There are good reasons why some prices have taken a retrograde step, where others have continued to climb.

Take the example where ample stocks of Russian base oils have become available, with storage limitations, and only a few locations that could receive these grades in any quantity. Baltic traders had talked these grades into a position of competing with mainstream production from European majors, so it came as no surprise when buyers opted for mainland supplies rather than incur extra freight costs, limited availability of slightly lower spec material, and the absence of some required grades such as bright stock.

Third party traders offered a simple and fast outlet for Russian material, by lifting large cargo lots, and this process gave buyers sufficient muscle to negotiate lower prices. With further material flowing into the supply system, turning over the stocks of Russian base oils became vitally important. Hence sellers lowered their expectations to move large quantities of this material in a timely manner.

Elsewhere in Europe this has not been the case, with one Mediterranean supplier selling at premiums of around $100 per metric ton over publicized prices for SN 150, SN 500 and bright stock. Combination cargoes of the right spec, in the right place, at the right time still command high prices.

The ranges of prices for API Group I base oils within Europe are now significantly extended. Light solvent neutrals are now between $1440 and $1520/t, and heavier neutrals such as SN 500 are now in a broader range of $1450 to $1535/t. Bright stock is commanding the largest premium at around $130 over published prices in a range of $1570 to $1680/t. (Prices are based on FOB sales or offers from main European base oil suppliers, in Northwest Europe, Mediterranean, and North Africa.)

Extensions to price ranges have all been at the top ends. The lower ends are only offered or quoted in exceptional circumstances. The higher ends reflect where the European market actually lies, but some suppliers are prepared to sell around the lower levels, so these must be included in any pricing spread.

Producers claim they almost always sell above reported levels, using the highs of these reported ranges as the base to which premiums are added.

Russian Baltic prices have adopted a different tack, and whilst sellers tried hard to push prices higher, the temptation of clean selling with large tranches moving from inventory became too tempting for many, and as a result prices have drifted lower for July sales. Levels for SN 150 and SN 500 are now $1385 to $1410/t for prompt July cargoes, depending on cargo size and destination. For example, cargoes destined for Northwest Europe and Great Britain will be sold at higher levels than those earmarked for the U.S., Mexico or western Africa where large parcels of this material are now being sold.

The Black Sea market remains outside the current game plan in the Baltic, with prices for light neutrals SN 100 and SN 150 around $1440 to $1465/t, basis FOB northern and eastern Black Sea loadports. Buyers are still wary of high prices, and whilst there are many shipping enquiries, not many deals have been finalised.

There are questionable enquiries for vessels to move cargo from Iran to Far East destinations such as Singapore and Vietnam. One shipping enquiry for some 40,000 tons of base oils to be moved from BIK to Singapore has been heard. Total exports confirmed from Iran for June and July come to around 35,000 tons, so any one cargo movement of 40,000 tons would seem improbable.

U.A.E. sources state that normal supplies of 2,000 to 3,000 ton cargoes of SN 150, SN 500 and SN 650 are being loaded out of BIK, and some is brought into U.A.E. for local use and for re-export. Prices are reported to be $1410 for SN 500, basis FOB U.A.E. ports, with the remaining grades being utilised within the U.A.E. blending market. SN 150 remains scarce, and some parties are now offering supplies of this grade in containers from the Baltic for around $1525/t basis CIF U.A.E. ports.

The Middle East Gulf has seen a spurt in demand for Group II and Group III base oils, with a number of blenders debating which route to take for the future. Some are stating that supplies of Group II/II+ can be guaranteed from Far East sources, whereas others are forecasting that with the new production of Group III grades starting later this year from Bahrain and Qatar, that this is the way forward. The only sting in this tail is that Group I material which will still be required to supplement Group III grades for many blends is becoming scarcer or less affordable.

West Africa awaits cargoes coming from the Baltic and mainland Europe. Prices landed for mainstream supplies are now $1655 to $1675/t for SN 150 and SN 500, with bright stock supplied into Nigeria at $1835 to $1860/t CFR Apapa port. Levels are similar for supplies into Ghana and Togo.

Group II/II+ numbers remain unchanged in Europe this week, but with sources in the U.S. and Korea piling on price hikes it can only be a matter of time before increases percolate through. U.S. shortages due to turnarounds and refinery maintenance may keep the market tight in Europe. A number of mainland European blenders have confirmed problems obtaining material.

Most receivers expect rises of $35 to $60/t with effect from July 1, resulting in levels of $1490 to $1530/t for the light vis grades, and higher grades around $1580 to $1675/t, all basis ex tank sales Northwest Europe and Mediterranean satellite storage.

Group III is also showing strong demand as many blenders scour the market for extra availabilities. Rumours abound that production will soon flow from the Qatar gas-to-liquids plant, with supplies shipped into satellite supply points in the European mainland. Buyers anticipate increased competition, and perhaps an opportunity to negotiate on prices.

Levels this week remain unchanged at 1365 to 1385/t for the ex tank supplies of 4 cSt material, and 6 cSt grades are pitched at 1395 to 1420/t.

Fundamentals continue to see-saw. Dated Brent is currently at $112.30 per barrel, with WTI showing around $94/bbl, and forecasts are divided on future trends.

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.