With few trades, API Group I prices throughout Europe have not changed significantly. Falling crude and feedstock levels have merely exacerbated buyers temptation to delay buying, and some who took advantage of yearend sales are finding that they do not require restocking until February or March. However, many now say that it is impossible for a continuous business to be able to buy all requirements at the bottom of the market, whenever that may be.

Levels for Group I solvent neutrals have barely moved, although it is anticipated that levels will be vigorously adjusted downwards this week. SN 150 has become tight, with a premium of $30-$40/t. Levels are $710-$720/t, with heavier neutrals at $675-$690/t. Bright stock is maintained at $975-$1000/t, and with considerable interest, prices may be slower to retract.

These export price levels refer to large parcels of Group I base oils being offered FOB mainland European and North African sources.

Local/domestic sales appear to be resuming, but many blenders are concerned that repeat business may either go to other suppliers, or may not be renewed at all this year. This situation does not augur well for extensive buying of base oils, and there may be some sticky times ahead.

Some local buyers say they can buy lower than export prices if they commit to forward volumes over the next few months, while others claim they are paying the correct levels, at a 25-30/t premium over export numbers.

Group II levels have certainly been revised downward over the holidays, with many levels at or below Group I. Prices are still being assessed this week as players return to their desks. Offers last week were near existing levels of $745-$775/t in respect of the light grades, along with 500N and 600N at $755-$795/t. These prices apply to first-tier suppliers offering approved products, but other grades are $710-$735/t and $730-$750/t, respectively.

Group III prices are being adjusted to reflect new overall levels. Buyers have pushed suppliers to take account of raw material costs which have obviously fallen over the past few months and adjust prices accordingly. Some suppliers were supposed to announce new levels on Jan. 1, but sources said that the market hasnt settled on levels that are acceptable to blenders throughout Europe and beyond. Levels are estimated to fall to 725-740/t for ex tank sales of both 4 cSt and 6 cSt grades.

Baltic & Black Sea

With the Russian Orthodox New Year holiday starting, supplies into the Baltic ports have been few. SN 150 remains tight for the normal range of quality parameters, although some high viscosity material is available at around $780/t basis FCA. Lower quality SN 150 is available for February loading at around $720/t basis FCA. SN 500 levels have fallen to $665-$680/t basis FOB with straight cut SN 900 offered at around $790/t for February loading.

Black Sea supplies will be available again ex Novo port, again on an FCA basis, loading in flexibags. Bulk parcels being made available after the Jan. 12 close of Russian holidays are offered at around $720/t in respect of SN 150, with SN 500 available at around $680/t. Turkish receivers are taking quantities of Russian exports into Gebze with a couple of parcels being offered delivered at around $745 and $695/t for SN 150 and SN 500, respectively.

Middle East

Middle East Gulf trade appears to be returning to normal after the Western holidays which have been readily adopted by this region, perhaps due to the large number of expats working in the area. Avails of Iranian-sourced SN 150 and SN 500 have been reported at $705/t and $652/t, respectively, on basis FOB United Arab Emirates. Mainstream Group I prices fell further, to around $720-$735/t CIF for solvent neutrals.

Bright stock offers made at the end of the year have been extended with long validities, although buyers are not in any rush to commit to these parcels, believing that with further falls in crude, base oils and bright stock have a long way to fall before reaching the bottom of the market. Some outrageous counters of around $800/t delivered have been received by sellers of bright stock. With offers between $1010/t and $1065/t CFR/CIF, there is quite a bridge to cross before agreement can be reached. One trader has offered $895/t basis CIF for March loading, perhaps believing that this is where the market will lie at that time.

The correlation between crude falls and current petroleum product prices suggests that this level may be achievable, but availabilities are also down to supply and demand, and this grade appears to be holding its own in the Group I stakes.

Group II and Group III availabilities abound in the Middle East Gulf, with new facilities about to shower the regions with copious quantities of both types. The Al Takreer unit in Al Ruwais will open its doors around the end of March, with up to 500,000 tons of Group III grades and 100,000 tons of Group II products hitting both the local markets and also nearby Indian and Pakistani receivers.

Group II offers from Far East and U.S. sources had abated over the last few weeks, but reports are that new offers at exceptionally keen numbers are again circulating amongst possible receivers. January loading prices have dipped again to new lows with sources reporting this week that an offer from one U.S. supplier/trader had been received at $687/t for both light and heavy vis grades. In the interim, Far East offers for the range of Group II grades have been received at $695-$725/t for prompt loading.

The potential for an oversupply of both Group II and Group III grades looms over this region, and whilst some receivers will undoubtedly benefit from this scenario, the longer-term effects cannot be assessed as positive for any market.

Africa

The East Africa and South Africa regions have been subdued over the past few weeks, with prices for locally produced Group I grades moving steadily lower to take account of lower production costs. These local grades also have to compete with imports from U.A.E. and Russia that can not only compete, but can also undercut some of the local delivered prices.

Group II grades are making inroads into the southern Africa markets, with blenders using globally approved grades to produce standardized finished lubricants under license and for own-label sales.

The West Africa region is remarkably quiet, perhaps as a result of Baltic activities being subdued by Russian holidays and also because a number of buyers have not yet returned from vacation. Reports this week are that some of the main buyers are looking to buy small quantities of Group I base oils in flexies, waiting for the market to adjust downward before committing to large parcels coming from Europe, the U.S. or Baltic.

There are many offers, but these are constantly being rejigged to take account of the new levels for forward supply. Some buyers are requesting that they purchase on the basis of getting the current FOB prices plus freight when parcels are delivered on a CFR/CIF basis into Nigeria. This aggressive approach is due to the lengthy delay between loading and discharging cargoes.

Group I and Group II prices are finding their way into the western Africa markets of Cote d’Ivoire, Ghana, and Nigeriawith offers at $745-$765/t for the range of solvent neutrals and the Group ll low and high vis products.

Bright stock is currently being offered between $915/t and $1065/t depending on quality and quantity. SN 900 in parcels of around 5,000 tons is being offered on a fixed-price basis, for March arrival into Nigeria at $848/t, along with parcels of SN 500 at $770-$790/t, all basis CFR/CIF West Africa ports.

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