Although the almost inevitable effect of base oil prices following crudes downward movements seems to be delayed, many buyers expect the numbers to follow crude down by at least another $100/t in the new year. Most are sitting the next few weeks out, waiting for the market to gravitate to its nadir.

European Group I prices have fallen again, but with few offers on the table, and even fewer completed deals, prices are sketchy, with only a few examples coming to light. FOB levels for the range of light solvent neutrals are assessed at $720-$730/t, with SN 500 at $685-$700/t. Bright stock is maintaining previous levels of $975-$1000/t, now almost $300 higher than the range of neutrals. Some say that this cannot continue and that bright stock will be discounted over the next couple of weeks.

These levels refer to what is normally termed export prices, referring to larger parcels loaded into seagoing vessels, but currently there exists an overlap between export and some local domestic prices, which has clouded the pricing scenario even further.

Domestic prices are non-existent, with only contracted barrels being purchased and delivered at this time. Prices for these supplies have been adjusted over December, in some cases more than three times, to maintain market share and keep prices competitive. The range of prices applying to local trade are continually being mixed into export numbers, with the result that other than delivery, storage and handling, costs prices appear to be on par with what can broadly be termed export levels.

Group II sources have cut prices again this month, and with receivers in Europe looking for lower numbers, prices are set to fall again over the next few weeks. Levels are now $765-$795/t for the lighter grades, and $785-$815/t for heavier material. Lower-tier prices are $725-$750/t and $750-$765/t for the light and heavy grades, respectively.

Group III prices have been adjusted by suppliers over the last two weeks, with levels falling back to 775-795/t for ex tank sales for both 4 cSt and 6 cSt grades.

Baltic & Black Sea

Baltic FOB offers for Russian export barrels have come out at around $680/t for quantities of SN 500, but renegotiations and back-trading are increasingly common due to the rate of change in prices. These moves by buyers extend the pressure on offered levels, and sometimes counters of $20-$30 can be successful. SN 150 still holds a premium over SN 500 levels, with supplies of this grade being quite tight. Offers have come out at $735/t basis in bulk FOB. Straight cut SN 900 is difficult to find, although this week, one Geneva-based trader has offered parcels at around $790/t for prompt January loading.

Black Sea avails of Russian SN 500 have returned, with Turkish buyers showing interest in taking 3,000-4,000-ton parcels of this grade. Prices are difficult to pin down, with one supplier offering delivered levels into Gebze at $730/t CIF. Counters are flying around the market, with many buyers now saying that they want to wait until January in order to determine where the market may be going.

Middle East

Middle East Gulf regions appear to be taking advantage of the time in which many players are away for Christmas and New Years holidays, as there are few reports of new activity. The same price pressures apply to this region, however, and Group I prices generally have retreated again. Noticeably, Iranian barrels have been offered into the west coast of India by local United Arab Emirates traders at levels which are generating interest. These levels have been reported, but not confirmed, at around $685/t basis CFR, which would netback to FOB levels of approximately $35-$45/t lower.

Other imported Group I prices have been recorded at $760-$775/t CIF in respect of solvent neutrals, with a number of bright stock offers and deals completed for this grade from the U.S. Also, sources revealed that some Middle East Gulf-based operators were concerned about laying hands on parcels of bright stock and hence were keen to fix cargoes of this grade even in a falling market. Seeing that this grade was not falling in line with other Group I grades, buyers decided to act rather than delay matters into the new year. At least two cargoes, including parcels of bright stock, will be delivered into U.A.E. during January and February.

Prices for the bright stock were indicated by sources to be between $1025/t and $1055/t CFR/CIF.

Group II activity in the Middle East Gulf areas remains subdued, with demand falling off during December for all the usual reasons. Even given year-end sale prices from some suppliers in Far East, buyers have remained resolute, stating that they foresee lower prices during first quarter of next year, taking account of where crude and feedstock levels now lie.

Suppliers have made offers, but with little interest, both sides appear to have made their retreat -at least until after New Years. Offers this week were $780-$795/t CIF for both light and heavy vis grades.

Africa

East Africa and South Africa are reported as very quiet, with few enquiries for imported products. Being considered are quantities of Russian SN 500 in flexies, which are being imported into Durban at levels expected now to be around $900/t basis CIF in containers.

West African buyers are still in limbo, with only a few purchases of bright stock being confirmed. This is possibly due to the uncertainty of the availability of this grade, weighed against the prices not moving downward with all other types and grades of base stocks.

A few receivers are reviewing the possibility to take parcels of Group II material to replace Group I grades. But a shortage of suitable storage -which would have to be converted from Group I -means that consideration is being given to importing these grades, (which in some cases can be landed at CFR prices) at levels below those of Group I solvent neutrals.

Enquiries for parcels of SN 900 have been issued from two receivers, looking to take large parcels of between 4,000 – 6,000 tons of this grade into Nigeria during February. Others are still looking at taking Group I solvent neutrals in flexies into areas such as Cote d’Ivoire, Ghana and Nigeria, affording players time to take in necessary stocks, but at the same time not committing to large purchases at prices which may go lower yet. Price indications for imported SN 150 and SN 500 are around $845/t CIF West Africa container ports.

Prices heard this week for offers of Group I grades in bulk were around $798-$820/t in respect of neutrals, coupled with bright stock levels at $1034/t all basis CFR/CIF Lagos.

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