Dated Brent is steady around $106 per barrel, having fallen at one point to around $103.50. West Texas Intermediate maintains at around $10per barrel lower than Dated Brent. ICE gas oil front month levels are now in the $890s with three months forward forecasted below $975/t.

European Group I prices are weaker, with the light fractions now $945-$965/t, maybe coming off around $20/t as seen in limited offers. Heavier neutrals are relatively more in demand, supporting $970-$985/t. With few parcels available from mainstream producers, these might go short, although the likelihood of prices rising is slim.

Bright stock has been nominated as the one Group I grade which will be produced well into the future even after Group II and Group III lighter vis grades have usurped Group I solvent neutrals. Prices for this high viscosity stalwart are currently $1100-$1120/t, since with few cargo-sized parcels available, and the supporting grades such as SN 500 also short, levels are not able to move higher. Paradoxically, this grade is being held back due to being short.

These price levels refer to FOB offers and sales of Group I base oils ex mainstream locations in mainland Europe and North Africa where and when availabilities allow.

European home markets are also looking to 2014, with a number of large and medium-sized blending operations reportedly running down inventories for the year-end and possibly not restocking on a large scale until January or February. With whatever demand present being sucked out of the market for the next two months, there may be pressure to empty tanks prior to year-end. This can only mean prices dipping, although sellers say they are determined not to undermine the market by selling at lower levels.

The differential between local or domestic price levels and that of export sales reflects only the associated costs involved in performing local delivered business, which is now estimated at 45-70/t, since most sellers are unable to extract any further premium in respect of domestic sales due to low demand.

Baltic and Black Seas
Baltic distributors have encountered difficulties moving material out of storage at respectable prices. Levels for the two main grades have fallen to $895-$910/t for SN 150 and $920-$930/t for SN 500. These grades are available on FOB basis, along with smaller quantities of SN 900 at $965-$980/t. Larger quantities of SN 900 may be available for December loading basis FCA at at around $945/t. These quantities are unconfirmed although prices are being talked.

Black Sea trade follows in the wake with offers for Russian SN 500 made by traders for supply into Gebze at $948/t basis CIF delivered. FOB levels are estimated to be $925-$930/t, with Uzbek offers for SN 150 at $925-$930/t CIF Turkish ports. However, demand is slow in Turkey with only a handful of European Mediterranean cargoes arriving into recognized blenders along with a couple of 3,000 to 4,000 ton Russian cargoes loading out of Ukraine.

With the Egyptian General Petroleum Corporation bright stock tender being serviced by the major supplier located in the Mediterranean, two more cargoes are due to be loaded for December arrival. The economics surrounding this supply remain shrouded in mystery, with claims that the material being imported is being bought back locally, at least in part, by the same supplier making the deliveries into Alexandria. The end of the state of emergency in Egypt may bring the region back to some form of normality, with trade starting to pick up for the local producers in Alexandria.

The same cannot be said for Syria, where civil war continues to erode all vestiges of normal trade. Some supplies of base oil are confirmed arriving into Syria but under government supervision and only by truck. These supplies are rumored to only go into manufacturing finished lubes for the military, allowing little finished lubes for private automotive and transportation uses.

In the Red Sea, Saudi exports continue to load for United Arab Emirates, Oman, and another small cargoes of Group I base oils for Singapore. Yemeni sources are said to be expanding the recycled lube oil unit in Al Hudaydah with exports of these lubes to East African receivers along with supplies finding their way to Turkey and the Mediterranean. Prices for the recycled lubes are around $765/t for Group I SN 500 and SN 150 grades on basis FOB in flexies, packaged and transported to container load ports.

Middle East
Middle East Gulf regions are described as having a lot of base oil activity. Group I supplies are not so much to the fore as was once the case, but with a high volume of marine lubricant grades being produced under license and own brands within U.A.E., Qatar, Bahrain and Kuwait, the reliance on high-quality Group I base stocks will continue for some time.

