This scenario should cause prices for available barrels to move up, but most August loading deals were done some time ago, leaving only operational and shipping tasks. With many commercial players on vacation, few new deals are being established, which appears to be a stabilizing factor for prices.

One interesting announcement is that London-based petroleum products trader Vitol will introduce base oil under Vitol Broking Ltd. Using the auspices of Vitols current global contacts, a new team has commenced business in specifically-targeted areas.

Dated Brent flattened out at just below $108 per barrel, only marginally different from one week ago. The crack between West Texas Intermediate and Brent has remained at just over $2, and with positive signals being received from Irans new regime, and Libya announcing crude output increases, these levels may be set to fall amid increasing supply options. ICE gas oil continues to show unseasonal strength, being cited at $913/t in front month trading Tuesday afternoon. With weaker forecasts for crude, the heat may be off base oils to move higher. However, many producers would want to realign prices given the poor contributions realized from this particular group of products.

In Europe, Group I prices are almost the same as last week, with few new reports of offers or business completed. Light solvent neutrals are retained at $945-$965 per metric ton, coupled with the heavier grades around $965-$980/t. Bright stock remains between $1060-$1075/t.

These prices refer to FOB selling levels contained in offers and sales of mainstream base stocks available out of European and North African refineries.

Local European mainland prices also remain as previously announced, with activity the lowest in some time. Many blenders within Europe are away from their desks for the duration of August. Some comments implied that the market may be starting to pick up, and that some blenders were expecting prices for base oils to firm once things returned to normal after the end of August. The differential between domestic local prices and export parcels is therefore unchanged at 60-80/t.

Baltic & Black Seas
Russian and Belarus base oils have started to feel the effects of the hike in Russian export duty, which added some $25/t to the FCA prices for material supplying the Baltic. Prices however dont reflect any surge, and whilst some extra cost can be absorbed along export routes, keeping prices competitive will certainly have an effect on margins, and may ultimately be the push for distributors to start raising prices.

FOB offers for SN 150 and SN 500 are still $940-$950/t along with SN 900 where available at $975-$990/t. A couple of traders are currently looking to load large parcels of these grades for Nigeria, with one 11,000 ton parcels of mixed grades considered for second half of August loading.

Black Sea trade is exceptionally thin with many receivers in Turkey looking to export base oil stocks which had been in tank perhaps as gas oil diluent. With the government starting to bite against this practice, many receivers are now looking to dispose of material in as short a time as possible, thus decreasing the need for imports of new material from Russian and Uzbek sources. Trader margins are now at a critical point with no further leeway to pricing down.

Prices offered remain at $935-$940/t CIF Turkey in respect of Russian SN 150 and SN 500, with Uzbek I-20A material from Fergana refinery offered around $915-$925/t.

Other exports, such as the parcel from Theodosia to United Arab Emirates, or the 3,300 ton cargo loading for discharge into Somalia, are not confirmed.

Middle East
Near Middle East trading continues to reflect the growing problems within Syria and Egypt. Adding Yemen into the frame this week has only heightened the current situation hitting these Middle East regions, which appear to have no clear end in sight. Yemen, although not a large user of base oils is one of the export markets for Saudi Arabia, and the current problems will only further affect the movement of base oils around these regions

Red Sea cargoes from Jeddah are preparing to move material out of storage towards the end of Ramadan and the Eid holidays. Those identified in last weeks report are confirmed as loading during second half of August for destinations in Oman and U.A.E., along with receivers in Singapore.

Iranian offers ex Middle East Gulf ports are still floundering in weak trading with many players missing from their offices during this time. Prices have been heard around $835-$850/t basis FOB Iranian ports, for quantities of SN 500. This presents an opportunity for U.A.E. re-exporters to move this material to locations in Far East such as Port Kelang where this quality of material can be used in the local markets.

Imports of Saudi Arabian and Pakistani materials will bolster the quality of U.A.E.s base oil market where a large number of small local blenders are now turning to recycled lubricants for the provision of lower-quality base stocks.

Africa
Eastern African and South African supplies are being maintained from local sources with a few enquiries for SN 500 being imported into Durban in flexies. Prices reflect the local markets where most base oil supply is made by truck, very much akin to the domestic European scene. Group I is assessed at $1125-$1180/t for the solvent neutral range along with bright stock between $1300-$1330/t.

Western Africa, and Nigeria in particular, has been quiet this week with few new enquiries for large parcels of bright stock or very heavy neutral grades such as SN 900 ex Baltic. U.S. producers are being canvassed for the supply of bright stock along with a couple of northwest European and Mediterranean producers. These parcels will be put together over the next few weeks for planned September arrival.

Receivers are determined to drive prices lower, but traders in this region are pushing hard to at least maintain current landed prices of $1025-$1050/t for solvent neutrals with bright stock being delivered at $1125-$1140/t. Target prices are much lower with some buyers in Nigeria looking for $965-$980/t for Baltic SN 500, and $1015/t for SN 900. Some say these prices are impossible, but others are negotiating with these levels in mind. Receivers in Apapa have requested bright stock at $1025/t, and these may be possible with lower quality material from the U.S.

European bright stock is assessed at $1120-$1135/t basis CFR Lagos, with SN 900 offered in quantities of some 4,000 tons at around $1035/t.

Group II & Group III
The European market for Group II grades has typically been quiet, but with increases applied from sources in both Far East and U.S., prices are expected to firm when buyers return to the market in around three weeks. Until then selling levels show few changes. Distributors of these grades are selling against monthly or quarterly contracted quantities and prices, with the result that few spot levels are recorded in the market flattening out the pricing graph much more so than Group I fluctuations.

Theres no news regarding European producers converting Group I facilities to Group II, although various permutations abound, with reports of some dropping light Group I neutrals in favor of marketing light vis Group III in their place. Group II prices within Europe remain static at $1055-$1100/t for the light vis material and heavier grades at $1130-$1215/t.

Middle East Gulf reports are thin and varied regarding Group II prices, with many buyers choosing not to comment on prices until after the Eid holiday period. Prices are being pushed higher by Far East producers with the next round of contracted sales expected to bring higher numbers. In the meantime prices are still at $1045-$1095/t for light vis products, and $1135-$1185/t for 500N and 600N.

Group III sellers within Europe have reported improved business with prices up to 940-960/t basis FCA northwest European storage. This upward pricing has apparently been brought about by some adjustments to supplies from Middle East sources in Bahrain, where there may be some supply problems, at least for material coming to Europe. This may have the effect of shortening up the market bringing prices back up to levels not seen for some months.

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