Europe

European API Group I avails have tightened further this week, with buyers struggling in some cases to put cargoes together. Even light solvent neutrals are shortening up around Europe and have moved $10/t-$20t /upwards to $495/t-$520/t FOB, along with heavy neutrals which have responded to a tight market by being offered some $20/t-$25/t higher than last quoted, at $540/t-$560/t.

Bright stock is in universal demand, with receivers in North Africa, East Mediterranean, and West Africa all looking for substantial quantities. Bright stock is $945/t-$960/t in offers, with one offer for a quantity of around 4,500 tons at $975/t basis FOB Atlantic Mediterranean.

Prices noted above are in respect of large cargo parcels of Group I grades available FOB ex mainland European suppliers.

Domestic prices for local European sales do not appear to be so precariously short, with adequate supplies of both mainstream and Russian export barrels from the Baltic finding their way into Northwest Europe and in some cases, even into Mediterranean regions. With prices having increased from May 1 and the market appearing to be in balance, perhaps the market will not see further adjustments until the end of May. The price differential between local ex tank sales and export is 75/t-90/t.

Group II price levels have certainly moved quickly upward, regaining some of the discounting that occurred earlier this year. Source increases are playing the major part of the price hikes, with sizeable adjustments being made particularly by U.S. suppliers. Reports from the European mainland are that premium specification grades carrying a raft of approvals have moved the fastest and also by the larger increases.

One strange aspect of the Group II market is that there does not appear to be any pressure on avails at this time, with adequate stocks being held in tank by sellers and distributors around Europe. With large parcels of Group II base oils arriving into northwestern European markets carried in medium range vessels of between 25,000-50,000 tons dwt, supplies seem to be covered from all angles at the moment.

Levels for light vis grades, from 70 neutral to 220N, are maintained at $545/t-$585/t with heavier vis material between $675/t and $725/t. These grades are often being sold in euros, so currency conversion and exchange rates are critical. Premiums of 50/t-120/t can be applied to these prices when material is redelivered to secondary storage or when sold on a delivered basis.

Again attention has been drawn to the complexity of the Group III market, where larger buyers receiving material in bulk on a CIF or CFR basis will be paying much lower prices than blenders purchasing on ex tank or delivered arrangements. Prices for 4 centiStoke and 6 cSt grades remain unchanged at 850/t-875/t. Levels for 8 cSt material are still around 820/t on the basis of sales ex-tank Antwerp-Rotterdam-Amsterdam – which is the same level as last week, contrary to an incorrect figure listed in last weeks report.

Baltic and Black Sea

Russian export grades are still prolific out of the Baltic with what appears to be a growing number of 3,000- to 5,000-ton cargoes of the two main grades, solvent neutral 150 and SN500, coming into Antwerp-Rotterdam-Amsterdam for redistribution throughout mainland Europe or for onward shipment to deep-sea locations. Some players suggested that these imports are taking the place of material lost from refinery closures, whilst others say these products – whilst often not so highly specified as mainstream production – can still be used as economic alternatives to mainland avails of Group I base stocks. Other parcels have been or will be programed to load for Nigeria during the latter part of May, showing that some traders and receivers appear to have found ways around the ongoing problems facing Nigerian banks.

FOB prices for SN150 and SN500 are keeping pace with other Group I increases around Europe, having moved upwards to $485/t-$500/t and $510/t-$535/t for the two grades, respectively. SN900 in large parcels is being indicated in offers at $690/t-$725/t basis FOB.

Black Sea reports are that another large parcel is being arranged on basis STS Kavkaz, Russia, for shipment to the United Arab Emirates. This parcel will consist of around 6,000 tons of two or perhaps three grades, the main material being SN900. Suitable shipping is the key to making these cargoes work out of the Black Sea, since it can be difficult to locate the right vessel within the right time scale to perform this type of voyage.

The usual cross-trades from the eastern part of the Black Sea into ports such as Gebze, Turkey, continue without interruption. Mediterranean supplies of Group I base oils ex ports in Spain and Greece still abound, with prices in respect of these trades at $560/t-$610/t for the range of neutrals. Small parcels of bright stock ex Spain, and sometimes Italy, are being offered at around $1,000/t all basis delivered CIF.

Middle East Gulf

Iranian exports of Group I material are increasing, with a large portion going into relatively local markets such as Pakistan and the west coast of India. However, there have been recent moves to establish Iranian export grades into Far East destinations, which may have started to feel the pinch in terms of Group I availabilities. FOB levels for SN500 remain around last weeks reported numbers of $495/t basis FOB Bandar-e Emam Khomeyni (BIK) or Bandar Bushehr. Offers for Iranian SN500 into Far East are heard at around $545/t basis CIF mainland China or Singapore for 5,000- to 7,000-ton parcels. The premium SN500 grade with higher viscosity index and better color is expected to sell at $10/t-$20/t higher.

The region has switched from net importer of base oils to major exporter with Group III production in Bahrain, Qatar, and now Abu Dhabi. Although the first two producers sales, marketing and distribution systems are well-known, it remains uncertain how the recent new availability from Al Ruwais will be handled, other than reports which suggest that a great deal of the production will be used for in-house blending operations and local use.

For Group II use, perhaps there will be a move to use the 100,000 tons of local production rather than import from Far East and U.S. producers, although a number of major players have already set up distribution networks to handle direct sales. Other markets in the west coast of India could be a target, although non-approved U.S. exports can be exceptionally competitive for this type of business. Suggestions that Middle East Gulf receivers would elect to stay with Group I and Group III rather than make the quantum leap to Group II base stocks have been repudiated by some.

Group II grades reflect continuing increases imposed by U.S. and Far East suppliers with indications for lower vis 100N/150N/ 220N grades at $575/t-$590/t, and heavier 500N and 600N material at $695/t-$720/t basis CIF/CFR.

Africa

Reports from South Africa maintain that a cargo is loading out of northwestern Europe for June arrival into Durban. This is thought to be Group II grades being satellite-delivered from Antwerp-Rotterdam-Amsterdam, which makes more economic sense than exporting smaller parcels from U.S.

Prices in respect of the Group I grades into North African ports have increased in line with European FOB rates with SN150 and SN500 at $565/t-$595/t and bright stock, where available, being landed into ports in Morocco, Tunisia and Egypt at around $1020/t CIF basis.

Receivers in Ghana have taken delivery of further quantities under tender, whilst other buyers in Cote d’Ivoire and Guinea have fixed smaller quantities of Group I base oils in flexies from Baltic sellers. Nigeria still languishes with lack of foreign currency. Some traders have found ways around this problem but do leave themselves exposed to possible default situations where receivers in Nigeria are being bound to honor payments for sales of parcels of base oils at some time in the future.

Baltic sellers are supplying at least two large, 10,000- to 12,000-ton parcels over the next few weeks, with one vessel already fixed clean to take one of these parcels during the second half of May. Large slugs of SN900 are being loaded, and in one case, with a two-port load, bright stock is being added from either Northwest Europe or Iberian Mediterranean sources. Italian suppliers have also sent two cargoes containing bright stock and other Group I neutrals to Apapa, Nigeria, over the last few weeks, and whilst these were planned some time ago, turnaround may start to play a part in the availability of bright stock over the next couple of months.

Price levels have firmed again this week with lasted calls being some $10/t-$25/t higher than last reported. Numbers are now indicated in offers at $563/t-$642/t in the case of SN150 and SN500, with SN900 ex Baltic at $808/t CIF/CFR. Bright stock, either ex Atlantic or Mediterranean, is heard at $1065/t-$1080/t same basis delivered.

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