Whichever conclusion is accepted, the fact is that API Group I availability is short in markets around Europe and parts of Africa but more balanced in the Middle East. In either case, prices are rising swiftly after a two- to three-month period of stagnation.

Prices for dated deliveries of Brent crude oil have strengthened to top $65 per barrel in early week trading, but West Texas Intermediate remains some $8 per barrel behind at around $57.40 per barrel. ICE gas oil has progressed in line with crude values to reach $585 per metric ton for front month settlement.

Europe

European Group I base oil prices appear to have gathered momentum once again, with levels for sales from Baltic Sea ports having risen markedly over the last 10 days. Mainstream European levels for the light neutrals have shown some small signs of advancement, but the major moves have been for the heavier cuts of Group I wanted for both export and local markets.

Light solvent neutrals are now assessed at $645/t-$675/t, but with heavier vis grades pushing higher to $725/t-$755/t. Bright stock has leapt in value after a surge in demand and is selling for $935/t-$990/t, depending on volume and availability of complementary grades to assemble ship cargoes.

The European Group I markets could encounter extreme shortages after the issuance of a tender from Venezuela for almost 70,000 tons with an emphasis on heavy-viscosity material. This tender calls for deliveries over a three-month period.

Producers have been coy when asked about increasing production to fill a large void that could be developing in the European supply slate. With base oil netbacks at more than acceptable levels, it is somewhat of an enigma why refiners would not be ramping up output, especially if demand appears to have at least turned a corner.

Local prices for base oils being sold within Europe have also risen substantially and maintained a premium over export sales. The premium is 75-90 per /t, but may become tighter since export prices, as usual, are rising faster than local prices.

Monthly pricing has largely disappeared because assessments were rising quickly and were being driven by exports. Baltic Sea imports flowing into Antwerp-Rotterdam-Amsterdam and the United Kingdom also helped push up prices within the region.

Prices for Group II imports have also increased, with both light and heavy grades showing relative strength. Distributors have been passing on markups by Far East and U.S. refiners, taking prices back to levels last seen six months ago. Prices are now deemed to lie between $685/t and $730/t for light oils. This category includes a new 60N grade from a U.S. importer expected to be used in light-vis hydraulic fluids. Prices for Group II 500N and 600N have risen to $755/t-$810/t.

Group III and Group III+ base oils have moved upward, but only by 5/t-10/t. One source said that suppliers contemplating markups must consider that customers now have a great deal of choice in Group III sources. There appears to be a degree of supplier-customer loyalty in this sector, perhaps more than with other grades. Prices are boosted slightly this week, ranging from 910/ to 940/t, on basis of ex Antwerp-Rotterdam-Amsterdam tank supplies.

Baltic and Black Sea

Baltic prices for the mainstay Russian grades SN 150 and SN 500 have climbed sharply, reflecting both the refinery gate levels being levied and markups within Europe. FOB Prices for SN 150 are around $620/t, while SN 500 is around $100/t higher at $720/t. SN 900 is pitched around $760/t.

Black Sea trade has also increased significantly, with both cross trade loading out of Azov and also Mediterranean-sourced supplies from Italy and Greece being in demand. Prices for Russian SN 150 and SN 500 grades into Gebze have moved rapidly ahead with levels of $635-$655/t basis CIF for the SN 150, and SN 500 around $725-$740/t on the same basis. Mediterranean cargoes are underway for Gebze and Izmit during first days of May.

Large quantities of SN 500 and SN 900 are being planned for export to Singapore, with other avails of SN 900 being offered to receivers in Nigeria. Prices are climbing and many receivers in export destinations are clamoring to agree to cargoes from both Black Sea and Baltic.

Middle East Gulf

Red Sea trade largely consists of Yanbu exports to Middle East Gulf destinations such as Oman and Jebel Ali, United Arab Emirates. Prices for these supplies are kept strictly confidential by sellers and receivers, but reliable estimates peg cargoes of Group I grades at FOB prices similar to the Mediterranean, suggesting CIF levels of $725/t-$810/t basis CFR U.A.E. ports. Bright stock is $1085/t-$1100/t.

Iranian suppliers are reportedly anticipating that economic sanctions will be lifted. Prices have risen on those expectations along with the general trend affecting almost all base oils in the region. Prices are now expected to be $670/t-$695/t FOB for SN 500, which along with parcels of SN 150 and SN 650 can still be made available on a re-export basis from U.A.E storage at $655/t-$685/t.

One offer for bright stock delivered into the U.A.E. has been tabled at $1115/t CFR/CIF for 4,000 tons loading ex Mediterranean, but this is expected to be turned down in the interim, with receivers targeting around $1060/t.

Reports of offers for May deliveries of Group II into Middle East Gulf markets have not been excessively high, given that levels in Far East sources have been raised. Offers have been confirmed at between $675/t and $700/t for light grades. However, higher-vis cuts of 500N and 600N have been pushed to $745/t-$790/t CIF southern Middle East Gulf ports. There do not appear to be many, if any, offers for Al Ruwais-produced Group II, perhaps confirming that it will be used in-house for its own branded finished lubricants.

Africa

With a maintenance turnaround underway at one of South Africas two main base oil refineries, cargoes of around 10,000 tons have been sent from U.K. refineries to Durban to maintain local supplies, according to market sources. Another 4,000-ton parcel is loading this month for delivery during the last days of May.

West African sources report a number of base oil cargoes being fixed from the Baltic Sea, the U.S and European sources along the Mediterranean for delivery end of April/early May. A 7,000-ton cargo has been sold ex U.S. Gulf Coast into Lagos. The Group I cargo is expected to be bright stock and SN 500/600. Another parcel of some 15,000 tons is on the table with receivers in Apapa, although the cargo may be discharged at an alternative site on the Bonny River. This cargo may contain heavy-vis Group II base oils in addition to bright stock and heavy Group I neutrals.

A cargo of 5,000 tons to 6,000 tons is expected to load from a Spanish Mediterranean port during the first half of May for discharge into Lagos.

As predicted, selling levels for material into western Africa, particularly Nigeria, have moved $30/t-$50/t higher than prices quoted last week. Offers for Baltic material were $852/t for SN 500 and $898/t for a 4,000-ton quantity of SN 900. Bright stock arriving into Apapa ex U.S. Gulf is assessed between $1065/t and $1094/t, in line with material being loaded ex European mainland. One reported offer contained a lower specification bright stock with viscosity index around 85 and color around 5.5, according to sources, at $988/t, although this is uncorroborated.

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.