East prices dipping, supplies from U.S or Europe may not be competitive just yet. Offers for November arrival into U.A.E. were pitched between $1160/t and $1175/t basis CFR/CIF. Buyers ideas of final pricing have also been discounted and are now around $1125/t.

Group II offers into Middle East Gulf regions have been reported as seemingly almost desperate. Offers to regular receivers of grades from Far East are competing against offers from U.S. sources with prices suggested (yet not confirmed) at below $1000/t for the full range of Group II grades. The report of the $985/t CIF offer from last week has still not been verified, but on the basis of current news, this could be entirely feasible. Offers received from Far East sources have been lowered, but are still being reported at $1020-$1025/t basis CIF U.A.E. ports for October delivery.

Africa

Group II distributors are reportedly finding success in the South African market. Notwithstanding, it appears that there are no plans to curtail production from the two Group I refineries in South Africa. Prices for Group II appear to be attractive, although there are no reported levels yet. Group I prices appear to have stood the test of attrition with levels for the three main grades delivered by truck at $1120/t in respect of SN 150, $1140/t for SN 500, and bright stock at around $1255/t. These prices are based on delivered material some distance form source, with transport costs a big factor.

West African receivers are directly and indirectly in negotiations with Baltic sellers for a number of parcels of Russian base oils. SN 900 is high on the list for many in this region, particularly in Nigeria. Ghana reports are that the annual tender for Tema will be on the table with a number of registered parties interested to participate. Two cargoes have arrived into Apapa recently, one loading out of the U.S and the other from European Mediterranean suppliers.

Prices for cargoes arriving now are irrelevant for future parcels, which are being marked down. Offers now are $50-$100/t lower in some cases, with some taking selling positions on prices and then waiting for the market to gravitate before making arrangements. With raw material costs falling, even receivers in Nigeria are not keen to make instant decisions, since comments this week implied that most major buyers could sit on the fence for some weeks before being forced to replenish inventories.

Group I neutrals offers are $ $970-$1010/t, with bright stock, where available, at around $1190/t. SN 900 is offered, in large quantities with apparently no supply backup, at $995-$1020/t, depending on quality and specification.

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.