Europe

Crude price drops have not been felt by base oil prices yet, as Group I levels do not appear to have moved much. The few buyers around at the moment do not appear to be in any hurry to finalize purchases, since the sentiment is that lower demand and falling raw material costs will bring weaker prices in coming weeks.

Indeed, many traditional bulk buyers are purchasing smaller quantities of base oils in flexies to tide them over until after the summer recess, noting that they expect prices to fall in coming weeks.

Despite many parts of the global market experiencing tightening and gradually increasing prices, the European scene is almost the reverse. Avails for API Group I material do not appear to be a problem, with most buyers able to select packages of base oils to suit receivers in both deep-sea and domestic markets. Fixtures to carry material to both Far East and South America have been noted, confirming that the arbitrage to both these regions may be open for European exports.

European Group I FOB prices have not really changed, with the exception of one or two minor adjustments which have mainly taken place at the top ends of the ranges. Light solvent neutrals are $530/t-$540/t, with heavier neutrals SN500/600 between $575/t and $585/t. Bright stock is also relatively static in limited offers this week at $920/t-$935/t, although one reported instance indicated a price offered for bright stock ex Europe at below $900/t.

The prices above pertain to bulk cargoes of Group I base oils sold or offered ex mainstream suppliers in mainland Europe and North Africa, subject to availability of each and every grade.

Domestic prices in Europe can be reported as stable to weak, with a few reports of prices being revised after the crude slippage a few weeks back. This may be in response to buyers demands, although one supplier expressed preferring to adjust prices more regularly and without prompting, rather than face large swinging cuts to numbers, which can destabilize the market. Other suppliers have been trying to edge up prices for heavier neutrals, which appear to be in demand, although supply evidence to date does not back up this claim.

The differential between local prices and those pertaining to bulk export cargoes has narrowed to 65-85/t depending on location and source.

Group II European import prices are also largely maintained, although some importers have mentioned that they would ideally pitch $10/t-$20/t higher for the light vis products, and $20/t-$30/t higher for the heavier vis grades. The problem is that the European market with the Group I effect simply does not allow these upward moves, and with ammunition such as crude and feedstock declines, buyers are citing lower numbers from August 1.

At this point prices are being held in the same spreads as last week, with the light vis range (excepting the low vis 65N grade, which is sold at a premium of around $25/t) between $710/t and $765/t, and the higher vis cuts at $780/t-$845/t. These prices apply to ex tank sales from storage facilities in Antwerp-Rotterdam-Amsterdam.

Group III prices have at last responded to small changes, with some levels being adjusted downwards by 10-15/t. This small movement occurred only in some cases involving a couple of the major suppliers of these grades. This action may be linked to volume offtake or other incentives to maintain use of these grades during the summer. These price adjustments may also be paid retrospectively, but the net result is that prices have changed for the fist time for many months.

Levels for the 4 centiStoke grades are 895-910/t, whilst the 6 cSt grades are 910-930/t basis ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Prices ex Baltic in respect of Russian and Belarussian exports appear to have stabilized and offers mostly have validity for one calendar month. This has meant that offers obtained early can remain on the table for some time before decisions are finally made to fix a cargo.

On the other hand, contracted buyers know exactly what they will be paying for that month’s liftings, instilling a measure of stability to the market. Reports are that the region is certainly not awash with material, and that supplies can be covered but additional barrels are not being stocked in tank.

FOB prices saw few notable changes. SN150 is $510/t-$520/t and Russian export-spec SN500 is offered at $555/t-$565/t. SN500 prices at the top of the ranges have been trimmed to bring this grade back into line with prices being offered out of mainland supplies. SN900 still being sought for destinations such as West Africa and Middle East Gulf is around $620/t FCA, with ensuing costs taking the FOB indication to $635/t-$640/t.

One large cargo of around 10,000 tons is being investigated for Middle East Gulf loading out of the Baltic around mid July. The arbitrage is difficult to work out on the basis of FOB rates plus freight, but there may be particular reasons for evaluating this enquiry out of the Baltic rather than Black Sea.

Black Sea reports include one 5,000-ton movement from Kavkaz to Gebze, with other enquiries for smaller 3,000-ton and 2,500-ton parcels coming out of the same source. Another small parcel of 2,000 tons is due to be loaded out of Batumi, but this may be Uzbek or even Turkmeni production. There is another enquiry for material to load out of Greece, but how this cargo movement can be achieved with the current banking problems in Greece is difficult to comprehend. Rumors from sources are that Turkish importers are using the INSCX exchange platform to gain liquidity to avoid using letters of credit through normal banking channels.

Prices remain around the same as last reported, with SN150 at $545/t-$560/t and SN500 at $575/t-$590/t CIF northern Turkish ports. Prices for Uzbek SN150 material from Fergana may be $15/t-$20/t lower due to different specifications.

Middle East Gulf

Red Sea and Middle East Gulf areas are affected by Ramadan and the Eid holidays, with many players away for the next few weeks. Iranian sanctions may be officially lifted any day now. It would appear that Iranian exporters have already decided that sanctions are over, with more announcements of material being shipped out of the southern ports to the west coast of India and also into the United Arab Emirates.

Prices have dipped again, with Iranian exporters trying to drive interest in taking available parcels, at $570/t-$580/t for the quantities of SN500 with SN150 in smaller quantities at $575/t-$585/t. These levels are based on FOB indications gathered from U.A.E. sources.

European and/or Russian Baltic supplies will have to compete with Iranian prices, and whilst it may be possible for buyers to accept higher-spec European production at a small premium, Baltic supplies may be tough to sell given current FOB levels.

European prices offered into the region have been heard at $585/t-$635/t for solvent neutrals, with bright stock offered at $995/t, all CIF/CFR U.A.E. ports.

Group II offers have been marked up some $25/t for the higher vis grades 500N and 600N, which may reflect source increases from Far East suppliers. Light vis grades appear to be unaffected, although one receiver in Qatar commented that levels had increased by $10/t for August supplies of 150N. The region is quiet, however, with seasonal and religious holidays detracting from normal activities, and it may be September before a true picture of the Group II market emerges.

With cognizance of the proposed increments, prices are $650/t-$665/t CIF in respect of the light vis grades, coupled with the heavier vis material between $795/t and $815/t.

Africa

No new reports have been incoming from South Africa this week, with continuing small cargoes of Group I and Group II base oils moving from Europe into Durban along with flexies being sourced from Baltic, Black Sea, U.A.E. and India.

West African receivers have been discharging a number of cargoes of base stocks into Ghana and Nigeria over the last few days, with more material on the water arriving before the end of July. The large enquiry ex U.S. Gulf Coast appears to have disappeared off the radar, perhaps due to the reasons suggested last week.

Buyers believe that prices should be headed downward due to plentiful avails in mainland Europe and Baltic – which others say is not the case – and also of course the downward effects of the $10 per barrel dip in crude prices. They believe that August prices should be 15-20 percent lower on the basis of raw material costs falling by the same. The pricing of base oils and crude has never followed a straight line yet, and it is difficult to see why it would change in this instance.

Yet some of the receivers in Nigeria are stating this week that they are unable to cover all requirements for their next cargoes due to restricted availability of one grade or another, which will aid prices to remain at least stable in the short to medium term.

Estimated levels for cargoes coming into West Africa are maintained at $635/t-$690/t in respect of the Group I solvent neutrals and bright stock moving out of Europe and U.S being sold at $1045/t-$1070/t basis CFR/CIF.

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.