Dated Brent had dropped below the $90 per barrel mark – more than $6 lower than last week – to $86.40. West Texas Intermediate follows closely at $83.60 per barrel. Dated Brent may go as low as $75 if OPEC continues current output and Saudi Arabia possibly ups production by 100,000 barrels per day. ICE gas oil followed the downward trend, to around $744 per metric ton.

Refining margins may be protected by falling raw material costs to an extent, but with poor demand, those margins may become squeezed.

Suffice to say that snapshot pricing is being used, with all numbers being subject to change.

API Group I FOB levels have been reduced by $15-$20/t on average, with some grades from certain locations showing larger falls. Levels for light solvent neutrals SN 100 and SN 150 are now below $900/t, with offers between $870-$885/t from mainstream supply points. Heavier neutrals have also fallen, and are now offered at $875-$890/t. Bright stock has weakened to below $1100/t with one offer at $1055/t for 3,000 tons to be shipped with other grades.

Prices above apply to export offers for sizeable parcels of Group I base oils which are available ex mainland European and occasionally North African supply points.

Demand is the missing factor in European local markets. Many buyers said that if they can delay purchases for up to a month, they would expect much lower prices than those being touted. Contracted buyers are pushing suppliers to review prices almost daily, with spot purchases almost absent, except in a few cases where urgent needs require a minimum for blends. Comments invited local prices to come into line with export sales, of course with extra handling and storage costs attached. This is an interesting concept based on a “cost plus” basis, rather than a hypothetical premium being added to export pricing.

Differentials between local/domestic and exports have narrowed to 30-40/t, perhaps also due to options for local buyers to purchase lower-priced material from the Baltic, for example, which has pulled down prices for truck and barge sales within mainland Europe.

European Group II prices might be described as setting the pace for Group I grades, since these base stocks have come under intense scrutiny from buyers due to announcements openly made and reported by sources in the United States and Far East. Instead of discounts applied to posted prices, the discounts are being used by buyers in Europe to set new levels on the basis that existing prices were the starting point.

This has brought Group II levels into line or even below Group I levels. Simultaneously, interest in Group II has been boosted by discounting at sources, and many blenders are assessing the quantum move to change from Group I to Group II permanently. Many distributors are unable to handle the number of enquiries for these products, and it may be some time until Group II stocks adequately cover the European market.

Prices are continually reviewed, but levels are $990-$1010/t in respect of the light vis grades, along with the heavier grades at $1015-$1045/t, all basis ex tank sales Antwerp-Rotterdam-Amsterdam-Germany.

European Group III price levels have decreased in line with other product groups, with imported Group III suppliers perhaps trying to eke out prices until the end of the month, maybe on the basis of working on a FIFO system, with existing stocks still in tank. Whereas European producers appear more likely to have reviewed and set new levels for 4 cSt and 6 cSt. This is not hard and fast, with a couple of importers willing to entertain new levels against a tide of pressure from buyers, who once again are raising the threat of having options to buy from competition. Prices for both have been further decreased by 15-25/t, to 870-895/t.

Baltic and Black Seas

Prices from Baltic suppliers appear to have flattened, perhaps reflecting the large decreases during the past ten days or so. Levels for SN 150, which appears to be the shortest, are around $830-$845/t, with SN 500 around $10/t higher. With freight added for these grades, levels are in line with mainstream pricing. But as with mainland European supplies, many buyers foresee the market going lower, and are unwilling to commit. Sellers are stating that they cannot lower FOB levels due to costs of ex refinery gate plus freights to get these products to FOB status in shore tanks in the Baltic. FOB levels for SN 900 have been discussed at around $890-$910/t, with buyers hesitant to accept.

Black Sea Russian trade is scant, with few availabilities being circulated, particularly for the traditional Turkish receivers who appear to be especially good at playing the waiting game. That said, the Black sea trading patterns are changing, with more Turkish receivers placing business with Mediterranean sellers who are now considered to be competitive for mainstream products. One offer for Mediterranean supply is $895-$899/t for neutrals and $1094/t for bright stock.

Uzbek supplies are still available ex Fergana, but these seem to be getting shunned by Turkish blenders due to quality and specs. These base oils are offered at $865-$880/t basis CIF Gebze, which some believe is $40-$50/t too high.

Turkish receivers are considering an offer for Group II material from U.S., which could be $950/t delivered into Aliaga. This would be for one or two of the light vis grades, 100N and 230N, which could be used with SN 500 from Russia if and when avails allow.

Middle East

There are few new reports from Middle East sources, with conflict in Syria and Iraq destroying all base oil market activity. Finished lubricants are getting through to all sides, although reports on activity are elusive.

Middle East Gulf markets are not suffering the same fate as the rest of the EMEA regions. This has prompted sellers into the region to examine prices for Group I base oils used within the area, since they are coming under severe buyer pressure to adjust levels which appear to have been artificially high, whilst other parts of the world have been trimming levels accordingly.

Offers for exported SN 500 ex United Arab Emirates are $30/t higher than new offers for Russian supplies into areas such as East Africa and South Africa, causing a downturn in the use of the re-exported Iranian barrels which were bought and sold on a local basis. Offers were $1125/t in respect of SN 500 in flexies delivered to Durban. Other competitors have been able to supply at around $1090/t, with higher spec and better range of characteristics.

Group I material from sources such as Saudi Arabia has also been subject to price adjustments and solvent neutrals landed into U.A.E. and Oman are now $1025-$1040 basis CFR. Bright stock from U.S sources has been offered at $1110-$1120/t, but receivers are looking for $20-$25/t lower.

Group II levels have been pulled down by offers from U.S. refineries which are forcing Far East suppliers to bring prices into line. Far East suppliers, keen to hold and protect market share, have gone beyond the latest U.S. offers with levels for both light vis and heavier grades below $990/t delivered CIF/CFR. These grades are now below Group I levels, and are tempting dual-purpose users away from Group I. With a regional reliance on heavy vis blendstocks due to higher ambient temperatures, this can only be partially accomplished.

Bright stock continues to be in demand, with a number of traders looking to show parcels from U.S. and South America. European bright stock is also now on the menu with prices lowering every day, providing possibilities for arbitrage to open. Receiver ideas on target prices remain very low, with some looking to take material below $1050/t.

Africa

East African reports are again of substandard base oils being imported into the Kenyan market. Unconfirmed reports are showing prices for such material at around $550/t CIF in containers or drums.

South African importers are looking at fresh sources for regular imports of SN 500 and sometimes SN 150, a demand which has traditionally been met from traders in U.A.E., but whose offers based on re-exported Iranian barrels are now deemed too high when compared to alternative imports and local production. Prices for local Group I material have been discounted over the last month to reflect global market trends. Levels are now estimated at $1095-$1125/t in respect of the solvent neutrals, and around $1245/t for bright stock.

West African markets are strangely quiet, with many receivers requesting either lower fixed prices, or floating numbers indexed to prices contained in publications. Traders are also holding back, waiting for European and Baltic levels to fall further. SN 900 is still in demand, although large parcels are not exactly forthcoming from either the Baltic or the U.S. Target prices for receivers in Nigeria have plummeted for all grades, but with some buyers realizing they may have to purchase an interim parcel before the market goes to its lowest, some are preparing to accept rock bottom levels currently offered.

Levels assessed based on European and Baltic supplies are at $915-$935/t in respect of the range of neutrals, with bright stock now offered at $1108/t. These will vary depending on source and terms, with one SN 900 parcel of 3,000 tons touted at around $1034/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.