Europe

API Group I grades in Europe have stalled on price movements, particularly in respect of light solvent neutrals where prices are maintained between $510 per metric ton and $525/t FOB. They appear to be weaker due to continuing availability of mainstream production and steady ingress of Russian light neutral exports into mainland Europe.

The heavier neutrals appear to be more in demand for exports and increased $15/t-$20/t this week to $590/t-$620/t. Bright stock sellers have indicated that they want more out of this grade and are prepared not to sell at lower levels than necessary, even to move large quantities. Offers are $965/t-$985/t, with one confirmed at below $800/t, but this is thought to be lesser-spec product available in smaller quantities from the Baltic.

Prices above are in respect of large, cargo-sized parcels of Group I grades supplied or offered on an FOB basis ex mainland European supply points.

European Group I sellers have been notifying buyers of 20/t-45/t hikes on an ex-tank or delivered basis from June 1. No real shortages are reported in the domestic markets, with all blenders appearing to be covered through June and July up to the holiday period when most of the repair and maintenance work is carried out. There are reports that perhaps more blending operations are opting to go down the Group II route than was first thought, perhaps due to heavy influence of U.S. imports and also new U.S.-affiliated production coming on stream next year, all of which carry major approvals and formulations.

The differential in prices for local ex tank sales over export levels has widened to 80/t-95/t.

Further source increases were announced this week from major U.S. importers of Group II base oils into Europe. The result of these intimations will presumably be further increments to selling levels in Europe and other import markets. How long it takes for these increases to filter through the ex-tank sales is not clear, with some immediate rises and others taking time to gravitate to end-users.

Lighter grades 70 neutral through 220N in Europe are 10/t-20/t higher this week, at $595/t-$605/t. Heavier cuts 500N and 600N rose to $710/t-$775/t. As normal, premiums of 50/t-120/t may be applied to Group II grades when material is redelivered to secondary storage or sold on a delivered basis.

The initial perceived increases to Group III grades do not appear to have been supported throughout the supply chain, with some sellers and distributors acknowledging that their prime responsibility to producers was to not lose out market share to new production.

There have been some small incremental adjustments to some grades for the smaller buyers who are lifting relatively small quantities of material on an ex-tank or truck-delivered basis, but these price rises may not apply to major purchasers of Group III grades.

However, should crude oil and feedstock values continue to increase, even in the case of gas-to-liquids production, these prices will definitely follow the industry trend upwards.

Prices are therefore maintained this week, with a slight acknowledgment to small increments at the lower end of the supply chain, at 885/t-895/t for 4 centiStoke and 6 cSt grades and 8 cSt material around 845/t on basis of sales ex-tank Antwerp-Rotterdam-Amsterdam.

Reports are that, apart from what have now become routine cargoes loading ex Baltic ports and being discharged into Antwerp-Rotterdam-Amsterdam storage, deep-sea exports interest is increasing for the normal grades and also some hybrids targeted at West Africa.

Prices for FOB sales of SN150 have remained constant this week but heavier grades, such as SN500 upwards, have risen significantly. SN150 is reported at $485/t-$505/t, with SN500 now being offered at $595/t-$625/t. SN900 in varying quantities is indicated in offers at $695/t-$745/t basis FOB, along with other less available grades such as a lower-spec bright stock 150, which is priced aggressively against mainstream production at $815/t-$835/t FOB, but in smaller quantities. Some receivers are looking at lifting a blend consisting of SN900 and bright stock which is estimated at around $745/t basis FOB or FCA, if loaded into flexies.

Baltic and Black Sea

Black Sea prices appear to running in line with European Mediterranean exports rather than Russian export levels, and given that the majority of imports into regions such as Turkey are being sourced from Greece, Italy and Spain, this should be no real surprise. It would appear that importers in Turkey are opting for higher-quality Group I material, now that a great deal of the fuel dilution scam has been eradicated using lower specification light neutrals. Prices for SN150 and SN500 are now $555/t-$645/t Kavkaz, Russia, SN500 is being priced at similar levels to the Baltic at $595/t-$620/t FOB. The resultant prices will be $645/t-$665/t delivered into Gebze, Turkey, depending on parcel size and quantity loaded.

