Buyers are passive with no apparent haste to restock base oil inventories, which may be lower than normal. Even with demand still missing, some refiners cutting production, and a number of planned turnarounds underway, there does not seem to be a shortage of material.

But the market couldnt be described as long either, since many suppliers have limited avails, but equally there are also limited outlets.

Sellers have been trying to inch prices higher, but with some resistance from buyers, these increases have been largely ignored and a general wave of agreement appears to be appearing as to where prices should lie.

Background statistics back up this scenario, with crude oil marking time at $112 per barrel for Dated Brent, which has been trading in a narrow range for the last four or five weeks. New growth in U.S. markets, and a further slowdown in Far East economies appears to be balancing crude supply and demand. ICE gas oil at $980 has increased some $15 over the week. It has been trading within a relatively short spread during the past two months. Vacuum gas oil prices are maintaining a delta between API Group l solvent neutral at $280 per metric ton, which most refiners deem acceptable in terms of contribution from base oils.

With no drivers to push numbers higher, the base oil market may be facing a stability not seen for some time.

Group l offers are $5 to $10/t higher, but with counter bids from buyers prices across the board, sale prices should be described as stable to weak. Spreads may have narrowed a little from last week, with lower end prices drawing upwards, the higher ends holding steady. Levels for Group l solvent neutrals are between $1065 and $1090/t for light grades with higher vis material $1075 to $1100/t.

Bright stock is pricing at $1090 to $1145/t for small parcels of 1,000 to 1,500 tons for export. But with few takers, it may be difficult to move this material, unless discounting takes place against other grades in mixed cargoes, as has been the case in two parcels loaded out of the Mediterranean and Atlantic.

All the above prices refer to cargo-sized parcels of base oils sold FOB, ex mainland Europe or North Africa.

Local European prices have not moved in line with exports as most producers would have liked, but have actually fallen in many cases due to blenders turning down offers and the lack of finished lubricant demand. Some are saying that this demand downturn is partly due to higher spec lubes lasting longer in the workplace. This cannot be the only factor, since the state of some EU economies hint as to the real picture.

Local European prices in euros, dollars and local currencies are $70/t higher than export numbers for each grade respectively.

Baltic and Black Seas
Russian Baltic activity has slowed because large buyers, in West Africa for example, replenished stocks over the past few weeks. This has slowed any increases which distributors and sellers may have been trying to impose on supplies from the region. But with mainland Europe slowing, differentials due to spec and location have to be maintained, encouraging Baltic suppliers to hold price levels. SN 150 and SN 500 are being offered at $1055 to $1080/t FOB, but with traders seeking $1020 to $1030/t to meet arbitrages which are open to Middle East, East Mediterranean and Central America, a stand-off remains in place with sellers unable to discount further due to higher FCA levels in Russia and Belarus.

Black Sea avails have increased, but with Turkish buyers always looking to squeeze the last cent out of prices, not many deals have been concluded. Of the business completed this week, prices have remained at $1045 to $1060/t for various quantities of SN 150 and SN 500. Some offers are holding at $1090/t for both grades, but without any takers. There are rumours of a cargo of Group ll material headed for Turkish buyers from Far East sources, but no corroboration of this movement could be found.

Middle East business has been subdued in areas such as Syria and Jordan due to the civil strife in the former country, and with Egypt cancelling one of the contracted cargoes under the import tender, demand is being affected in the Eastern Mediterranean. Small cargoes of Group l grades are being sought for Lebanon, possibly for forwarding into quieter parts of Syria, where business still must carry on.

Middle East Gulf
On the other side of the peninsula, the Middle East Gulf market has not turned up any dramatic events. Iranian base oils are still dribbling out of southern ports into receivers in UAE. This business is being arranged locally in small parcel lots, but no cargo movements have been reported out of the Gulf to India or East Africa other than in flexies during the last few weeks. Offers from Iranian sellers to the West Coast of India have been reported, but how they would be arranged and accomplished with the sanctions in place, remains a mystery.

UAE Group I export prices remain at $1070 to $1085/t FOB, and flexibag FOB prices for SN 150 and SN 500 at $1165 to $1180/t. Receivers in UAE are considering Russian material from both Black Sea and Baltic, but the supply economics do not appear to allow this arbitrage. Turkmenistan base oil is also rumoured being offered ex UAE, having either been transited through Iran or Pakistan, although these supplies are so far unconfirmed.

Africa
East Africa has seen Group l base oil arriving both in bulk and in containers, with supplies coming from UAE and from Red Sea sources. North Sudanese buyers are again in the market for Group l supplies, with a tender being issued last week for Oct. 13 closing. Group l grade prices CFR/CIF East African ports are $1230 to $1255/t for solvent neutrals, with bright stock landing into ports such as Dar-s-Salaam and Mombasa at $1340/t

South Africa shows no signs of base oil shortages, which may have been incurred with the turnaround at the Sasol refinery, one of the regions main Group l suppliers.

West Africa is expecting three cargoes from Baltic and mainland Europe, all of which were all negotiated at the low point of the market four to six weeks ago and dispatched for Nigeria. Prices are anticipated to be $1115 to $1145/t for SN 150 and SN 500/600, with bright stock at $1200-$1220/t, all CFR Lagos.

Another two cargoes are expected at the end of October/early November, and will carry prices as reported last week, $20 to $30/t higher than the prices above.

Group II/II
Group ll European sales are following Group l, except that contract business is growing with grater acceptance for these base oils. Prices have moved up a little over the past few weeks, but with spot demand still low, not many term prices were adjusted Oct 1. Levels remain almost as per final September numbers of $1150 to $1170/t for light vis grades from 70N to 220N, with heavier material such as 500N/600N selling ex tank at $1180 to $1235/t.

Middle East Group ll supplies are showing signs that demand may be increasing just a tad, with contracted supplies being arranged for October delivery. Prices have been adjusted downwards in line with Far East source FOB discounting $10 to $20/t, and levels are now $1040 to $1080/t for the light grades, with high vis oils $1110 to $1140.

European Group lll supply is possibly now exceeding demand, as predicted with the production of material from Bahrain and Qatar, some of which affects the European market. Although these imports are held under single corporate control, the products which were situ must find a home, which was fine when the European Group lll market was short. With the market diluted by the extra flow of material, prices are starting to come under pressure, and there have been comments this week of net prices some $50/t lower being offered for Group lll sales (around 40/t).

Prices are estimated at 1120 to 1135/t for the 4 cSt grades, with 6cSt material now being sold ex tank at 1160 to 1180/t. These prices are net values, and may comprise of TVAs, quantity discounts, and contracted volumes.

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.