Europe

API Group I grades such as bright stock are becoming less available, particularly in large slugs, which is bringing a new dimension to a market which traditionally has either been short or long.

Buyers are shopping suppliers in various loadports to be able to combine base oils to build cargoes, which incurs time and costs which must be passed on to receivers and ultimately, end-users.

Falling feedstock levels, combined with producers trying to close down inventories, are putting pressure on Group I prices to weaken. Prices havent moved downward, though, and offers for some grades actually increased. Light solvent neutrals are $495/t-$510/t, with heavier grades such as SN500/600 remaining at $620/t-$640/t. There have been unconfirmed suggestions from certain sources that offers have been made below these levels.

Bright stock has hinted at moving upward, particularly for parcels which are in the right place at the right time. This refers to this grade being loaded with SN500/600 or other heavier material thats in demand in export markets such as West Africa. This grade has moved to $895/t-$925/t depending on parcel size and availability of other grades being co-loaded.

Levels above refer to export offers and sales of Group I grades made available ex mainstream sellers or producers in mainland Europe.

Local prices remain in neutral. Sources claim that some sellers will offer incentives for December lifting and deliveries, presumably to reduce inventory for yearend, while other sellers have announced tightening avails for some Group I grades, which suggests prices may firm.

No marked changes have been reported to levels for domestic sales of Group I base stocks, which carries a 70/t-85/t premium over exports. Smaller quantities of bright stock are available at prices under the export low, where resellers have merely maintained margins for material in tank.

European Group II prices appear to have remained flat the last few weeks, with all supply points in the U.S. and Far East operating normally. With adequate availabilities, marketers are once again looking to defend market share, or in some cases break into the European scene. New availabilities may start to appear in 2016, creating further competition in what many describe as an expanding market.

With the closures of more Group I facilities, more blenders may certainly move to Group II products where possible. With Group II and Group I prices mostly in parity, such an insurgence seems inevitable.

Light viscosity grades levels are still $520/t-$545/t. Heavier vis grades 500N and 600N are $720/t-$760/t on an ex tank or FCA basis within Europe.

European Group III supply has come under further pressure as sources suggest that new production is starting to impinge on existing business, with both local producers and importers being exceptionally keen to retain market share. The most obvious method of preventing share erosion is to modify prices to appease buyers. These efforts have necessitated dropping prices by 25/t-40/t for both grades in some cases, although some suggested that this was ongoing and not a one-off adjustment.

Weaker prices are detected this week, with both 4 centiStoke and 6 cSt grade at 830/t-855/t for ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Baltic trade for Russian and Belarussian exports is affected by some distributors and resellers not providing in-tank stocks of Group I base oils for spot business, but instead taking orders for cargo quantities and then approaching Russian refineries to supply grades. This appears to be causing delays to some vessels being loaded and also difficulties in offering competitive prices.

Some of the prices being offered from Baltic have been higher than European mainland FOB numbers, preventing uptake. However, one some 10,000-ton parcel has been loaded during first days of November for discharge into Apapa. There are two large cargo enquiries on the table with buyers saying they expect to fix these parcels clean this week.

Contract business is unaffected by this pattern with regular deliveries of 3,000-4,000-ton parcels being made into Antwerp-Rotterdam-Amsterdam from Liepaja, along with a single purchase of some 6,000 tons of SN150 and SN500 bound for the west coast of the United Kingdom.

Generally, prices contained in offers for SN150 are $485/t-$510/t, with SN500 between $565/t and $625/t due to variations between suppliers. SN900 has also been the subject of much debate with FOB prices offered at $695/t-$725/t, with FCA numbers around $15/t-$25/t lower, taking account of movement costs from railcar to tank.

Black Sea base oil business has been almost nonexistent, with Turkish elections completed last week and receivers awaiting the new importation rules for base oil. Availability has been reported as tight, although one major supplier is said to have large quantities of material in tank awaiting sales. With no outlets through Middle East Gulf receivers due to local prices in that region being exceptionally low and the arbitrage now closed, traders are looking at the possibility of sending parcels from the Black Sea to West Africa. One report has placed an FOB offer for quantities of SN500 and SN900 at $525/t and $630/t, respectively, although this has not been confirmed.

