As crude and product prices move upwards, base oil players cite the normal base oil delay as a response to any price movement of other petroleum derivatives. How long this delay will last is anyones guess because few sellers are prepared to state where they want to pitch prices. Buyers, on the other hand, are pushing to purchase as much material as possible at current levels.

Part of the cause of this stand-off has been rapidly rising crude levels because of the Iran situation. Dated Brent touched $113.70 per barrel last week.

While crude levels have retreated slightly, values are still around $113.00/bbl, some $2 to $3 higher than last week. International Commodity Exchangegas oil front month touched $966 per metric ton during the last few days, some $13/t higher than reported last week. The crack for vacuum gas oil is again robust around $5.50/bbl in Europe, but with signs that this could rise with demand to around $7 to $8.

These fundamentals mean that base oil prices can only be heading one way unless a quick fix is found to defuse the Iranian situation, and the Middle East Gulf returns to some form of normality.

Sellers are keeping their cards close to their chests, although one producer in Northwest Europe commented that any offers for SN 150 and SN 500 would be priced up by some $25/t for prompt supply during January. Others have said that they would rather not offer at this point until some clarity filtered through on the situation.

API Group I levels remain $1010 to $1055/t for quantities of light solvent neutrals, with heavier grades at $1020 to $1075/t. Although these spreads remain unchanged, the lower ends of these ranges could be difficult to find. Bright stock has moved upwards again. According to two sources in the Mediterranean, prices are some $15 to $20/t higher than those mentioned last week, giving a spread of between $1235 to $1300/t for this grade.

One producer in Northwest Europe was prepared to offer bright stock at prices around $1225/t for a prompt loading of some 4,000 to 5,000 tons. A number of interested parties were in negotiation, all stemming from West Africa.

All the above prices refer to offers or completed business, on an FOB basis, out of mainland European and North African suppliers.

Baltic/Black Sea
The Baltic is still somewhat confusing with almost a two-tier market in place. The traditional distributors who buy their supplies from Russian traders, who in turn buy the material on an FCA basis from the Russian refineries, are offering on FOB basis at new slightly higher levels. Prices offered are around $945 to $970/t for SN 150 and SN 500

Suppliers with direct refinery access say they may sell below market prices for large parcel sizes where the material is being taken out of the European market. Levels of $880/t for both SN 150 and SN 500 may be repeated if buyers can accept these quantities. One commentator suggested that it was too soon to repeat cargoes of that size and composition.

Another area for disposal of these quantities is Nigeria where national strikes continue.

Black Sea business has picked up this week with a number of Turkish traders looking for material for import into Gebze. One cargo of 3,000 tons of SN 500 has been loaded since Jan. 1, but others are under negotiation and may follow. The price for SN 500 was around $965/t basis CIF.

There are a number of offers for SN 150 and SN 500 on the table currently, but there are also wide variations on price ideas. One large parcel of some 7,000 tons of SN 150 and SN 500 is being talked about for India or UAE, with a price tag around or just lower than $900/t. This cargo has not been finalized and prices have not been confirmed.

Middle East
The Middle East is experiencing traumatic times. Problems in Syria are preventing normal supplies of base stocks arriving by sea and going to traditional receivers within this area. Supplies are filtering through but are arriving via circuitous routes. Material is coming in through Turkey in the north, Jordan and Lebanon in the south and east, and even Iraqi supplies are finding their way into some of the blenders within Syria. The origin of the material in each case is difficult to pinpoint, with suggestions of Iran, Russia, and Saudi Arabia as potential sources. Prices are impossible to extract, and the banking system may be defunct.

Iranian material has been reported sold into Turkey, but few cargo lots of export base oils are being heard of now coming out of the southern ports in Iran. Prices reported last week for one cargo offered into India were believed to be so far off the mark that doubts were cast as to the reliability of the information received. On further investigation the FOB prices should have been stipulated at around $980 to $995/t basis FOB Bandar Imam Kohmeini portfor the quantity of SN 500.

The Iranian threat to close the Straits of Hormuz will further limit the movement of base oils through the ports in the south, and should full blown sanctions be applied then both exports and imports may cease. There have been a number of enquiries from Iranian buyers to procure Group lll material, but with banking limitations and high default risks, most suppliers have shied away from this market.

Africa
The East and South Africa markets have been relatively subdued over the past few weeks.

West Africa has its share of problems with a national strike being called in Nigeria. Buyers are assessing the situation on a daily basis, but government departments and banks are unavailable for business. The result is that no transactions can be put into place. The other problems appear to be that although the ports authorities are working “as normal” potential delays and demurrage for vessels arriving at Nigerian ports are growing. .

Prices for cargoes arriving remain as previously reported, but with the future uncertain, it may be very brave traders who sail a vessel into this area knowing that it may take some weeks to be able to discharge the cargo. There could be a cessation of business into Nigeria until the strike situation has been resolved.

Group II/III
Group ll imported grades marketed in Europe have seen little change in prices over the last couple of weeks with many producers having reduced price levels at source. These discounts have been necessary in the face of falling Group l numbers.

Prices for the light Group II grades in Europe are around $1100 to $1130/t, with the heavier vis grades such as 500N selling at between $1225 to $1250/t out of tank, Northwest Europe and Mediterranean storage.

Group lll grades have become particularly short, with a report that a major European supplier had declared a situation of Force Majeure to customers. This situation remains unclear as this has not been borne out from talking with receivers and blenders based in Europe, although some have commented that material is still short in spite of new production now flowing from Qatar and Bahrain.

During the period running up to the holiday season some blenders did not receive total quantities requested, but this may have been due to logistical reasons rather than production difficulties, and allocations were instigated to ensure that material was shared around. From comments received this situation appears to have been resolved.

Group III prices are at 1365 to 1390/t for quantities of 4 cSt material out of tank, and for the 6 cSt grades between 1380 to 1425/t.

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.