Dated deliveries of Brent crude revived to around $48.95 per barrel, having increased more than $3 per bbl from last week. West Texas Intermediate crude followed the trend to $46.40 per barrel. ICE LS Gas Oil echoed the movement by around $40 per metric ton, to $428/t front month settlement.

Europe

API Group I base oils throughout Europe are stable due to the lack of deals being completed. FOB levels remain at existing levels, reflecting a weakening market in terms of activity. Prices for light solvent neutral grades mainly remain at $495/t-$510/t, with the heavier solvent neutrals 500 and SN600 between $585/t and $610/t. Bright stock is also steady, with offers at $955/t-$980/t.

These prices pertain to large, cargo-sized parcels of Group I base oils supplied or offered on an FOB basis ex mainland Europe.

It been almost impossible to reach representatives in the local markets, and with no input, prices are assessed unaltered. Those few players around this week have seen little or no change to prices, and are dismissive of the rise in crude and petroleum product price levels, saying rises could be reversed swiftly should the market respond to a long crude outlook. Levels will probably remain unchanged until the end of August, after which many will have returned to the fray. The difference between local levels and lower export numbers is 80/t-110/t.

Theres a similar malaise in Group II markets, which is expected to revive itself in September during an expected large buying spree when blenders restock inventories after the summer lull. Meanwhile, importers are perfectly placed to take advantage of any spurt in demand, with adequate stocks being replenished from U.S. Gulf Coast sources.

Prices this week are maintained with no suggestions of incremental moves. Light grades remain $630/t-$645/t, with the heavier vis grades, 500N and 600N between $735/t and $780/t. A premium of 50/t-120/t can be applied in respect of material being redelivered to satellite storage locations, and for products sold on a delivered basis.

Group III prices, however, remain under pressure due to the recent increases in production and availability. Reports are that many buyers continue to remain loyal to incumbent suppliers. However, these same buyers are looking to purchase at what they perceive to be a fair price and with some recent offers heard at extremely low levels, Group III prices may be due for a major revision, and this will only be in one direction.

With imports into Europe and the U.S. from the Middle East Gulf, exports from European Mediterranean production going to the same U.S. markets, and existing European domestic production, vast oversupply may unfold.

The Group III market comprises a number of different playing fields taking the same products in varying quantities and delivery methods. Prices quoted are in respect of supplies sold on an ex-tank basis in Antwerp-Rotterdam-Amsterdam and do not reflect the lower numbers which will be paid by major consumers of these grades who tend to purchase on an CIF basis in large bulk parcels. Numbers are reportedly 835/t-850/t in respect of the 4 centiStoke and 6 cSt grades with 8 cSt products around 820/t, ex-tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Sea

Only one reported large parcel of around 7,500 tons for West Africa has loaded this week out of Baltic suppliers in Riga, Latvia. Other, slightly smaller cargoes have been moving into Antwerp-Rotterdam-Amsterdam from southern Baltic ports, taking up the slack from the lost production of Group I grades earlier this year. Another cargo for Nigeria is due to load this month, but an interesting enquiry is on the table for 5,000 tons of Russian export grades into Egypt. This would be unusual, but economically could prove beneficial to North Africa. Other possibilities are for material to load for the United Kingdom, with another southern Baltic port co-loading in northwestern Europe for the Far East.

FOB prices for Russian export barrels of SN150, SN500 and SN900, remain unaltered, although one trader said that sellers are in place to make deals work for large enquiries. SN150 levels are $480/t-$498/t; with SN500 trading at $555/t-$570/t; SN900 offered at $685/t basis FCA; and FOB levels expected to be around $700/t. Lesser quantities of SN1200, whilst not yet in tank, are being offered at $740/t-$755/t FOB.

In the Black Sea region, business has slowed down with only one main cargo ex Mediterranean sources making its way into Izmir, Turkey. Exports ex Kavkaz, Russia, appear to be slow following the large parcel of heavy grades which loaded for U.A.E. and Far East receivers, although another parcel may be sourced ex Kavkaz for Indian receivers during September. There are offers in the Turkish market for Russian SN500 for $585/t-$600/t basis CIF Marmara ports, with SN150 in the same offers at $495/t-$515/t. The few buyers at this time say they are looking for lower prices in light of crude and feedstock moves, although changes this week may push some buyers to action.

