Some reports suggest that base oil demand is starting to pick up in some areas while remaining dull in others, such as Mediterranean Europe. Levels for the range of light solvent neutral grades are $525-$540/t with heavier neutrals at $520-$545/t.

Bright stock grades are maintained in the same ranges as previously noted, with some buyers waiting to gauge sellers reactions to the latest crude moves. Prices reported in current offers remain between $638/t and $663/t.

These FOB offered prices refer to export parcels of API Group I base oils made available ex mainstream production within Europe and North Africa.

Domestic local prices within Europe remain under pressure from buyers who are almost always looking for lower numbers. One source complained that with the market quickly moving downward over the past three months, buyers have adopted expectations that whenever material is required, prices will always be lower than initial offers. This has led to the market becoming artificially depressed – bringing lower prices which inevitably must move back up given rising raw material costs. This is a seller’s view, which is not necessarily shared by the many buyers who are countering current prices and new offers.

Local prices for Group I base oils being sold ex tank are 40-60/t higher than FOB levels applying to bulk export sales, reflecting the higher storage and handling costs, and also the terms under which payment is made.

There are variations to some reported prices, with some sellers in North Africa setting new tariffs at $620-$675/t in respect of their solvent neutrals and around $750/t for quantities of bright stock. Some buyers say sellers need to reexamine these local selling levels in light of much lower surrounding market levels.

Group II European prices appear to be flat this week – perhaps ripple effects of crude increases have caused uncertainty. There are no reports on further price erosion for these grades. However, in a mid-month market, prices might not have moved anyway.

Market share is paramount, with suppliers very aware of possible competition coming into an already crowded market. Levels reported, however, have taken on slightly higher numbers than last week with the range of light vis grades being sold at $565-$585/t, and heavier vis grades in the $590-$625/t range. Some buyers reported levels $30-$40/t lower, but these offers have not been substantiated, and may apply to lower specification or non-approved grades.

Group III markets seem relatively stable, although some suppliers are complaining about exchange rates and the lack of options to recover these non-controllable costs. Buyers said that with even more new production coming on stream, it may only be a question of time before the market is glutted. In the meantime, 4 cSt and 6 cSt material loading ex rack is 855-885/t.

Baltic and Black Sea

Russian and Belarus exports are still thin due to resellers not wishing to carry large stocks of base oils in light of continual price dips. Even some producers with stocks said they too had to purchase from refineries, and that inventories were priced on material in-tank.

Distributors and resellers are accepting firm deals, and after financial instruments are secured, ordering from the respective refinery takes place. This is leading to problems for supply and also for pricing of the material, since there is an extended window between confirming a parcel to loading.

There are some prompt supplies available, but at higher prices. Prices are in broad spreads, with the two main grades SN 150 and SN 500 between $475/t and $525/t basis FCA and FOB. SN 900 is available at around $575/t on the same basis, along with smaller parcels of light neutrals such as SN 70 and bright stock with varying specs. These products are mainly available for loading into flexies with prices being offered on a delivered basis, or FCA where required.

Black Sea supplies have again been disrupted by the Ukrainian problems with some material being rerouted to the Btumi port for loading. Buyers have expressed interest in parcels which may be available during March with SN 500 and SN 900 being offered in combination parcels for deep-sea locations. Mediterranean cargoes continue to discharge into the usual Turkish ports such as Gebze and Aliaga. Local sources report CIF prices at $548/t in the case of 3,000 tons of SN 500.

Middle East

Middle East base oil trade for Group I products has become something of an enigma, with varying prices being applied to different end users. Last week, prices for Iranian re-exports of SN 500 were reported at $480-$490/t basis FOB United Arab Emirates ports.

It would appear that these reports were exaggerated, and depending on end use, this material is generally available at $520-$615/t. Some sellers have confirmed that for firm deals of large parcels of this grade, they may be prepared to work special numbers which could ultimately be close to $500/t.

Local markets dependent on SN 500 and SN 150 are showing higher levels, at $625-$645/t for truck-delivered material. Imports from producers in Saudi Arabia are priced higher, with high-quality Group I base oils being delivered into Oman, U.A.E. and other Gulf Cooperation Council ports at $635-$655/t in respect of the range of solvent neutrals, with loads of bright stock at $740-$765/t.

Large parcels of bright stock and other heavier vis grades continue to stimulate the interest of buyers in the Middle East Gulf, with a number of sources being tapped to test any possible arbitrage. With almost constant demand for heavier viscosity grades in this region, long term supplies – particularly of bright stock – are fundamental to blenders throughout the Middle East Gulf. Offers of material from U.S. and Far East producers are on the table, and with prices hanging in the balance, many expect to see decisions over the next few weeks to secure cargoes rather than wait.

Group II supplies into the Middle East Gulf are once again coming under pressure from buyers who are seeing more source discounting, particularly from producers in the Far East. Offers for March supplies have dropped again, in some cases by $20-$30/t. Offers are now around $635/t in respect of the light vis products, and with demand higher for the heavier vis grades, large parcels are offered at $660-$675/t.

Some buyers are expressing concerns for future avails of Group II base oils, since a number of extended turnarounds have been disclosed by some of the prime producers in the Far East and the U.S. This situation will not affect the short term supply picture, but could affect this years second and third quarters. A number of Middle East Gulf buyers are discussing steps to secure contracted longer term arrangements, which would act as protection against any potential temporary short supply situation.

Africa

West Africa markets, long since dominated by Nigerian imports, are changing, with a number of traditional receivers based in locations such as Cote d’Ivoire and Abidjan looking to broaden their prospective procurement areas. A number of new enquiries have been issued for small quantities of Group I base oils to be delivered in flexies into these regions, mainly from European and Baltic supply points.

Mainstream receivers in Ghana and Nigeria are now convinced that the base oil market has reached its nadir, and are taking steps to replenish depleted inventories which have been merely topped up during the last few months. Problems in the Baltic have not helped, with some traders facing fixed price offers which may be difficult to maintain should the market start to turn.

Prices remain flat. With one eye on weak base oil prices and another on rising crude levels, buyers in West Africa are now looking to firmly fix cargoes for delivery over the next three months. Some are investigating a new concept of financing forward contracts through an exchange, then being able to draw down against stocks over an undetermined period, only taking technical issues into account regarding the long term storage of Group I base oils.

Prices remain at $585-$590/t for Group I SN 150 and SN 500. Russian export quality SN 900 is trimmed to $685/t, with bright stock universally offered at $745-$785/t.

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.