Devaluation of the euro is influencing the European market in sales transacted in that currency or other local ones. With the euros exchange rate to the dollar falling to around $1.05, variable costs for refiners have risen – some claim $50 to $60 per metric ton.

With Dated Brent crude oil falling back to around $53.40 per barrel, and West Texas Intermediate moving lower to $43.40, crude is once again exerting downward pressure on base oil prices. Last weeks rise to $62 for Dated Brent appears to have been a temporary blip for the market, and forecasters now saying oil could return to their nadir reached some six weeks ago. ICE gas oil as a petroleum product marker is hovering above $500/t at $512, and if this barrier is breached, the price could retreat to the lows of $475 seen in early January.

This spells bad news for the European Group I market, since more refiners are urgently reviewing whether to continue producing that grade. The saving grace for Group I producers is bright stock, which continues to be in demand and which has no Group II or III substitute.

FOB Group I prices within the European arena have stalled around last week’s levels, with all players in the market reviewing current levels. Light solvent neutrals are bound in a range between $575-$595/t, with heavier 500 and 600 grades showing at around $585-$595/t. Bright stock prices rose slightly to $690-$725/t. These prices refer to large bulk parcels of export grades sourced from supply points located in mainland Europe and North Africa.

Local sales of Group l base stocks are also marking time on price, partly because prices in any given month are usually not set until the end of the preceding month. Domestic Group I prices remain around 45-70/t higher than export levels.

Group II base oil prices in Europe are awaiting the effects of increases announced in both the United States and the Far East. Buyers taking quantities of Group II products are expressing disappointment that these grades may see mark ups in spite of raw material costs remaining weak and falling back to former levels. Some are saying that producers may have acted prematurely on the rebound in crude prices. Much of the Group II being sold within European circles are also priced in euros, so the effects of its devaluation could come into play.

Group II prices remain unaltered this week, lodged between $590-$620/t for the range of grades between 100 neutral and 220N, while 500N and 600N grades were still $615-$660/t. Sellers and buyers agreed that there is upward pressure on oils in this API category.

Group III trade appears to relatively unscathed by crude fluctuations or exchange rates. The potential for shortages of these grades due to a maintenance shutdown of the Shell-Qatar Petroleum joint venture plant in Qatar seems largely unfounded within the European markets, with no apparent lack of availability for the two main grades. There are still reports of some suppliers pushing price increases on the back of exchange rate liabilities, but prices held steady between 870-910/t for ex tank sales of both 4 centiStoke and 6cst grades.

FOB prices for Russian and Belarusian base oils ex Baltic terminals are reported as slightly weaker after rising around $100-$150/t the previous few weeks due to both higher refinery costs and also lack of availability.

Availabilities of all grades appear to have improved for April, with parcels of SN 900 becoming available for loading next month at FCA prices of around $645/t for 1,000-ton parcels.

Black Sea trade appears thin this week. Buyers and receivers have not come to terms with recent price revisions, and now armed with ammunition from falling crude prices this week, they have become even more stand-offish. Turkish buyers are in the market for substantial quantities of Russian material, some of which may be supplied during the latter part of March if agreement can be reached on prices. Volga river traffic is moving again, and this may bring more availability to Black Sea receivers with STS loadings at Azov, Ukraine.

Uzbek SN 150 material is available ex Fergana and is being made available basis FOB Eastern Black Sea ports in flexitanks at around $555/t. Bulk volumes of Russian SN 150 and SN 500 are being offered in ranges of $615-$635/t, basis FOB, with Mediterranean loading prices for these two grades being offered at $690-$720/t, basis CIF Gebze.

There have been offers of Group II material in large slugs coming from both the Far East and the U.S., but no reports have yet been received of these deals being concluded by traders going into Turkish receivers.

Red Sea reports contain notice of a cargo of more than 3,000 tons of mixed grades being delivered into Port Sudan from Greek sources, with price indications of around $675/t for SN 150 and SN 600 grades. The usual raft of Group l grades are being loaded ex Yanbu and Jeddah for receivers in the United Arab Emirates and Oman with prices reported around $675-$695/t CFR for SN 150 and SN 600.

Middle East Gulf levels for Iranian exports of SN 500 appear to have been held static this week, with few reports of new prices being issued. Levels are steady at around $645-$660/t for shipments re-exported FOB from U.A.E. ports. One large 10,000-ton parcel is still being worked FOB by traders ex Bander Bushire.

More Group l material is scheduled to arrive in the next couple weeks in tandem with U.S. deliveries to Indias West Coast. This will possibly spell the last parcels to come out of U.S. Gulf Coast supply points for some time because the U.S. market is starting to feel limited availabilities. Other Group l sources are being tapped by receivers in the Middle East Gulf, with Brazilian barrels apparently being quoted and offered to U.A.E. buyers. Far East sources for Group l material are being re-examined since the arbitration window from Europe and the U.S. into gulf regions is closing.

The emphasis this week has been on Group II cargoes being planned from Far East coming into the U.A.E. and Qatar. The usual receivers will be taking some 20,000 tons of Group II grades within the next few weeks, perhaps just in time to beat price increases that appear to be imminent due to increasing raw material costs, although that situation may now be easing. Price levels for April arrivals are confirmed between $645-$660/t for the light grades with heavier vis 500N between $685-$715/t on basis CFR/CIF, price spreads depending on location of discharge port within the gulf region.

South African receivers have been actively looking at imports in flexies from the Black and Baltic seas to supplement local supplies from domestic producers. These imports appear to be growing with a number of traders and blenders taking Group l grades into Durban port. Prices can be very competitive, with latest indications for SN 500 at around $895/t, basis CIF.

Nigerian buyers in West Africa have been active this week completing purchases of base oil cargoes ex Baltic, Northwest Europe and also the U.S. Gulf. With Baltic availabilities coming back onstream, traders have been quick to try to arrange cargoes for import into Nigeria. Prices, however, have risen dramatically over the past few weeks, and now – with a potential for them to weaken again – some West African buyers have purchased at what may be a small peak in the market. This does not augur well for any traders who have sold on an unsecured basis, since signed contracts are virtually useless.

Prices for purchases completed within the last three weeks are assessed between $685-$725/t for Group l solvent neutrals, with bright stock being bought at around $875-$895/t, basis CFR/CIF Apapa port. SN 900 is being offered at between $745-$760/t, same basis. These prices, however, may start to adjust downwards by some $25-$40/t over the next few weeks. This is gauged on current raw material costs but is purely dependent on what happens to crude and feedstock levels in the short term.

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