The softer news this week has been the retrenchment of crude oil and petroleum products to levels which may mean that base oils do not have so far to climb out of obscurity.

Dated Brent is trading at $110.70 per barrel, falling some $2 since last week and taking pressure off rising petroleum product prices. ICE gas oil has retracted to close at $926 per metric ton in Tuesday trading for front month settlement, some $37 lower than one week ago. This trend is forecast to continue, with adequate crude stocks on both sides of the Atlantic, and warmer weather predicted for the weeks ahead.

Group l base oils within Europe have reversed the trend of the last nine months and are back in demand, albeit for smaller quantities of available material. With a number of producers having limited production of base oils to committed and contracted supplies, the spot export market is woefully short of material in large cargo parcel sizes.

Higher offers, some $30-$50/t above last weeks, are emanating from those few suppliers who have sufficient material. Light solvent neutral grades, basically various grades of SN 150, are $1010-$1065/t, with SN 500 offered at $1020-$1075/t. Bright stock is in demand, with a number of receivers in West Africa looking for this grade to balance large slugs of SN 500/600. As a result offers are touted at $1095-$1150/t.

The spreads are considerable. Some sellers are prepared to supply to regular lifters at what appears to be a discount, whilst new or irregular buyers are being offered at substantial premiums.

The price levels above refer to bulk parcels loading for export from mainstream European and North African supply points, where availability and price expectation allow sales to take place.

Local markets within Europe have seen demand lifting over the past few weeks. A number of sellers announced increases effective March 1, and many blenders were trying to replenish inventory last week with trucks and barges at full capacity to deliver material prior to price rises kicking in. Producers and domestic distributors have increased prices by more than $100/t (75/t) over the last month. Levels are established now around 100 higher than export, due to local demand and lack of export material.

Baltic & Black Seas
Baltic prices for Russian and Belarus base oils have moved with mainland European selling levels, coupled also to higher FCA prices from Russian refineries. Increases are still to be realised in the Baltic due to material being in relatively short supply, but with offers for forward purchases showing large increases. Fixed price FOB offers for late March, early April loading are around $1035/t for SN 150, whilst SN 500 is priced some $10-$15/t higher due to demand. SN 900 remains in short supply with one parcel for end March offered at $1100/t.

Black Sea trade has been subdued. Turkish buyers are suspicious of changes to import regulations from April 1, but these players will still require material for blending. There are also rumours that some cargoes have been diverted to the north, where demand is more certain.

Prices for available material have moved upwards from around $980/t, basis FOB for both grades SN 150 and SN 500, to offers now at $995-$1020/t. Turkish cargoes are landing at $1020-$1035/t basis CIF Gebze, but these levels will not be repeated in the short term, and are expected to be around $1050-$1065/t for incoming cargoes later in March.

Middle East
There have been a number of enquiries for East Mediterranean locations, but delivery conditions are difficult with port restrictions and only small parcels able to be handled. This in itself, without other factors such as the problems in Syria, has inflated prices, but has also made this business attractive for traders. Prices delivered are expected to show around $1150-$1200/t for CIF delivered Group l solvent neutrals.

With exports from and imports into Alexandria, Egypt remains balanced in spite of banking problems for purchasing quantities of bright stock through the Egyptian General Petroleum Corp. tender, news of which is expected anytime.

Middle East Gulf Group l demand appears to be on the up, with a number of offers from Far East and Indian suppliers made to blenders in Oman, U.A.E. and Bahrain. The intention would appear to be to make up a number of composite cargoes for a number of receivers on one vessel, thus affording economics of scale. Due to low demand in Far East, prices have kept low, and with rising numbers in Middle East Gulf, the arb may be open to move considerable quantities of Group l and Group II base oils into this area.

European supply is not feasible, with higher FOB levels plus freight, and lack of avails ruling out any possibility of movements from these sources, so with local supplies of lower quality Iranian base oils still available ex BIK, higher spec material may be sourced from Far East producers.

Prices are two tiered in this region with Iranian material at $990-$1040/t and SN 500 at $995-$1050/t, but imports from Far East could be assumed to be $25-$40/t higher, assuming higher specifications for the material. Bright stock is expected to be priced around $1200/t, selling at a premium to the other grades.

Africa
Sudanese receivers have requested significant supplies of Group l base oils in flexies, possibly for shipment to Chad. Prices have not been made available from potential suppliers as yet, but this business will be premium rated, and may see elevated numbers around $1250-$1300/t for the neutrals, and perhaps $1400/t for quantities of bright stock, basis delivered CIF Khartoum.

South African receivers continue with flexi lots of lower spec U.A.E. material delivered into Durban, remaining competitive against the higher quality local supplies. Prices for flexies of SN 500 delivered into Durban are now $1125-$1165/t.

West African buyers are looking at options to purchase material in large cargo lots. Baltic supplies are in the frame along with possibilities from U.S. and South America. Freight is killing attempts to move material from Far East, India or Middle East Gulf to West Africa, but with shortages in the European arena, anything might be possible given the right vessel.

Prices are offered at new highs reflecting the FOB scene plus increased freight levels to these regions, at $1135-$1165/t for solvent neutrals. Bright stock is around $1245/t, all basis CFR, Ghana, Nigeria or Cameroon discharge ports. SN 900 if available in quantity ex Baltic will be offered around $1195/t

These levels are some $65-$100/t higher than cargoes arriving into the region in the next few weeks.

Group II/III
Group II markets in Europe appear to be flourishing, with the potential shortage of Group l grades. Prices this week are maintaining the differentials between the grades, although direct comparisons are difficult.

Prices are higher than last week, with some distributors using March 1 to elevate levels to around $1120-$1175/t for the light viscosity Group II grades from 70N through to 220N. Heavier vis grades such as 500N and 600N are levied at $1245-$1275/t, all on an ex tank or ex rack basis, Northwest Europe or Mediterranean storage.

Middle East Gulf Group II base oils are moving upwards in price more slowly than their European counterparts. In some cases Far East suppliers are trying to compete with Group l material, diluting the value of the Group II products, at least in the short term. Prices are maintained lower than European levels at $1065-$1085/t for light vis grades, with the higher range around $1125-$1175/t. The above refer to delivered prices basis CIF U.A.E. and other southern Middle East Gulf ports.

Group III supply continues to outstrip demand for these grades throughout Europe and Middle East Gulf. Prices remain under constraint although a few producers have used March 1 to tweak some of the numbers upwards. The spread is now established between 995-1055/t, for both 4 cSt and 6 cSt grades on an ex tank basis.

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.