Mediterranean cargoes are missing this week from the schedule with no reported movements from Italy or Greece, perhaps a function of the confusion regarding importation of base oils into Turkey.

Middle East Gulf

Middle East Gulf markets are now a net exporter of base oils, with quantities of Group I base oils being moved to India, Pakistan and Malaysia, and large parcels of Group III material being shipped from Bahrain to the west coast of India.

Group I exports made up entirely of Iranian production are being made either directly from southern Iranian ports or through United Arab Emirates. Some 50,000 tons of Iranian grades have been identified as leaving Middle East Gulf ports in November, effectively closing the arbitrage for any imports of Group I base stocks from Europe, Black Sea or Far East, and at the same time increasing local competition due to FOB prices which have remained low for some weeks at $440/t-$460/t for SN500. Grades such as SN150 and SN650 are also offered, along with some smaller quantities of Iranian bright stock.

Such has been the effect of the Iranian export material that few other cargoes of base oils have entered Middle East Gulf regions.

Group II markets are quiet, with only a handful of enquiries. There are a couple small parcels being worked for import into United Arab Emirates, but no major sales have been reported this week. Offers have been dismissed as too high, although receivers have admitted confidentially that most have ample stocks, and unless suppliers are willing to discount, many have no interest in taking material into tank before Jan 1.

Offers are $520/t-$545/t CIF for lighter vis grades, with heavier material at $665/t-$680/t. Buyers said they need prices to be about $20/t lower for the light material and $35/t-$50/t lower for the heavier 500N. Whether these counters are real or tongue-in-cheek isnt clear. Sources are saying the market is oversupplied and that with continuing lower crude and feedstock levels, these prices must be adjusted downward.

Africa

East African trade has recorded one regular import from Italy into Tanzania for a quantity of some 8,000 tons of three grades of Group I base oils, an arrangement which has been handed down from previous ownership of the blending facility in Dar es Salaam. CIF prices are not disclosed but are estimated to be around $585/t in respect of the SN150, with SN500 landing at $655/t, and bright stock around $985/t.

South African markets have remained quiet after the ICIS base oils conference held in the region last week, with few reports of new discussions coming out of the meetings. Many attendees were only back at desks yesterday.

The shipping enquiry for a 10,000 ton parcel to be moved from Mumbai to Nigeria appears to have lapsed, with no further action being taken on this remote and unlikely cargo movement.

West Africa has not seen the large import volumes of base oil which some were predicting would be fixed during November for delivery early in the new year, although some sources commented this week that they were close to completing deals for cargoes which would be loaded in December out of mainland Europe, the Baltic, Black Sea and the U.S.

Latest prices being quoted in offers for CIF/CFR delivered material have moved ahead a little, particularly for bright stock parcels which are in demand throughout West Africa, and expectations are that whilst there may be some reductions in solvent neutral pricing, bright stock prices will likely be pressured to rise the next few weeks.

Heavy neutrals are $655/t-$680/t depending on quality and source. Mainland European levels may be higher, but at the same time supplies from sources such as Black Sea, if shipping can be worked out, may come in at substantial discounts. Bright stock is now estimated to sell between $985/t and $1025/t with SN900 at anything from $775/t to $845/t.

Discussions within West Africa markets and particularly Nigeria, are on the attempts to curb illegal lubricants there.

The question of substandard finished lubricants has in part been traced back to imports of inferior base oils which were purported to meet specifications of SN900/bright stock or another high viscosity grade. Evidence has come to light that material such as furfural extract was imported from various sources and was generally used as a high vis blend stock. This has now been addressed and has been declared illegal, although one anonymous party has stated this week that this type of material is still finding a way into Nigeria and possibly other West Africa countries. Inspection of cargoes on arrival on an ad hoc basis by authorities may start to limit this activity, sources said, but this action is still to be put into place by government agencies.

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