After the OPEC meeting in Vienna, there were rumors of actions and reactions by members, but crude oil prices nevertheless stood still the last week. This is easing the base oil market by adding a measure of stability. Dated deliveries of Brent crude traded in London yesterday at $74.10 per barrel for August front month, little changed from last week. West Texas Intermediate crude rose nearly $4 to $68.80/bbl, maybe because of tightening U.S. crude inventories. ICE LS gas oil is priced at $642 per metric ton, only some $6 lower than last reported but still for July settlement.

Europe

Group I export prices across Europe were level this week, and with a large number of deals completed, there appear to be no limitations on availabilities. In one case almost 50,000 tons of API Group I grades have been sold out of one Italian refinery during June. Sources say this has little to do with attractive pricing and more with demand suddenly rising. Buyers realize prices are not falling rapidly during the summer months and may start to firm depending on raw material costs. This surge of buying activity has taken the pressure off rising stock levels at almost all Group I refineries around Europe.

Light solvent neutrals are still priced between $785 per ton and $825/t, while heavier grades are at $885/t-$925/t and bright stock is $945/t-$965/t. These levels pertain to large cargo-sized parcels of Group I base oils available on an FOB basis from mainland European supply points.

Prices for Group I sales within Europe were flat this week. Sources said demand is starting to fall because many blenders are not looking to increase stocks over the summer months, when cut back on hours in order to perform routine maintenance. Buyers said they see no sign that prices would rise in the short term and that they expect to resume buying at the end of August or beginning of September.

The high differential between intra-regional prices and export numbers remains 60/t-90/t, with the proviso that they may fall towards the end of this week.

Group II levels are reckoned stable since prices for imported oils are unchanged in source markets. In a few cases it is heard that small price cuts may be implemented at the beginning of next month. This follows substantial hikes during June by one main producer – a move that was not not copied by other suppliers.

FCA or delivered prices are stable at $875/t-$920/t for light-viscosity grades and $955/t-$975/t (815/t-820) for 500N and 600N.

Group III markets within the European perimeter, including Turkey, Ukraine and Western Russia, are reasonably stable although there is an undercurrent of firming from suppliers. Sellers are keen to re-establish Group III prices above those for Group II grades after the former sagged under various pressures the past couple of years. Progress is well underway since values rose at the end of May and showed no evidence of price erosion.

Oils with partial slates of finished lubricant approvals remained at 765/t-780/t for 4 centiStoke, 785/t-800/t for 6 cSt 785/t-790/t for 8 cSt, all on an FCA basis. Group III oils with full slates of ACEA and European OEM approvals command higher prices of 800/t-825/t for 4 cSt, 820/t-845/t for 6 cSt and 825/t-850/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

One interesting dynamic is the price relationship between Group III grades, which differs greatly from region to region. European demand appears to be greater for 6 cSt oils, while 4 cSt is most popular and carries a premium in the Far East. Eight cSt oils are priced above other viscosity grades in Europe but cost less in Far East markets.

Prices are for ex rack or truck-delivered smaller lots of Group III and do not reflect costs for material delivered in bulk cargoes to large users such as major blenders or additive manufacturers, which may be considerably lower than levels posted above.

Baltic and Black Seas

Baltic markets are steady. Confirmation came this week that the large cargo reported for Nigeria last week is to be loaded by the weekend. The 10,000-ton parcel will sail to Apapa port in Lagos, the first Baltic cargo to travel that route in almost three months. Receivers have expressed relief that the cargo has been fixed clean, and now expect the vessel to arrive in July. Other routine movements from Riga, Latvia, and Kaliningrad, Russia, into Antwerp-Rotterdam-Amsterdam and the east coast ofthe United Kingdom are scheduled during this last week of June.

Another cargo that deserves attention is a parcel loading out of Baltic for discharge into Gebze, Turkey. This is normally an improbable event, but might be made possible by the vessel involved being Turkish flagged, meaning its owners may have elected to offer discounted freight so the vessel could sail to home waters without ballasting.

Prices in the Baltic are unchanged this week at $740/t-$775/t for SN150, $825/t-$840/t for SN500, $855/t-$870/t for SN900 and $845/t-$920/t for bright stock, depending on quality, source and loadport.

Black Sea sources report the large cargo ex STS Kavkaz, Russia, loaded in early June and departed with a partial cargo of base oils for Rotterdam and thence to the United States Gulf Coast. The base oil quantity on board is reported as 8,000 tons. Prices remain strictly private and confidential but are considered to be below $800 STS for Russian SN500.

There are fewer Group I cargoes this week than sometimes in the past, but receivers in Gebze and Derince, Turkey, said a number of cargoes have been arranged for loading in early July. Prices for these cargoes remain at $795/t-$825/t for light neutrals, although SN600 and SN500 have dipped by some $10/t to $890/t-$920/t, CIF basis.

