Dated Brent crude has reversed its downward trend, back up to around $102.65 per barrel. Feedstock levels are stable with ICE gas oil front month figures of $858 per metric ton -up from last week by about $17/t. Some analysts forecast that crude will fall to new lows, whilst others maintain it will surge again due to increasing demand from China and other user economies.

Its difficult to reassess base oil prices. Some areas show aggressive selling, whilst others are conservative, with producers looking for measured prices against current raw material costs.

API Group I prices in Europe show few changes to the spreads of last week, with demand flattening out for both light solvent neutrals, priced between $980 – $1035/t, and heavier grades of neutrals, between $1020 – $1050/t. The only other comment this week was that Group I solvent neutral avails do not seem as tight as they were some weeks ago, despite a number of routine turnarounds in Italy, Spain and Portugal.

Bright stock is still in demand, but sellers and buyers cant agree on price. Receivers for this grade are looking for lower levels than FOB sellers are prepared to offer, which is causing an impasse between the two factions. Sellers state that there is no substitute for this grade. Therefore, they are offering at levels they consider reasonable. Buyers and traders, on the other hand, are insisting that prices should align with other Group I grades, and that large premiums are unreasonable. So the stand-off continues.

Offers for bright stock have been heard between $1120 – $1165/t FOB mainland Europe from Mediterranean and northwest European suppliers.

Local European supplies have come under pressure, not from falling mainstream prices but from offers for material from Baltic and Eastern European producers. Many large independent blenders have been offered first class quality Group I material on a delivered basis for May and on an ex tank basis from Antwerp-Rotterdam-Amsterdam storage.

Prices are attractive compared to contracted supplies from mainstream producers. But with formulation limitations, regular suppliers are showing little concern and are continuing current pricing into May.

The differentials between domestic local prices for Group I supplies and export offers for larger parcels of combined grades are maintained at around 140 – 170/t.

Baltic & Black Seas
Baltic offers into mainland Europe have increased, with a number of distributors from that region sending cargoes into northwest Europe for either local sales or options on export cargoes for the future. With little real trade in the Baltic, players are looking at all options and alternative markets to establish supply routes into new areas, some of which already have competitive supplies.

Two known May cargoes are being worked out of the Baltic for West Africa – one for 8,000 tons of mixed grades and the other for 6,200 tons – but receivers in Nigeria are not rushing to buy, still believing that the base oil market will fall further, despite strengthening crude and alternative product prices.

Prices for the two main grades SN 150 and SN 500 have not altered much, with sellers trying to maintain some dignity without having to actively discount prices to move material out of tank. Levels are between $920 – $935/t, with quantities of the heavier vis SN 900 being offered around $1000/t. All basis FOB ex Baltic loadports.

Turkish buyers are avoiding the market for many reasons, buying only small quantities of Russian and Uzbek base oils. There are many enquiries, but there is a wide gap between whats being offered and what Turkish buyers would consider.

Offers are heard at $965 – $975/t basis CIF Gebze/Izmit port range for a number of grades from SN 80 equivalent through SN 700. Buyers, however, are looking for FOB levels around $880 – $885/t. With fundamentals starting to rise again, there is no sight of common ground.

A parcel of some 10,000 tons loading out of Theodosia is now being considered for West Africa, after attempts to place it into the west coast of India or UAE appear to have been stymied.

North African exports seem minimized, with imports into Algeria taking place to supplement local production. The Moroccan tender appears not to have been finalized, whilst Egyptian imports continue ahead of the Alexandria Mineral Oils Co. July and August turnaround.

Red Sea barrels are loading for a milk run which will call into Sudan, Tanzania and Kenya to discharge bulk cargo. Prices are holding up for bulk base oil supplies into East Africa, largely unaffected by recent market moves in Europe. Middle East prices tended to increase for Group I and Group II supplies over the last few weeks, hence no sustained pressure from the market to decrease prices.

Levels for supplies into Dar-es-Salaam and Mombasa are estimated around $1145 – $1175/t for Group I neutrals, with quantities of bright stock between $1265 – $1300/t.

Middle East
Middle East Gulf imports have seen the usual Iranian export/import barrels flowing, but now at substantially higher prices. Levels are now around $1085 – $1100/t basis FOB BIK for quantities of SN 500. Few exports of SN 150 and SN 650 have been seen of late. A cargo of some 2,500 tons is earmarked to load from Greece to discharge into Kuwait during 1H May.

Cargoes of Group I grades from Thailand and Indonesia are identified as moving towards UAE, and although these are smaller in size, it is anticipated that these parcels are bright stock which has been called short in UAE, due to lack of European barrels finding their way east.

Africa
South Africa can expect a turnaround at the Safor refinery, although local sources say this will have little effect on the local markets, with sufficient cover in stocks from storage. The small export from Durban to Luanda has appeared on shipping lists again, suggesting that this movement is imminent.

West African trade is light, with Ghana receiving another cargo from Antwerp-Rotterdam-Amsterdam in May. Nigerian buyers are reticent to buy during its first rainy season, as demand for finished lubes and base oils is low.

In addition to the two Baltic cargoes being booked for West Africa, further parcels of some 5,000 tons may be fixed ex Livorno for 2H May load, along with 6,000 tons out of Antwerp-Rotterdam-Amsterdam.

Prices have not altered radically from last week, with no reports of cargoes landing this week. Levels are slightly lower, between $1110 – $1130/t for the range of Group I neutrals, along with heavier SN 900 at around $1125/t. Bright stock, where loaded in tandem with other base oils, is now assessed between $1220 – $1240/t. All prices are basis CFR or CIF Nigerian, Cameroon or Ghanaian ports.

Group II/III
Group II prices within European mainland are showing slightly weaker levels following Group I cuts. Distributors of imported Group II base oils have announced that prices will be reviewed on May 1. However, they do not say that prices will decrease. Many buyers are reporting that they expect lower vis products to decease, whilst the more expensive higher vis grades may actually increase. Levels remain at those of last weeks: $1155 – $1220/t for the range of light vis grades, with higher vis material between $1280 – $1310/t, all on the basis of ex tank sales.

In the Middle East Gulf regions, some grades for the lower vis products have been discounted and now compete with Group I base oils, whist the higher vis grades have been hiked to new highs. The rationale behind these moves, according to one importer, is that the lighter vis grades are lower in cost to produce and it is possible to substitute Group I products with additives such as VI improver. The higher vis Group II products are not easily replaced by other grades, are higher in cost to produce, and thus command higher values yielding better realization and netbacks.

Offers for May deliveries average between $1075 – $1100/t for light grades, and $1185 – $1220/t for the heavier range, all on a CIF delivered basis.

Levels for Group III within Europe have not moved, although one importer commented that they would be issuing new tariff prices w.e.f. May 1 in whats anticipated to be an attempt to raise prices to accommodate producers and align with other global Group III numbers. At present, however, prices are retained between 960 – 970/t for both 4 cSt and 6 cSt.

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