Certain producers are prepared to offer spot availabilities at lower-than-market prices to move material, but seemingly only to buyers who are trusted to load cargoes prior to year-end. Sources noted that one offer clearly stated that the parcel must be loaded with bill of lading issued prior to the last working day of 2015 for the offered prices, otherwise a premium would be added, bringing prices to the current market norm.

Dated deliveries of Brent crude dipped to around $43 per barrel last week then revived to $46.25 per bbl. West Texas Intermediate maintains the crack at $43 per bbl, whilst ICE gas oil is maintained at $433 per metric ton.

Europe

European FOB levels have only slightly weakened, even taking into account some of the lower offers. Light solvent neutrals are $480/t-$495/t, with heavier neutrals SN500/600 down to $585/t-$595/t. Bright stock has also come off this week, with one offer some $30/t under last week’s reported low, bringing the spread to $865/t-$895/t. This range is wider due to the one-off offer thats significantly below other prices.

Prices refer to export offers and sales of Group I base stocks made available ex mainstream supply points within mainland Europe.

Domestic or local sales of API Group I base oils appear flat, with new prices expected from Dec. 1. Apart from year-end selling, contract supplies prices are being rejigged to keep buyers interested in maintaining stocks over the quieter winter season. Demand appears to be steady although some sellers are beginning to see a downturn in offtake volumes which began around early November. Light neutrals seem to be taking the brunt of this, with some blenders switching to Group II alternatives, which have almost come into line on pricing.

Due to weaker export numbers, the 85/t-95/t premium of local supplies over exports is higher but may revert following changes to domestic prices after Dec.1.

Group II sales within Europe are following a similar track, but also have continuing decreases from U.S. and Far East sources. The realignment of posted prices in the U.S. and traded levels in the Far East are easy to track by buyers within Europe and are used to pressure distributors to modify prices.

More and more blenders are turning to Group II to produce the new generation of finished automotive lubes. Some products such as gear oils and some marine lubricants will maintain use of Group I higher viscosity grades such as bright stock, but dependence on Group II is mounting.

Currently, light vis grades are $510/t-$540/t, with higher viscosity grades between $690/t and $745/t ex tank Antwerp-Rotterdam-Amsterdam. Buying sources are looking for discounts of $30/t-$50/t or euro equivalent w.e.f. Dec. 1.

Group III markets are not expanding as quickly as material comes on stream, so competition is growing. Producers in Europe are looking to gain foothold in new markets where production is either limited or nonexistent, testing markets such as the U.S. and South America with distribution networks. It may take years to assert a meaningful presence when faced with incumbent importers of these grades.

With suppliers vying for market share, prices are starting to come under pressure, with buyers trying to coax sellers to regularly review levels in light of alternative avails. Levels are 820-835/t ex tank Antwerp-Rotterdam-Amsterdam and other Mediterranean storage, with the possibility of price reform next month.

Baltic and Black Sea

Some large Baltic deals are being done for loading early in December, but there are also smaller, more routine cargoes moving from Liepaja to Antwerp-Rotterdam-Amsterdam and the United Kingdom. SN150 and SN500, the two main grades, are varied in price depending on the supplying distributor and refinery. Offers vary from $465/t for SN150 to $505/t. SN500 was $542/t in one offer, and buyers are expecting to start dropping prices further in coming weeks.

However, supply is fairly balanced and suppliers said they do not want to drag prices downward only to raise them again in January.

SN900 is being offered to receivers in West Africa. Only delivered prices are being quoted for this parcel, at $775/t-$800/t basis CIF West Africa ports.

Black Sea trading is thin, with Turkish buyers staying away from the market. Some say they have bought cargoes in the last couple of weeks and do not require further stocks before New Year, but with import licenses running out on Dec. 31 and a renewal process which may be long and cumbersome, it is difficult to understand why these importers would not purchase at this time.

A couple of unconfirmed enquiries have been made to Mediterranean suppliers for EUR 1 material.

Prices offered for Turkmeni material basis FOB Batumi are reportedly $550/t for the high VI SN180 and SN350, each available in 3,000-ton lots. Russian offers from Kavkaz are reckoned to be 575/t-$585/t for SN500 delivered into Gebze, reflecting huge discounts from previous offers, but not many are rushing to these avails.

Red Sea shipping reports are that large parcels of Group I material have been moved from Saudi Arabia to Jordan, the United Arab Emirates and perhaps Oman.

Middle East Gulf

Other trade into the region has been slight, with the emphasis on exports. Large parcels of Iranian material are loading or about to be loaded for the west coast of India, but the reported grade split is rather odd in that SN150, SN600 and bright stock are mentioned. These are not typical Iranian exports, although a lot may have changed during the sanction period.

SN500 continues to either be shipped directly from southern Iranian ports or through transshipping agencies in the U.A.E., although even with the low prices, many of the opportunities for sales into the Far East have been negated by falling prices. With the arbitrage closed for deep-sea traffic, the west coast of India has become the target market with prices marked down accordingly.

From unconfirmed reports, prices close to $485/t are being heard for Iranian export SN500 delivered into Mumbai. With the arbitrage closed for U.S and European barrels to move into Middle East Gulf receivers, Iranian and Saudi Arabian production have taken on the role of supplying this region with Group I base oils.

Group III exports are moving from Bahrain to India, emphasizing the fact that the Middle East Gulf region is now a net exporter of base oils – a very different story from times in the past.

Group II imports also seem stalled. Despite many offers on the table and renewed discounted prices from suppliers in the Far East and U.S., uptake is low. Some players say that they will ride out December with stock in hand and will look to buy for January or February arrival. This suggests that stocks are higher than normal, or that receivers are playing a clever waiting game to have material on the high seas at year-end, thus minimizing inventory and stocking levels.

Prices are reportedly $495/t-$510/t for the light vis grades with heavy 500N and 600N down again this week at $635/t-$650/t for combination cargoes calling at both west Indian ports and Middle East Gulf (thus trimming on the freight angle).

Africa

South African importers report further European cargoes being brought into the region. And with official notification that local refineries will not restart production of Group I base stocks, these requirements will have to be covered from affiliate trades and other approved sources. Dearth of Group I may open doors for Group II and Group III and a rise in naphthenic imports.

A few very large cargoes are approaching the coasts of Ghana and Nigeria, but there may be more to come as traders negotiate discounted prices for large Group I slugs from Europe and the U.S.

Receivers in Nigeria, for example, report that they are prepared to purchase opportune or last-minute year-end cargoes. The problem is that there does not appear to be a plethora of avails to meet this spurious demand, with sources in the Baltic possibly in balance, mainland Europe tight on some of the heavier grades, and Atlantic U.S. suppliers not really looking to sell at extremely low levels.

Gossip heard from Nigeria early this week pointed to buyers being disappointed with current offers – some wanted $50/t-$70/t lower, based on Group I material historically flowing from many more sources than today. Sellers have advised receivers to be prepared for higher prices and less availability.

Perhaps one step in the right direction was noted this week, when buyers in Apapa opted to take 500 metric tons of 150N instead of SN150, which are now side-by-side in pricing. A delivered price is likely $585/t CFR for this grade as part of a larger parcel.

SN500 and SN600 are $655/t-$685/t CIF/CFR. Bright stock appears to have come off a little but remains scarce in terms of large cargoes and is estimated to land at $975/t-$1020/t CFR/CIF, the lower end being the heavily discounted parcel being purchased out of mainland Europe. SN900 is $775/t-$800/t in bulk, taking the selling price quoted out of the Baltic, with smaller quantities in flexies offered into Nigeria, Ghana and Cote dIvoire at around $865/t.

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