Fully approved, European-sourced Group III is being offered delivered on a CIF basis to Gemlik, Turkey, at $895/t-$935/t for 4 and 6 cSt grades. Partially approved Group III is being offered into the Turkish market from suppliers moving larger cargoes into European and U.S. distributors.

Middle East Gulf

Large parcels of both Group I and Group II base oils have been reported loading from Yanbu and Jeddah, Saudi Arabia, for receivers on the West Coast of India. Quantities are considerable as a total of more than 30,000 tons may be loading into two vessels sailing to multiple ports in India.

With the Muslim holiday period almost over, markets in Middle East Gulf and surrounding regions would be expected to return to normal, and although Ramadan and Eid do not appear to impede the movement of cargoes into and out of the Middle East, commercial business and trading is dulled during this period due to the daily fasting restrictions.

Many contacts and sources have deserted their desks to attend industry conferences.

Availability of Iranian SN500 dipped again with few new parcels loading out of Bandar-e Emam Khomeyni or Bandar Bushehr. Some ship owners already declared they will no longer lift Iranian cargoes for fear of being subjected to action when the U.S. re-imposes sanctions.

However sources said Iranian SN500 is loading for receivers in India and Hamriyah port in Sharjah, United Arab Emirates. Sources suggested that prices for premium Iranian SN500 have dropped to $810/t-$825/t, which would imply FOB levels around $780/t-$800/t.

Group III trade within the region is buoyant as around 25,000 tons was announced to load from Al Ruwais, U.A.E., within one week. This material is for local United Arab Emirates receivers and their counterparts on the West Coast of India. Other sources within the region are also reputed to be loading large parcels for distribution to hubs around the world.

Notional FOB prices are increased this week due to reports of higher selling prices by distributors in regional hubs. GIven that operating and marketing margins remain the same for distributors, FOB levels are assessed higher to $820/t-$850/t for all three main grades of partly approved oils. Those with full slates of approvals are expected to netback at around $855/t-$885/t.

Bulk cargoes of Group II from Yanbu appear to be flowing into regions other than the Middle East Gulf receivers, as sources suggested that supplies by truck are finding their way into a number of Gulf Cooperation Council member states. The main bulk markets appear to be based in the Indian sub-continent. U.A.E. blenders are reportedly looking to take a large cargo of Group II grades along with the regular supply of Group I grades from Yanbu and/or Jeddah, although some sources claim they are taking Group II material from Al Ruwais in smaller quantities, and do not require larger quantities from the producers in Saudi Arabia.

Imported local supplies of U.A.E. based Group II base stocks being re-sold ex hub storage, are available on either FCA, truck or flexi delivered basis and are priced in respect of the light grades 100N/150N/ 220N at around $1025/t-$1060/t, with 500N/600N between $1120/t-$1170/t. There have been reports of a heavier vis grade from Al Ruwais being offered at $890/t ex-tank.

Africa

North African and cross-Mediterranean trade is to the fore this week with a number of cargoes and supply arrangements being notified. Buyers in Morocco, Algeria and Egypt appear to have elected to take larger than normal quantities of Group I base oils loading out of one Italian source. Wit cargoes of all three main grades, SN150, SN500 and Bright stock loading between now and the end of the month this trade has been boosted by more than 15,000 tons of material from this supply source.

With five new cargoes being announced for West African receivers this week, one could imagine that the Nigerian markets had returned to their peak, but in fact two cargoes are not destined for that particular market. One parcel is booked for Guinea and Cote d’Ivoire, whilst another is fixed into Luanda in Angola. The latter is co-loading out of the Baltic with another port in northwestern Europe, whilst the former is being supplied by incumbent suppliers from Livorno.

The Nigerian cargoes are all loading out of Baltic and mainland European ports, with no reports of any further bookings from U.S. Gulf Coast. it has been suggested however, that another U.S. Gulf Coast cargo is being worked currently but confirmation will not be forthcoming until next week at the earliest. Once again the same old rumors abound, with Group II grades are forming part of the new cargo.

Prices in respect of Group I base oils going into Nigeria are revised this week, since indications from Baltic and from Mediterranean suppliers suggest slightly lower numbers. As indication only, light neutrals SN150 from various sources are assessed between $855/t-$880/t. SN500 is indicated between $955/t-$975/t with mainstream bright stock or lower Baltic between $980/t-$999/t. SN900 ex Baltic supply has been assessed at around $935/t.

Quoted prices refer to large parcels of more than 5,000 tons of Group I base oils delivered CFR or CIF into Apapa port, Nigeria.

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