There are no new reports regarding Red Sea activity this week, either from receivers fixing Group I cargoes out of northwestern Europe, or loading out of Saudi Arabian ports.

Middle East Gulf

In the Middle East Gulf, Iranian SN500 continues to be offered out of the southern Iranian ports of Bandar-e Emam Khomeyni (BIK), Bandar Bushehr and Bandar Abbas. SN500 prices have moved upwards again this week for June loading, and are heard in the United Arab Emirates on the basis of FOB at $535/t-$555/t FO. This grade has moved upwards by more than $100/t from the lows early this year. Offers into China and Singapore have also been revised upwards with two parcels of SN500 being offered at $610/t delivered. Offers from one Iranian producer for a premium SN500 grade, with higher viscosity index, better color and flash are at $635/t, same basis.

Receivers and blenders in the Middle East Gulf, principally in the U.A.E., said that their finished lube markets are not yet ready for the premiums which will necessarily have to be paid if this region moves away from straight Group I blending. Some of the smaller blending operations that are dependent on larger traders importing cargoes from outside the region are concerned that the move to Group I plus Group III, and perhaps to Group II blending would damage their ability to serve what are basic markets with very little high-tech requirements, premium original equipment manufacturer use or local emission controls.

What appears to be taking place is a move for smaller operations to look outside for alternative Group I supplies from Europe and Russian, and with Saudi Arabian producers about to ramp up the production of bright stock at one of their units, opportunities appear to abound.

It is still unclear if the 120,000 tons of new production commencing from Al Ruwais will be resold to third parties or used internally. Some buyers have expressed interest to take supplies from this source, but so far, its unclear whether this material is actually available yet.

Prices in the Middle East Gulf regions for the few offers which have been made over the last few weeks reflect the source increases in the Far East and the U.S., with numbers now $610/t-$635/t for the lighter grades, with heavier 500N and 600N base oils at $755/t-$785/t basis CIF/CFR. These levels are much higher than previously noted, perhaps due to the lack of commitment from suppliers when looking at the Middle East Gulf markets.

Africa

Group I supplies between Spanish and Italian Mediterranean ports and North Africa are continuing, and apparently contracts have been drawn up to cover the original supplies which would have been made from Mohammedia refinery in Casablanca, Morocco. This production will not restart according to sources this week, since other main parts of the refinery are also to be mothballed and perhaps decommissioned. This production becomes another member of the lost Group I production league. Prices for the cross-trade Group I grades are pushed higher this week, since there had been not reports of cargoes for some 20 days prior. These levels are now $575/t-$655/t in respect of the range of solvent neutrals, with bright stock at $1035/t-$1060/t CIF.

Nigerian enquiries abound, with traders and receivers busy in the market trying to source varying quantities of Group I grades both in bulk and in flexies. Buyers are searching Baltic and northwestern Europe for parcels of required grades with others looking to Mediterranean producers for suitable avails. What is still not clear is how these cargoes are to be imported since theres still problems surrounding the issuance of letters of credit.

Baltic reports are of a number of large proposed parcels of SN500, various grades of SN900 and some bright stock. These parcels are for anything from 8,000-16,000 tons in one case, and although none of these parcels has yet been confirmed for June loading, there is no smoke without fire.

Delivered prices have continued to rise over the last few weeks, particularly for the grades required into Nigeria, and new offers reflect revised numbers. One interesting economic fact is that for the smaller standalone bulk parcels of 5,000 tons and under, there is very little cost and hence price differential between a true bulk supply and delivery in flexies.

Levels in respect of smaller bulk and flexi supplies are now $615/t for SN150 and $755/t for SN500. Mainstream bright stock is at $1075/t-$1095/t, with quantities of straight SN900 at around $695/t. Hybrid blends of Baltic bright stock and SN900 can be made on a varying scale depending on the percentage blend of each constituent part at $725/t-$765/t. Lower-spec bright stock grades are indicated at around $800/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.