Dated Brent made a slight comeback, increasing to $78.30 per barrel in early week trading, although its predicted to drop below $70 per barrel in the first quarter of 2015. At just below $75, the differential between Dated Brent and West Texas Intermediate is perhaps the smallest its been for some time. ICE gas oil is trading lower, at around $690 per metric ton.

These frequent changes in crude and feedstock prices are too small to affect longer-term base oil prices, but the underlying trend will support fuel prices being brought into line with both buyers’ expectations and sellers’ contribution limitations.

Group I levels within mainland Europe have dipped by perhaps another $10/t across the board, bringing light solvent neutrals to $780-$810/t, with medium vis and heavier neutrals at $770-$790/t. This anomalous situation, where SN 500 is being priced below SN 150, for example, appears to be purely caused by the amount of heavier vis material available.

Bright stock, meanwhile, seems to have flattened, with some offers maintained at levels from weeks back, at $985-$1020/t. This may be due to a tightening of avails, coupled with demand rising in Middle East and Far East, solely for this grade.

These prices relate to export barrels being offered or sold in large parcels ex mainstream Group I production in mainland Europe, or occasionally North Africa.

European local markets have not moved drastically downward, perhaps due to many blenders waiting until after Dec. 1. Assessments from a number of local buyers puts the new expected levels for Group I domestic sales at 30-55/t higher than export offers.

Group II prices in Europe vary enormously. Some offers have been with products not carrying the raft of approvals which can be attributed to the premier league sellers, and these prices have been very low, in some cases below Group I exports for comparable viscosities. However, in a similar vein to domestic European levels, many expect that Dec. 1 will bring prices into line with current expectations, which are lower than current quoted levels.

Many Group II buyers are all too aware of source discounting, which continues in the Far East and in the U.S., and those same buyers are looking to have these adjustments passed down to imported prices within Europe. Levels for Group II are being maintained, with the expectancy that many will be lowered next week. The lighter vis grades, from 100N to 220N, are still $840-$865/t, with the heavier ends at $850-$870/t.

Similarly, Group III prices within Europe are left unchanged, with the market getting used to the new levels of 850-865/t basis ex tank for both 4 cSt and 6 cSt grades. Many buyers believe that downward adjustments will be forthcoming early next week.

Baltic & Black Sea

Baltic sales of Russian and Belarusian base oils are going through a strange period. With this region being instrumental in some of the new lower pricing around Europe, sales appear to be difficult at this time. This may be due in part to the fast approaching year-end, when neither sellers nor buyers want to carry large inventory. According to one seller and a buyer, the ideal situation would be to have cargoes loading mid-December, on the water by year-end, and arriving for discharge in January.

This may be a pipedream for many, as regular liftings will have to continue as and when shipping is available. Prices indicated for the two main grades, SN 150 and SN 500, have stayed approximately the same, with quantities of SN 500 offered at $735 basis FCA. The unusual pricing disparity between SN 150 and SN 500 is more obvious in the Baltic, with SN 150 offered around $80/t higher than SN 500. The reason is said to be that SN 150 is short, whilst SN 500 is abundant.

SN 900 is also short, but is also facing delays to complete cargoes due to timing and also beliefs that prices for this grade may also dip further. Current offers are $845-$860/t FOB.

Black Sea trade appears to have altered enormously after the Crimean episode and the continuing political unrest in Ukraine. Mediterranean suppliers are providing most of the cargoes being imported into Turkey, since with lower prices and availabilities running high, parcels of Italian, Greek and Israeli base oils are finding their way into the Turkish market, which appears to have suddenly found strong demand. This may be for the export of finished lubes into areas of Syria and Iraq, which are short due to constraints on local production and importation of base stocks.

Prices for cargoes landed into ports such as Gebze and Aliaga are around $845/t in respect of quantities of SN 500, with SN 150 in smaller quantities around $895/t and bright stock where required at $1045-$1075/t.

Middle East

Middle East Gulf regions are perhaps a little more encouraging than some other regions, in which demand has fallen to a new low. Activity appears to be relatively high in United Arab Emirates and Qatar and Kuwait, but with the uncertainties of the Iraqi situation, any traditional routes have been altered to take account of new requirements.

Iranian Group I material is reputed to be going cross-border into Iraq instead of finding its way to the southern Middle East Gulf ports where this material was re-exported from U.A.E. traders. Prices for the SN 500 are $790-$800/t basis FOB U.A.E. ports.

Other imported Group I grades coming into the region from Saudi Arabia and Pakistan have been landed into southern Middle East Gulf ports at $825-$855/t for a range of solvent neutrals. Bright stock enquiries are still trying opportunities in Europe and the U.S., with the European arbitrage marginally open. Offers appear to be $1145-$1170/t, since with demand rising for this grade in Far Eastern markets, sellers are able to achieve better returns by selling into those areas rather than Middle East Gulf, where receivers are looking for around $100 lower.

Group II imports are being lined up for early January arrival into Middle East Gulf regions such as Qatar and U.A.E., and with prices for these grades now competing against Group I solvent neutrals, many more blending operations are making the transition to these grades, since with greater reliability on supplies, these grades offer a secure future for end users. With prices maintained at around last week’s numbers of $840-$870/t basis CIF for all viscosities, these levels may come under further pressure from importers since more source discounting is being announced almost daily, both from Far East and U.S.

December may be relatively slow, since buyers want to have low inventories at year-end, and feel that further adjustments are forthcoming over the coming weeks.

Africa

South African reports are that flexies of SN 500 are being delivered into Durban during January from Baltic sources. Prices are competitive, at $950-$965/t CIF, bringing levels for these imported grades down below local prices. A large number of enquiries have started to be issued for these supplies, with importers and receivers wakening up to an opportunity which may be only short-term.

West African sources report that receivers in Nigeria are only looking to take parcels of base stocks arriving after Jan. 1. They do not want to purchase now, since they believe the market has further to fall, and they want zero inventories at year-end. This has paused the purchasing of large parcels from Baltic, Europe and the U.S., with receivers unwilling to commit beyond taking small parcels of Group I grades to tide things over.

Group II offers have been made from the U.S into Nigeria, and reports are that one parcel of some 3,000 tons may be confirmed for January arrival. Prices are believed to be in the same ballpark as Group I offers, with 150N and 600N at $865-$880/t co-loaded with bright stock, which is currently as low as $1070-$1085/t. With other options and alternative destinations for bright stock, these levels may soon rise.

Various specs of SN 900 grades are offered at $885-$1010/t depending on source and specification.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly atpumacrown@email.com.