Iranian prices have reportedly started to fall to around $925-$940/t basis FOB, but may fall further. Indian importers have shunned these levels as unworkable for the quality and the hassle, although one offer at a very low tariff has been reported for Iranian SN 500 to be delivered into west coast India at $910 CIF. This parcel of some 4,000 tons is unconfirmed.

Saudi Arabian barrels of mainly SN 500 with SN 150 from Yanbu and Jeddah are being sold into U.A.E. and surrounding receiving ports, landing into Jebel Ali at $1025-$1065/t basis CIF.

Africa
East Africa remains buoyant with many enquiries for flexi-delivered virgin SN 500 and also recycled base stocks. Durban still imports SN 500 from U.A.E. with prices around $1085-$1120/t landed in containers.

South Africa hosted the latest ICIS conference in Cape Town last week with many African, European, Indian and Far Eastern delegates. The supply scene appears to be set for Group II to enter the market to supplement local Group I. Storage and distribution will have to be addressed by importers.

West Africa meantime sees the latest loading of a 13,000 ton cargo from the Mediterranean, part of which will be destined for Ghana for supply under the current annual tender. The remaining 8,000 tons appears to be unsold at this time, but representations are being made in Nigeria to discharge this part of the cargo. The overall freight savings will make both parts of the cargo an attractive proposition for traders involved, rather than supply the Ghana tender on a standalone basis.

There are also rumors of a further 17,000 ton cargo considered for loading after Dec. 10 which would also be marked for sale into Nigeria.

With Baltic SN 500 falling to new lows, and possible FCA sales of SN 900 in larger quantities, it is difficult to estimate the economics of a Mediterranean-supplied cargo, which would presumably include SN 150, SN 500/600 and bright stock. On the basis of Baltic alternatives, landed CFR prices are $1025-$1040/t in respect of SN 150 and SN 500/600, with bright stock at around $1170-$1190/t. There may be deals which would yield lower levels, particularly for bright stock, but until cargoes are actually landed, no confirmation can be made.

As an alternative, SN 900 blend could be landed at around $1025/t, a substantial saving against bright stock, but although the two grades can be substituted to an extent, they are not directly comparable in quality, specification or price.

Group II/III
Many Group II producers are targeting Europe where there is currently no significant indigenous supply. Prices for Group II are coming under pressure due to the fall in Group I levels, and with light vis Group II trying to compete with the light ends of Group I, there may have to be a further alignment on prices.

Prices for these products have been weakening in past weeks to around $1040-$1065/t for light vis grades. Higher viscosity material, which is the more difficult sell against Group I, is at $1095-$1155/t basis ex tank sales from Antwerp-Rotterdam-Amsterdam storage.

Middle East Gulf Group II also show signs of a weakening market, with more and more avails filtering out of Far East supply points. This potential oversupply is concerning for all producers who are keen to protect existing business which has been tough to build, and sometimes even tougher to retain. However, buyers in U.A.E. said that they now have choices as to where to purchase Group II.

Buyers commented that due to what they consider an almost standardization in technology, the output in Group II from as many as twelve producers will be interchangeable and that with more production, these grades may become commodities. This is unlike Group I production which almost always varies in specification and characteristics. This does not seem to be the case, but convincing some of the more liberal buyers may be difficult.

December prices are stable to weak, with levels for the light vis grades 100N, 150N, and 220N at $1020-$1040/t, and for the heavier grades 500N and 600N between $1115-$1145/t, all on basis of CIF landed prices into U.A.E. or other southern Middle East Gulf ports.

The Group III European market is stable, with no impetus for prices to move downwards. Tuesdays gas leak at Porvoo refinery in Finland where Neste produces has reportedly had no impact on that facilitys Group III base oil production.

Prices are still at 975-995/t for both 4 cSt and 6 cSt. It is worth mentioning that prices for 8 cSt are higher by some 60/t. Prices indicated are on an ex tank basis from various storage facilities in northwestern Europe, Baltic and Mediterranean regions.

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.