API Group I light neutrals, for example, are available from nearly all major producers and resellers – a glut that is exacerbated by relatively higher demand for heavier products and a growing acceptance of light vis Group II grades, which can compete in price with their Group I counterparts and offer a raft of benefits.

Dated deliveries of Brent crude have relented to trade lower at around $63.65 per barrel, while West Texas Intermediate hovers at $58.20 per barrel. ICE gas oil is trading at $584 per metric ton for front month settlement – some $20/t weaker than last week.

Europe

European Group I prices have altered little this week. FOB levels for light neutrals have dropped to $530/t-$545/t, perhaps because large quantities of it are widely available. Buyers interested in this grade can likely place a bid at lower levels to take this material out of the market.

SN 500 and SN 600 still show a degree of strength in terms of demand. Heavy neutrals are at $655/t-$680/t, showing a differential of around $150/t over the light vis grades. Bright stock remains in demand, but with adequate supplies of this grade in Europe, sellers are unable to achieve premiums. Offers are $1055/t-$1085/t, but actual selling levels are perhaps $25/t-$30 lower.

These prices refer to cargo-sized parcels of Group I base oils being sold or offered for export sales, loading ex mainstream supply points in Europe and North Africa, subject to availability.

Local and domestic prices in Europe have also shown a degree of weakness, with many blenders looking to scale back purchases of both base oils and additives to maintain lower inventories during the summer. The current differential between local and export prices is similar to that of one week ago, at 55/t-85/t. With declining demand, however, the premium may decrease over the next few weeks.

European Group II levels appear to have flattened out after sellers tried – mostly in vain – to escalate prices on the back of source increases. With Group I prices starting to weaken, Group II levels may start to follow, with prices set to be reviewed on June 1. Light vis Group II grades are becoming universally acknowledged as the replacement base stocks for some Group I light neutrals, with current levels between $695/t and $745/t. Heavier 500N and 600N are between $785/t and $835/t.

Whilst ex-tank Antwerp-Rotterdam-Amsterdam prices do not appear to alter very much from one week to the next, Group III business is brisk, with steady demand for the two main grades being produced and used within Europe. Prices for 4 centiStoke and 6 cSt grades are unchanged for yet another week, at 915/t-945/t.

Baltic and Black Sea

Baltic prices for Russian and Belarusian exports have waned this week due to slower demand, although market sources confirmed that there is interest in moving more large parcels from Baltic ports to West Africa in early June.

FOB levels for the two main grades, SN 150 and SN 500, have widened even further than previously noted. SN 150 is being made available at $515/t-$525/t, whilst significant quantities of SN 500 are on offer at around $620/t. SN 900 is also being made available, and by netting back offers for delivered material, FOB levels are expected to be around $750/t. Bright stock supplies are also available ex Baltic ports in limited quantities at around $835/t basis FOB.

Black Sea reports contain confirmation of a couple of cross-traded cargoes of around 3,000 tons each. One is loading in either Kavkaz or Kerch and bound for Gebze; the other is for receivers in Greece. Another large, 8,000-ton parcel has been booked through Red Sea and then onwards to the United Arab Emirates. This cargo will most probably contain SN 900 and SN 500 grades. Prices for SN 500 delivered into Gebze appear to be around $648/t CIF, with material into Greece carrying a freight premium of around $20/t. SN 150 is also offered along with SN 500 and SN 900, at $545/t-$560/t basis CIF.

Trade from within Red Sea areas is confined to local supplies ex Yanbu and Jeddah, although with an option to discharge into a Red Sea port, cargo quantities of SN 900 from Black Sea may be destined for import into this region. There has been one noted cargo of some 2,000 tons being supplied into Aqaba from the Mediterranean, but details are not confirmed as to grades and prices yet. The Yemeni situation remains unclear, with little news or reports coming out of that region.

Middle East

Middle East Gulf imports are highlighted this week, with large parcels being booked from U.S. Gulf sources along with the Black Sea arrangements noted previously. Other cargoes are being negotiated from the Black Sea, with one parcel of around 10,000 tons being promoted for early June loading. Prices are all strictly private and confidential for these movements, but estimates put CIF/CFR numbers for SN 500 at around $665/t, with SN 900 around $775/t.

Prices increases appear to have halted, with many players in the region forecasting that levels will drop back slowly over the summer recess. Group I movements within Middle East Gulf are again looking at parcels of Group I grades going ex U.A.E. to Kuwait, with two parcels of 5,000 tons each being worked for June. With the European arbitrage still firmly closed into Middle East Gulf for Group I base oils, there has been renewed interest in Iranian material being exported out of the Middle East Gulf to the west coast of India and beyond. One parcel of 7,000 tons has already been confirmed loading on a direct basis ex BIK, and assumed levels for this grade put a price of around $635/t basis FOB in respect of SN 500.

Group II offers for material coming into Middle East Gulf receivers in June have been revamped, with prices for light vis grades being discounted by $10/t-$20/t, to land at offers of $655/t-$670/t.

The heavier 500N, however, is being offered at $785/t-$800/t, reflecting small increments being applied to FOB levels for this material. Some buyers have said that they will not accept any increases and are looking for prices to be adjusted downward. Suppliers have said that raw material costs have risen over the past two months, and these small increases take account of these movements. Negotiations continue between both sides.

Africa

European Group I material is again on offer into South Africa in flexies. The only exceptions are some major cargoes which are being used to supplement refinery output thats been lost as a result of a major turnaround. Baltic-sourced offers for many grades, including SN 150, SN 400, SN 500, SN 900 and bright stock are on the table for South African receivers, with prices ranging from $765/t to $825/t in respect of the neutrals, with the bright stock at around $1050/t basis CIF Durban port.

With local delivered prices some $150/t higher, even after additional costs of importation duty, storage and handling, these imports are more than competitively priced against incumbent local supplies.

West African receivers have welcomed the news that prices, at least in the short term, are not going to move further ahead. With a number of options for cargoes to be loaded, buyers in Nigeria in particular are anxious to seize the moment when FOB levels appear to have slipped, and hence landed prices will reflect these decreases in due course. One cargo of 7,500 tons has been fixed from the lower Baltic ports, whilst another larger parcel of some 12,000 tons is still being considered for loading ex U.S. Gulf Coast for a Nigerian port.

Buyers now appear to have the luxury of choice, with Group I and Group II availabilities being shown from suppliers in the U.S., Europe, and Baltic and Black Sea regions. This will enable traders to bargain between suppliers, perhaps reducing price levels further.

Prices for bulk material coming into West Africa sites are constantly undergoing review, with further cuts being made this week in light of slightly lower FOB numbers. CIF/CFR landed levels are presently indicated around $765/t-$785/t for SN 500. SN 900 is around $865/t, and mainstream-quality bright stock is maintained at $1125/t-$1155/t.

Offers for heavier grades in flexi-bags are around $975/t in respect of SN 900, with quantities of lower specification bright stock at $995/t. Another offer for lower-quality SN 500 and bright stock is reported at $825/t and $1035/t respectively.

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.