Dated Brent crude is $3 per barrel lower this week, at $102.70 in late Tuesday trading. ICE gas oil is holding up despite relative easing in crude values, closing at $860 per metric ton for front month settlement, compared to last weeks $879/t. With gas oil values relatively stable, base oil levels do not have to fall far before conflicting economics start to enter the equation.

Group I FOB prices are the same as last week, with light solvent neutrals between $965 -$1010/t, and medium-to-heavy grades such as SN 500/600 in a range of $1000-$1025/t. Bright stock has not lost any ground this week, with no known deals completed, and remains banded between $1085-$1125/t. Most major suppliers report sufficient availability of all grades despite a raft of turnarounds, some of which have been completed and units restarted.

The above FOB prices refer to bulk cargo lots, offered or sold ex mainstream supply points within mainland Europe and North Africa.

Local and domestic Group I base oils prices have not moved materially this week. The differential between export sales and local supplies delivered mainly by truck and barge remains between 120-140/t, a narrower spread than last week.

Baltic & Black Seas
Baltic levels remain intact, but with buyers rumbling with aggressive bids to take material to both deep-sea and European locations, it may be a matter of time before levels start to weaken in this domain. Sellers are sticking to levels of $945/t for FOB supplies of SN 150, and around $960/t for the SN 500 grades, which were misreported last week at much lower levels. The lower prices referred to very low-quality material which was offered on a DAF sales basis for prompt acceptance. It is not clear if this material has been sold to any of the distributors and resellers in the region. The heavier vis SN 900 grade, where available, is being offered around $1000-$1020/t.

Sellers report receiving bids for these grades at some $20-$30/t lower than the above levels, but as of today, the higher prices remain, with only one new enquiry this week for 6,000 tons of mixed grades bound for West Africa. Other enquiries are still awaiting conclusion.

Black Sea SN 150 and SN 500 levels are reportedly lower than those of the Baltic, basically due to quality parameters for some of the material being offered. Russian prices are in line with Baltic levels, whilst material offered from Uzbek sources tends to be lower. Prices for cargoes of around 3,000-4,000 tons are confirmed between $935-$945/t, basis CIF Gebze/Izmit range, and with freight for these parcels around $35-$40/t, depending on loadport.

Turkish buyers are still not frequenting the market, perhaps due to government regulation of imported base oil. Some commented that provision of finished lubes is lagging in the Turkish market, which may in part be quelling demand for imported base oils.

Middle East
Near Middle East and North Africa markets remain depressed due to the turmoil in Syria, and the various positionings by some of the regions major powers. News of an enquiry for Sudanese buyers has emerged, with one Spanish source cited as a possible supply point for the cargo of 5,000 tons of mixed Group I grades. However, when this tender has been issued in the past, the incumbent local Red Sea suppliers have retained the business due to the difficult logistics of delivering cargoes into Sudan.

Offered prices were heard to be on the basis of European lows plus freight, showing delivered numbers around $1035-$1050/t for neutrals, with bright stock quoted around $1145/t, basis CIF Port Sudan. These prices are in line with expected offered prices from Red Sea suppliers operating out of Yanbu and Jeddah.

Middle East Gulf Group I activity is reportedly subdued, with no new Iranian export parcels announced yet this week. Local UAE receivers report offers from European traders for material loading out of the Black Sea, with offers for SN 150 and SN 500 around $985/t CFR, and a heavier neutral, possibly I-50A, being offered at close to $1000/t. These prices are attainable, but shipping large cargoes of these grades out of the Black Sea is difficult due to draft restrictions and limited shore storage.

European barrels from the Mediterranean have also been offered into UAE and the west coast of India. The arbitrage remains shut, but possible price falls in Europe could open the door for material flow.

Africa
UAE traders continue to supply many East Africa receivers with Group I base oils in flexies. This is becoming widely accepted, since many more buyers can stock and raise finance for these lower quantities. South African buyers are also back in the market for these supplies, with prices for SN 500 delivered into Durban around $1160/t, a competitive level compared to local truck delivery.

West Africa awaits the next Tema tender for Group I base oils into Ghana. This major supply tender is due in the next couple of weeks, and will be an interesting barometer for West Africa prices. Nigerian receivers are sitting on the fence again, believing the market has one more downward step to take before they will consider buying. One buyer added that a very competitive offer would warrant reconsideration, since inventory was reaching critical levels.

West African prices are currently frozen, with little change to FOB levels in the Baltic or within Europe. Receivers are considering a parcel of heavy material offered from the U.S., since this report was notified of prices of $1075/t for low quality bright stock on CFR delivered basis. Prices for mainstream European supplies remain at $1035-$1120/t for solvent neutral grades, with bright stock ex European sources around $1175-$1200/t.

Group II/III
Group II prices have dipped this week and may continue dropping, with many U.S. suppliers reducing prices at refinery gates and Group I levels possibly eroding further. Suppliers within Europe are aware that Group II prices must remain competitive against Group I to gain a foothold in the market.

Prices are quoted around $1125-$1170/t for light vis grades such as 150N and 220N, since really light grades do not figure highly in the European supply slate. Heavier material such as 500N and 600N are between $1260-$1285/t. All European prices are based on ex tank sales.

In the Middle East Gulf and nearby regions, Group II grades are competing with liberal avails of Group III in combination with Group I products. Imports are still the name of the game, although Group II production will start in 2014 in in Saudi Arabias Yanbu refinery, and this could alter supply for most of the Middle East.