Crude and feedstock prices have remained consistent the past few weeks and some predict the trend will continue, even amidst talk that agreed-upon production cuts are being met through fabled accounting and renewed tensions between the U.S. and Iran. If crude does stay flat, it would remove one potential source of pricing pressure for petroleum products including base oils.

Prices for dated deliveries of Brent crude were around $55.20 per barrel in late Tuesday trading this week, with West Texas Intermediate crude maintaining a $3 crack at $52.30/bbl. ICE LS Gas Oil, a marker for petroleum products, were at $488 per metric ton, close to last week’s level.

Europe

European FOB levels for Group I grades are unchanged this week, $610/t-$625/t for light solvent neutrals and offers of $690/t-$710/t for heavier SN500 and SN600. Bright stock is still available in quantity and shows few signs of being limited in supply terms. It trades slightly weaker this week at $895/t-$920/t. Unconfirmed rumors say bright stock being offered as cheap as $865/t for prompt shipment in combination with other Group I grades.

The prices above refer to large parcels of Group I supplied or offered FOB ex-mainland European supply points.

Base oil sellers were late issuing February prices, leaving re-sellers and distributors uncertain about where to pitch prices, since some buyers have been calling for retreats from end-of-January hikes. A compromise appears to have materialized, with buyers accepting offered prices with the provision that major drops in crude could lead to retrospective discounts applied later in February for base oils.

The differential between domestic prices and export levels to 65/t-90/t, depending on grade.

Some Group II suppliers declared price hikes effective Feb. 1 in based on the crude oil run-up that was already cited for markups by other suppliers. The most recent increases generally range between 30/t and 45/t, with one United Kingdom purchaser reporting increases of more than 60/t. These levels of increases have not spread across Europe, at least not yet, as increments in Germany and the Netherlands only amount to 20/t-30/t, but it is unclear at this point which suppliers are leading in terms of establishing prices.

Continuous adjustments have muddied the pricing picture for Group II grades, but light neutrals being delivered in bulk into European supply hubs are assessed at $655/t-$685/t, while 500N and 600N lie at $790/t-$820/t, all basis CIF. Ex-tank prices incur premiums of $35/t-$50/t (30/t-45/t) to cover storage and handling, and additional transportation charges will be added to parcels delivered by barge or truck.

Last weeks column noted that sources had identified an opportunity for Group III oils to be imported to India at such low prices that they could be re-exported to Europe at competitive rates. The scenario indeed played out, as traders took such oils into Turkey in flexi-tanks. The delivered prices for these Group III oils (which do not carry a full slate of OEM approvals for finished lubricant formulations) are lower than the comparative prices paid to European sellers of oils of similar specs that do carry full approvals. This anomaly bears out some the weird attributes of Group III markets.

Group III prices weakened this week, with discounts being offered to first-time buyers and volume-commitment specials bandied to others. At the same time, some sellers tried to push increases, stating they are needed to cover production costs. Prices for partially approved 4 centiStoke and 6 cSt are adjusted to $645/t-$655/t, FCA Northwestern Europe. Prices for fully approved 4 cSt and 6 cSt oils FCA Antwerp-Rotterdam-Amsterdam dipped to 695/t-720/t, while 8 cSt oils are 675/t. Large CIF cargoes of Group III may be $55/t-$80/t lower than the equivalent dollar prices for FCA sales.

Baltic and Black Seas

Along with routine shipments out of the Baltic into Antwerp-Rotterdam-Amsterdam and the U.K., there are reports of one large cargo being assembled for West Africa, probably Nigeria. Details are not yet disclosed, but the cargo will load in at least two ports, possibly three. This parcel is in addition to the early February loading currently taking place in the Baltic.

FOB prices are still attractive for resale in mainland Europe and U.K., although sellers have been pushing markups. SN150 is pegged at $550/t-$575/t and SN500 at $630/t-$655/t, a bit lower than last week. SN900, where available for large in bulk shipments, is now priced around $734/t FOB.

Black Sea reports confirm another large cargo from Kavkaz, Russia, is being offered to receivers in the United Arab Emirates and is scheduled to load during the second half of February. Ice around the Azov Sea may hamper the loading of a large parcel on an STS basis.

Group I imports into Turkey from Mediterranean suppliers have resumed after a short break during January, with quantities of SN600 and smaller lots of SN150 planned for arrival into Derince during February and March. SN150 is priced at $612/t-$625/t and SN500 or SN600 at $698/t-$720/t, CIF Turkish ports.

