Group II prices remain as before, with light viscosity grades being sold around the upper ranges of the Group l price band, between $1,095 and $1,145/t, with heavier, high VI material showing at $1,175 to $1,265/t, depending on method of delivery and location with the EMEA areas. There are large regional variations to Group II prices, depending on whether supply is imported European base stocks, or supplied into other regions such as the Middle East Gulf, East Africa and South Africa, from Far East sources of production.

Group III prices for material delivered within the European mainland are unchanged. There are reports of lower prices for some Far Eastern imports, but the mainstay producers and import marketers of Group III base oils confirm that delivered levels are 1,310 to 1,340/t for 4 cSt material, and 1,360 to 1,385/t for heavier 6 cSt oils. Group III grades continue to be in short supply, and a secondary or reseller market is evolving, with some of the major purchasers of these base oils trading material to smaller end users and blenders. These price ranges include these transactions, in addition to direct sales.

Other regions such as the Middle East Gulf and West Africa are reported to be quiet during the European holiday period, since there is normally a great deal of interactivity between European, MEG and African players, most of whom are out of station at the moment on vacation. With no reported deals or further cargoes, prices for all regions are maintained as per last weeks report.

On reflection over the last 12 months, average prices for all groups of base oils have increased by around 40 percent, confirming the strength of the market and the potential for producers and refiners to stamp their authority on the scene. Among the main drivers behind the increases has perhaps not been the scarcity of availabilities, but the lack of a surplus of material, which has helped to maintain a balance marginally in favour of the supply side. In addition the relatively recent large increases to crude and feedstock prices have lifted raw material costs back to levels not seen since 2007-2008.

With crude and other fundamentals trading higher by the day, prices for WTI and Dated Brent have now reached their highest levels for some years, even in thin trading, and are now showing at around $91.30 and $93.60 per barrel respectively. These crude levels are creating new highs in response to the cold weather in Europe and the U.S., and also stock levels in the U.S which are reported at an all time low. ICE gas oil has traded at a recent high at $779 at the end of last weeks activity. Low sulphur vacuum gas oil and high sulphur vacuum gas oil as mainstay feeds for base oil production have also moved up substantially in value, and whilst the DB crack is not so pronounced as before, VGO is showing affinity strength with other petroleum products, underlining the trend which surrounds raw materials in the industry at this time.

Having examined the last year, it appears to be relatively simple to predict the future. There have not been any large increases in the European market to take account of new raw material costs, and with some early price adjustments having already taken place in other major markets such as Far East and U.S., it would seem probable that European producers should follow the upward trend early in the New Year.

Those very few commentators who were around this week confirmed that prices were under review, and suggested that, on return after the New Year break, discussions would quickly gravitate to price increases to all types of base stocks within the EMEA regions.

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