However, this week has been particularly quiet in the market, with only one FOB deal reported. There have been pockets of activity whereby producers facing the approaching year end are looking to move certain stock grades out of tank.But there are no queues of buyers, so we may see bargain sales during December with even lower prices, on the basis that producers will try to maintain current levels when January comes around. But many refiners may face a dilemma: sell cheap to clear inventory, and pull the market down, or keep stocks in tank.

With dated Brent crude settling (at least for the present) around $50 per barrel, this is bringing a certain degree of stability to feedstock values. According to a number of Mediterranean producers, there is still not a great deal of material around.

Bright stock remains relatively scarce throughout the region, in any sizeable quantity, with even small lots still commanding in excess of $1,050/mt. But again, no buyers are really participating, they are watching and waiting to see how far these levels will recede. These prices for bright stock are being supported by export prices from the United States touted at around $1,200/mt. Buyers, however, are responding by buying higher viscosity solvent neutral grades such as SN 800/900, since this material can be used as a bright stock substitute at a much lower price level, around $800/mt.

Russian avails have been seen ex tank in the Baltic region for some weeks now, but this flow may be ebbing due to low netback expectations, and rumors are that deals have been done at sub $700/mt basis FOB.

In the Middle East producers such as the Iranians are battling to sell their material against cheaper material coming from the Far East, and we are seeing the predictable buyers market, but really without any serious buyers. Prices for these Group I base oils have reached levels of around $760 to $820/mt basis CIF/CFR in United Arab Emirate and Indian ports, thus ruling out European grades being able to compete on a delivered basis into these areas.

Prices for European imports of Group II are holding up as one would expect, but with shutdowns and turnarounds, the volume of material coming into the region is not particularly significant, and with economic downturn forecast in the industrial sectors where Group II base stocks would primarily be utilized, no real further increase in demand will be seen from now until well into 2009.

The current banking and credit squeeze is not helping matters. Many areas of the region are declared as country risk by the major European banks, and confirmation of locally issued letters of credit is becoming more and more difficult by the day. One Black Sea seller was offering SN 150 and SN 500 on basis of cash in advance which might give some insight as a sign of the times. Exchange rates have also played their negative part, with major buyers local currencies losing out against the dollar, including the euro, rupee, Middle East currency basket, and all West African currencies.

One perhaps surprising element in the whole picture this week is that freight levels for smaller vessels (5 to 10 kt dwt) are still holding up, although there are some signs that these freights are beginning to fall in line with the recent dramatic falls in daily rates for larger tonnage vessels. With the number of cargoes drying up for these vessels (not just base oils, but also vegetable oils and chemicals) the outlook looks as bleak as for the rest of the industry.

The market this week is being subjected to the perceptions and expectations of buyers, as they sit and wait. The only certain belief fixed in buyers minds being that the prices have further to fall and that they can hold out until that time comes.

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