In the Red Sea, Group I shipments from Yanbual Bahr and Jeddah, Saudi Arabia are reportedly at normal levels, consisting mainly of cargoes going into Oman, the U.A.E. and the West Coast of India during the second half of February. The inquiry from Aqaba, Jordan, for between 4,000 tons to 5,000 tons of Group I still has not been publicly issued. Traders in Europe and the Middle East Gulf have set sights on this tender but are awaiting information about timing, volumes and grades.

Middle East Gulf

Group I trade around the gulf is centered around exports from Iran and Saudi Arabia, supplemented occasionally by shipments from the U.S., Brazil and Europe and U.A.E. re-exports of Iranian oils. To this complex mix add rumors that an idled plant in Basra, Iraq, will resume operations and perhaps begin exporting.

Last week prices for exports from Bandar-e Emam Khomeyni and Bandar Bushehr, Iran, were reported to have increased, but reliable information now suggests that small volumes of SN500 are available at $630/t, while SN150 is available at $600/t, rates that are considerably lower, though it is unclear whether these prices apply to FOB, ex-tank, or delivered sales. Ex-U.A.E. prices for Iranian SN500 are therefore re-aligned to around $625 FCA, or $615 FOB, although smaller volumes delivered in flexies into South and East Africa are being netted back at $665/t.

Group I imports from the U.S. Gulf Coast are still present, but with little buying interest in Middle East Gulf regions particularly the U.A.E. Prices for these oils have had to be revised more than once, and with Group I availability ex-U.S. perhaps waning, offers may have been withdrawn. Contract shipments of Group I from Red Sea sources to Oman and Fujairah, U.A.E., are estimated to land at $645/t for SN150, $695/t for SN500, and $965/t for bright stock, all CIF/CFR.

Larger volumes of Group III ex-Al Ruwais, U.A.E., are heading east, with receivers in India accepting large slugs now on a regular basis. Shipments to South Korea have also been identified – a striking development since that country is the worlds biggest source of Group III. To compete on a CIF delivered basis with domestic base oils that can be made available on an FCA basis requires hard pricing strategies. This suggests that FOB levels out of Al Ruwais of $465/t-$495/t for 4 cSt and 6 cSt oils.

Prices for Group III grades remain unchanged from last report: $610/t-$635/t for light grades, $765/t-$795/t for SN500, and $810/t-$830/t for SN600 from the U.S. or the Far East, CIF Middle East Gulf. Smaller parcels of Group II entail premiums of $45/t-$90/t depending on size, delivery mode and distance from U.A.E. storage hub.

Africa

As reported last week, East African trade has been brisk, with the two large cargoes arriving into Dar-es-Salaam, Tanzania. Normal traffic is also flowing from the U.A.E. and India, much of it in flexies. A number of importers take rerefined base oils into the country to produce lesser quality lube for sale in Tanzania, Kenya and Zimbabwe, where demand exists for lower spec products. The days may be numbered for such traffic, though, given efforts by regulators to elevate their markets.

South African buyers have issued a couple of inquiries for smaller lots of imported SN500 and SN150, which are currently being supplied from the U.A.E. Russian exports are an alternative, and offers are currently in receivers hands. Prices for SN500 and SN150 are reported at $765/t and $685/t, respectively.

Large cargoes of Group I and Group III sourced from Europe continue to make ingress into South Africa, along with Group II originally produced in the U.S.

West Africa markets expect deliveries discharging into Senegal, Ivory Coast, Guinea and Ghana. Nigerian receivers are still hanging back, although trade may be ready to pick up given increased traffic out of the Baltic and rumors of a cargo from the U.S. There are also hints that financing impediments may be falling. Three cargoes are programmed to arrive into Nigeria promptly, with some 30,000 tons of Group I discharging through Apapa.

Many Nigerian buyers predicted previously that base oil prices would fall, but they are now coming around to the idea that prices are stable and that they could rise. Thus there is a new interest to pick up cargoes now rather than in a month or two.

Prices for stocks discharging into Nigeria are still varied since some of the supplies were purchased before base oil prices increased and others afterward. Group I prices are here assessed unaltered from last week at $585/t-$655/t for solvent neutrals, $955/t-$980/t for bright stock from the U.S. or Europe and $755/t-$775/t for SN900. These are FOB levels applied to cargoes loaded before price increases. Freight costs of $75/t-$130/t must be added, always depending on cargo size and vessel approvals.

Offers for a shipment loading from the Baltic and Northwestern Europe still carries the same prices as last week for SN900 and other Group I solvent neutrals: $855/t and $718/t-$798/t, respectively. Bright stock ex-European sources is lower this week, around $1030/t. All prices are based on CFR/CIF Apapa port, Nigeria.

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