The market is fragmented, with pockets of activity here and there, but overall the situation is described as weak to stable with little selling or buying interest.

With Dated Brent crude retreating down to just over $107 per barrel, and ICE gas oil trading at $908/t, down marginally from last week by some $3 to $4/t, feedstock markets prices have gravitated to their own levels, and the market will now operate within those confines. Complexities raise their head in the form of the vacuum gas oil crack rising to the highest for some time due to demand for this particular feedstock.

This will push base oil refiners to strive for higher realisations wherever possible, while at the same time buyers have seen prices for crude and products fall, and are looking to pay lower prices than some weeks ago.

Europe
API Group l prices remain almost at last weeks levels, perhaps with a few dollars or euros shaved off the top end of prices, reflecting the underlying weakness of the whole scene. Levels for Group l light solvent neutrals are $1280 to $1305/t, with heavier grades such as SN 500 still selling at $1290 to $1330/t.

Bright stock still manages to confuse the picture by being priced in some cases below heavy neutrals, ranging from $1265 to $1320/t.

The prices above refer to European mainstream supplies in bulk, on the basis of FOB supplies ex Northwest Europe, the Mediterranean and North Africa.

Baltic and Black Seas
Local or domestic prices have fallen back due to pressure from European-based blenders electing to buy either Baltic Russian material or Eastern European production, which is being priced on a much more aggressive track than mainstream European material. Prices in this area have fallen by some $50 to $60/t, with reports of further adjustments to be effective June 1.

Russian Baltic business has not been to the fore this week, with many distributors trying to squeeze out margins from traders and other buyers who are unwilling to pay the asking price. Buyers have been throwing counters at sellers of around $70/t, which would take prices below $1200/t for SN 150 and SN 500. These levels are not acceptable to distributors who are paying higher prices for FCA sales within Russia and Belarus.

Prices remain the same as last week with SN 150 and SN 500 at $1255 to $1265/t, although one trader has announced buying a mixed cargo of some 5,000 tons of these two grades at $25/t lower. This has not been corroborated by the seller, but suggestions are that combined with a parcel of bright stock this cargo will make its way to West Africa.

SN 900 has been offered at lower than normal prices, around $1245/t, to try to compete with bright stock from mainland Europe, but economics and specifications dictate that two-port loading for quantities of this grade are required en route.

Black Sea trade has also been thin, with no real interest coming from Turkish buyers. Prices had been lowered, to almost what must have been close to break even, at $1220 to $1225/t basis CIF, netting back to something like $1175/t! Even these levels have not stimulated buying interest, although the rumour of another large cargo to go to the Middle East Gulf or India has been confirmed as being worked, but nothing has been finalised as yet.

Middle East
In the Middle East Gulf, the Iranian situation grows no better, with scarce supplies of material coming out of the usual FOB source ports. Shipping has been made virtually impossible for vessels with receiver approvals, limiting the sale of Iranian SN 500, SN 150 and SN 650 to traders in United Arab Emirates, where the material can be taken by small vessels operating under an Iranian or UAE flag.

Prices are difficult to figure on a straight sales basis, but supplies of material are available at FCA or FOB ex UAE at levels not dissimilar from last week. These are assessed at $1240 to $1260/t for SN 150 and SN 500 basis FOB UAE ports

Africa
East and South African markets are relaxed with a number of supplies arriving from Far East. No changes have been reported within these areas, with domestic production restarted after turnarounds in South Africa, but with all demand covered out of planned inventory.

Prices remain higher due to ancillary costs of storage and transportation, and are $1370 to $1455/t basis CIF East Africa seaboard ports, for all solvent neutrals, including light Group ll grades.

West Africa buyers and receivers are sticking to ideas on prices ex Europe and the United States, which would mean producers having to discount levels by another $50 to $70/t. With the fundamentals of crude and feedstock costs levelling out, it is difficult to see how these cuts in prices could be established.

Refiners and sellers trading into this area are maintaining offers at relatively high numbers, perhaps hoping that one or two receivers will buckle and establish the pricing trend.

Prices have not dipped below the rates commented on last week, with landed levels at $1375 to $1415/t for Group l neutrals with the quantity of bright stock confirmed at $1370/t basis CFR Lagos, Nigeria, port. Further expectation for prices to continue to fall appears to be more hope that anything else, but if one producer caves into demand along with rising inventories, there may be some downward adjustments to current levels by possibly up to $30/t.

The probability of bright stock landing into this region at under or around $1300/t appears to be nigh impossible given background factors.

Group lI and Group lll
Group ll availability within the EMEA region has increased a little with new production of Group ll grades from the Gdansk refinery. Reports are that grades are available, but also that there may be issues with final specifications. Prices for Group ll imported material have been adjusted to reflect the comparison with Group l and Group lll, with some distributors bringing levels down $20 to $25/t across the board. This must have been purely market forces driving this action, since source prices have firmed over the past few weeks.

Group II levels are similar to last week at $1345 to $1385/t in respect to lighter grades, with heavier grades such as 500N upwards being priced at $1425 to $1485/t.

In the Middle East Gulf, sales for June have been announced and appear to be some $5 to $15/t lower on a delivered basis. This is not to say that suppliers have lowered prices but could merely be linked to lower freight rates with more shipping tonnage becoming available on Far East to Middle East Gulf routes. Prices numbers could be adjusted downwards by some $10 to $20/t in weeks to come. Group II levels are $1275 to $1385/t for all grades.

Group lll barrels in Europe have been price adjusted downward by relatively small decreases of some 5 to 15/t, with levels showing at 1375 to 1440/t, for the lighter 4 cSt material with 6cSt material selling at 1440 to 1460/t. The changes in prices mostly are effective from June 1, but some suppliers have already made amendments and some have even backdated these for purchase during May.

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.