The Mediterranean cargo, which is possibly made up of SN150 and SN600, would be expected to land at around $530, and $620/t, respectively.

Middle East Gulf

Red Sea activity is limited to the loading of cargoes previously identified out of Saudi Arabia, with one report for a small quantity of material to load out of Antwerp-Rotterdam-Amsterdam for Aqaba, Jordan, although this quantity is small enough to be loaded into flexies which may provide more efficient freight costs and easier dispatch.

Other Middle East business taking place in Middle East Gulf regions is also seasonally quiet again after a mini surge in demand, particularly for Group I imports. This demand appears to have been sated, with traders in United Arab Emirates only looking at taking some Iranian barrels of SN500 during the first days of September. Iranian sellers have not reported any changes to FOB levels, although two sources, one in U.A.E. and another in western India, confirmed that offered prices have dipped over the past couple of weeks, suggesting FOB levels at around $575/t in respect of Iranian SN500 ex Bandar-e Emam Khomeyni (BIK). SN150 is also quoted in smaller quantities at around $560/t FOB.

Russian Group I material ex Baltic has also been pushed in offers to U.A.E. buyers considering the benefits of these parcels, which are primarily made up of SN900 and SN1200. These heavy vis grades can be used in Middle East Gulf markets in a number of applications, although one blender said formulations would have to be altered if such grades were to become a regular feature of the market.

It is estimated that landed prices for SN900 CFR U.A.E. could be $775/t-$800/t, substantially less than the costs of bright stock, although SN900 cannot be described or used as a direct replacement for bright stock grades.

Group II trade is quiet. With copious quantities of Group III material being made available out of Bahrain and Al Ruwais, economically it is hard to see how Group II grades will compete, (except in some specific formulations) with Group I and Group III. Far East and U.S. majors are still targeting users for Group II in Middle East Gulf areas, insisting that demand for these grades will grow even against the flow of Group III technology in this region.

Offers for Group II grades in large bulk parcels are maintained at $600/t-$625/t for light vis grades and $765/t-$790/t CIF for the heavier 500N and 600N.

Africa

South African receivers are in the process of procuring Group I base stocks from various possible sources including the Baltic, mainland Europe, U.A.E. and India. The final choice as to which product to purchase is reliant almost totally on landed price, although certain importers have restrictions on specifications and characteristics. Prices in respect of SN500 offered CIF Durban are $620/t-$670/t. Oddly, some importers are intent on taking lower-spec grades along with what could be described as premium Group I material, thus reflecting that there are uses for all of the various grades and levels of base oils being imported.

West African cargoes going into Nigeria are identified out of Baltic, and also another parcel which sold ex U.S. Gulf Coast comprised of 12,000-14,000 tons of mixed Group I grades, with the emphasis on the heavier ends including bright stock. Bright stock landing into Apapa or Onne, Nigeria, will probably be $955/t-$780/t CFR/CIF, with heavier neutrals SN700 and SN500 being part of the mix.

With negotiations going on in Europe between Nigerian receivers and sellers, more cargoes are expected to be announced in the next couple of weeks which will be primed to load during September and perhaps even October. These cargoes will load from a variety of sources, with Baltic, mainland Europe and U.S. being among the favorites. Prices are being assessed on a continuous basis with SN150 currently being quoted at around $540/t and SN500 at $620/t. Bright stock ex mainland Europe or U.S. is estimated to be priced slightly lower than previously reported at $1010/t-$1025/t CFR Lagos with quantities of Russian export SN900 still $765/t-$780/t and SN1200 at $800/t-$820/t loading ex Baltic.

Quantities of a rerefined light solvent neutral with viscosity index minimums of around 115 are being made available in flexies delivered CIF into Apapa at $495/t-$525/t depending on number of containers and quantities. This grade will come in at around $100 lower than virgin base stocks, and with the higher VI, may prove to be a new addition to the raft of products entering Nigerian markets. These oils have primary uses in blending process oils and other industrial lubricants.

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