Base oil prices have not yet had time to react, and it may be after August until prices are radically altered, depending on the direction of the crude markets then. Some pundits forecast a return to crude prices below $40 per barrel, whilst others are citing only a temporary dip in levels until after the summer recess, when prices again surmount $50 per barrel.

Europe

API Group I prices are maintained, given uncertainty as to which direction prices will move, and also taking account of the dwindling record of transactions taking place during this time of year. Prices are steady as few refute these levels – light solvent neutrals remaining $510/t-$525/t FOB; SN500 and SN600 between $595/t and $625/t; and bright stock in offers at $985/t-$1,010/t.

Prices above are in respect of cargo-sized parcels of Group I grades being supplied or offered on an FOB basis ex mainland Europe.

Local or domestic prices in respect of Group I base oils are also maintained, with only a few blenders calling for lower numbers w.e.f. Aug. 1. Sellers are prepared to marginally adjust some prices lower, almost as a gesture while waiting to see where levels will gravitate.

Buyers are now intent on holding back from ordering and restocking until September, although some have intimated that they will review the situation on a weekly basis during August to appraise the right time to buy replacement inventories. The differential in prices between domestic levels and lower export numbers is also maintained at 80/t-110/t.

Group II prices are assessed as stable to firm, although the impetus to increase prices for some of these grades due to increasing demand and shortening of production appears to have been sated, with prices flattening and no reports of higher numbers. Prices therefore remain, with light grades 70 neutral through 220N at $630/t-$645/t, and the range of heavier viscosity grades between $750/t and $800/t. A 50/t-120/t premium may be added for material which is redelivered to satellite storage locations, or for product sold on a delivered basis.

The industry acknowledges that although Group II production is growing exponentially, there are few new markets to soak up the additional supply – but producers and sellers appear to have adopted a head-in-the-sand attitude. Some have admitted to cutting back on production rates, but since many of the refineries output is formulated on an optimum basis, attempts to adjust production rates can be both difficult and costly.

However, Group III prices, at least within Europe, appear to remain stable. Local supplies ex tank Antwerp-Rotterdam-Amsterdam are 875/t-885/t in respect of 4 centiStoke and 6 cSt, with 8 cSt material around 840/t. These prices refer to the many local, smaller truck deliveries and ex rack supplies, with major purchases on CIF basis to large buyers substantially lower.

Baltic and Black Sea

Russian exports continue unabated during the summer, with a couple of large parcels being examined and proposed for delivery into West Africa. Prices remain static with no downward pressure building yet, although some traders have requested reoffers for large slugs of product which have been on the table for the past couple of weeks.

Most prices remain in the same ballpark as last week, although there has been some downward pressure on SN500 prices. FOB levels for SN150 and SN500 are now $495/t-$520/t and $590/t-$600/t, respectively, although some players have reportedly been proposing lower levels. SN900 is $705/t-$725/t basis FCA, and around $15/t-$25/t higher on the basis of FOB. Smaller quantities of SN1200 can be made available and is currently assessed at $770/t-$785/t FOB.

In Turkey, its still unclear as to what will happen in the short- and long-term aftermath of the attempted coup. Most have commented that it is business as usual, but these are guarded comments amid many arrests and suspensions of principle players in many areas of commerce. It is only right to report known prices in respect of base oils finding their way into Turkey. Russian cross-Black Sea trade has quantities of SN1500 and smaller quantities of SN150 and SN900 going into ports such as Genze and Aliaga, at $620/t-$635/t in respect of SN500, with SN150 at around $525/t and SN900 in small quantities (often flexies) at around $735/t.

Middle East Gulf

Middle East Gulf markets, particularly in respect of Group I business, are surprisingly active where normally at this time of year the region experiences a hiatus. This is possibly due to this years timing of Ramadan and Eid al-Fitr observance.

Iranian SN500 still pours out of the southern Gulf ports, with further offers for cargoes into Far East and India this week. FOB prices appear to have stalled in their rising spiral, perhaps due to other crude and product prices falling back during the last couple of weeks. Prices, however, are reported as stable with no reported downward pressure yet. Levels will still be around $600/t on basis of FOB avails. Other Iranian grades have been quoted this week with smaller quantities of SN150 priced slightly lower than SN500 at around $590/t, and quantities of SN650, which is of poorer quality, at around $555/t, all basis FOB.

A European offer for a quantity of bright stock has been rumored at an associated level of around $1,018/t CFR United Arab Emirates.

Group III exports from Bahrain and the U.A.E. continue, with Bahrain material going deep-sea to Europe, the U.S. and Far East, whilst U.A.E.-sourced production is selling into the Indian market alongside the Bahraini material.

Group II business in Middle East Gulf regions has been reported as expanding. This is a function of the distributor business which is being handled locally by independent parties representing the major suppliers of these grades. The material is sold in smaller parcels ex satellite storage in locations such as the U.A.E., which covers smaller receivers of these grades throughout the Middle East Gulf.

Prices in respect of large cargoes offered to Middle East Gulf receivers from the Far East and the U.S. for light vis grades are $635/t-$665/t and for heavier 500N and sometimes 600N at $790/t-$805/t CIF.

Africa

Group II grades appear to have been firmly established in southern Africa, with a couple of cargoes from the U.S. and Far East being imported into Durban, South Africa, along with quantities of Group III grades ex Malaysia. Southern Africas markets are changing fast and it will be interesting to see if this region adopts more Group II use or choses the Group I and Group III routes for future blending operations.

Intra-Mediterranean trade has reportedly seen some oddball offers, such as some from Baltic-, Italy- and Iberia-sourced material. Greek availabilities have been shown to Egyptian importers by traders who may also opt to take Uzbek Black Sea grades into Moroccan and Tunisian buyers looking for slightly lower-spec, and hence lower-priced, Group I. Rerefined light vis oils have also been offered delivered into North African buyers who apparently can find a use for this type of material, which carries a significantly high viscosity index of 118.

West African receivers, other than those in Nigeria, have come to the market with requests for base oils to be delivered in flexies into Cote d’Ivoire, Guinea and Ghana.

Nigerian receivers are taking large cargoes from the Baltic, mainland Europe, the Mediterranean, and the U.S. There appear to be two cargoes offered or being worked out of the Baltic for September arrival into Lagos, along with another parcel out of the U.S. East Coast and the U.S. Gulf Coast.

Current prices into Nigeria are based on material arriving into ports in that country presently without taking account of material being loaded now or in the future, which may be subject to varying FOB levels and different freight rates. Indications are assessed at around $575/t for SN150 delivered and around $675/t for SN500. Bright stock is currently $1,045/t-$1,065/t CFR Lagos, with SN900 landing at $795/t-$810/t in bulk, and SN1200 at $845/t-$865/t.

Prices may now start to drop slightly in view of current crude and feedstock trends, but these changes may not become evident for at least another four to six weeks, when FOB levels may be adjusted. Based on perceived pressure, freight rates are forecast to possibly rise slightly into West Africa, which may offset any downward adjustments to FOB levels in Europe and the Baltic.

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