Base oil prices hit new lows almost daily and offers become meaningless unless accepted within hours. One source claimed that demand exists, but people just arent buying.

Demand is only notional, really, with most players living hand-to-mouth across northwestern Europe, United Arab Emirates and West Africa. For example, some 3,000-4,000-ton parcels are split between more than 10 receivers, instead of just one or two.

The European mainlands API Group I FOB prices have fallen by an indeterminate amount. Yesterday afternoons offers were $645-$685/t for SN 150, despite it being less available, $620-$655/t for heavier neutrals, and $930-$965/t for bright stock.

These are loosely termed export sales, where normally larger parcels of Group I base oils are loaded into sea-going vessels destined for markets outside Europe.

Local prices have blurred with export levels, with some sales $40-$50/t lower than anticipated.

Demand for Group I replacement stocks has been muted so far this year, with a number of blenders commenting that they have supply for another month or so. Many European blenders are opting to move, at least in part, to Group II. With storage options at a premium, many will only buy bright stock from the Group I range, although some sellers will only offer bright stock if its coupled with other Group I grades.

Group II prices are down $45-$60/t in U.S. dollar and euro equivalents, with revisions for individual customers and Far East and U.S. sources announcing further reductions almost weekly.

Levels of $685-$710/t for light grades are becoming normal, with heavier vis 500N and 600N offered ex tank at $680-$730/t. Suppliers with less-qualified products under approval systems are $10-$25/t lower, competing almost directly with Group I. Offers to mainstream blenders were $695-$725/t and $710-$740/t depending on viscosity.

Buyers are asking why Group III prices have remained relatively untouched by the 40 percent drop in last summers base oil prices. Suppliers are now reacting with large adjustments effective immediately, but many users of these grades are demanding compensation for prices paid over the last few months, when all other base oil values were falling. Quite how this will be accomplished is not clear.

Buyers are drawing attention to feedstock costs, which have more than halved for primary production of these grades. However, production from gas-to-liquid sources is less transparent, with some suggestions that raw material costs have not moved. On this basis, it is assumed that they were never very high in the first place, and the real costs were from new technology plants research and development investments and capital expenditures.

The new years new levels have been announced, at 705-725/t for ex tank sales of both 4 cSt and 6 cSt grades, amid further calls for levels to come into line with other types of base stocks.

Baltic and Black Seas

Baltic regions had been relatively quiet, due to the Russian Orthodox Christmas taking place through Jan. 12. Some players have stayed at their desks, trying to accommodate enquiries for large and small parcels of base oil exports, but few deals were reported. Although it may be too early to establish a new vein for prices, levels will certainly have fallen, particularly for the SN 500 grade. Levels are now discussed at $620-$645/t, with higher-viscosity material – more akin the mainstream European production – at the upper end of the range.

Receivers in western Africa and other areas are clamoring for SN 900, but, as usual, are not willing to pay sellers’ asking prices. Sellers are looking for FCA prices around $765/t, but with buyers’ ideas closer to $735/t, there may be a standoff.

SN 150, being relatively short, maintains a higher profile with excellent-quality Naftan material being offered in bulk at around $735/t FOB. Lower quality Russian export grades are available to be loaded into flexies at around $720/t basis FCA.

Similarly, Black Sea markets have been subdued, as many Russian traders return to their desks this week. Turkish buyers are back in the market with a 5,000-ton parcel of two grades being delivered at the end of January into Gebze.

Gradually, exports are returning to the ports utilized prior to the Ukrainian crisis. Prices for Russian exports delivered into Turkey are expected to be around $715/t in respect of the SN 150 grade, with SN 500 around $985/t, both on delivered CIF basis. Mediterranean imports into Turkey appear to have diminished, perhaps with the reappearance of Russian barrels.

Middle East Gulf

Middle East Gulf communities are bracing for the new wave of Group II and Group III from Abu Dhabi. Whilst U.A.E. and Dubai, in particular, remain trading hubs, many trading and blending companies having grown, are now looking to expand outward to India, China, and Far East, where markets have growth potential. The Middle East Gulf is also developing, but openings for private third party traders are becoming limited, with established players fiercely protective of their market share.

There is still a heavy reliance on Saudi Arabian-produced Group I solvent neutrals, particularly in the Gulf Cooperation Council regions, with U.A.E. depending to a large extent on the continuing export of Iranian barrels of Group I SN 150, SN 500 and SN 650. With Iraqi production bedevilled by insurrection and a continuing shortage of base stocks throughout that region, the supply logistics in Middle East Gulf areas has changed radically over the past few months. Iranian material is now believed to trade cross-border into Iraq, and material transiting through Turkey and Kurdistan is moving from Turkmeni and Uzbek sources.

Like all other regions, Middle East Gulf prices are continually under pressure, not just from local sources but from other areas, such as the west coast of India. Iranian re-exported SN 500 ex U.A.E., for example, is priced just above $620/t, with one unconfirmed report of material offered at $595/t FOB. Mainstream prices are now down to $655-$670/t for SN 150 and SN 500 with imported bright stock offered at $928/t CIF for lower-viscosity material, and prime quality at around $995/t basis CIF U.A.E. ports.

There are few new reports for Group II parcels ex Far East sources being offered into Middle East Gulf regions. With the onset of the Chinese New Year not far off, it would appear that these source suppliers are training their sights on the local and Indian markets, skirting the Middle East Gulf. Perhaps this is a precursor to the establishment of Al Takreers Group II production at Al Ruwais, but many receivers deny this and are saying that they have no requirements, and will wait until prices gravitate further before purchasing Group II.

Suppliers apparently are also bemoaning the counters from buyers in these regions, with some calling for prices of around $645/t CIF in respect of all grades. Offers, where made, have been $35-$40/t above these levels.

Africa

Reports are that South African base oil numbers have been adjusted for Group I local production and have been “taken into line with global assessments.” Some industry estimates are that levels will be based on European refinery contribution levels, plus around $100/t. The resultant prices will of course have to compete in the local market, so exactly where numbers lie is down to investigation.

West Africa has seen a number of enquiries being issued from Ghana, Nigeria, Cameroon and Cote d’Ivoire. With some of the existing French territories starting to experience the withdrawal of some Group I grades, receivers have been looking for substitute material, other than Group II grades which are being offered in place of existing light neutrals. These grades are mainly to be supplied in flexies, due to relatively small quantities being required.

Nigerian buyers are sensing that prices may be nearing the bottom of the pricing cycle, and not wanting to miss out, these receivers have registered interests in purchasing large quantities of Group I base oils from Baltic, northwestern Europe and the Mediterranean. These receivers have pre-decided on the prices they are prepared to pay, and have formulated bids some of some $100/t below current FOB levels. These buyers may eventually be proved correct but must wait for the market to adjust before suppliers capitulate to levels that far below current prices.

Offers are $695-$745/t for the range of solvent neutrals along with some Group II low and high vis products. Bright stock offers are $884-$985/t, depending on quality from various sources. Parcels of 3,000-5,000 tons of SN 900 are appearing in offers along with SN 500 in lots of 10,000 tons or more, at $835-$870/t CIF/CFR West Africa ports depending on freight, which is calculated using parcel size.