There has been some perceived lower quality material sold at numbers which would not have been contemplated even one month ago, these grades being sold at FOB numbers under $500 per metric ton, for SN 150 to SN 500. This is uncharted territory of late, and these sales are definitely having the effect of exerting downward pressure on the whole market and of course on other material of higher quality, which does not necessarily have to be sold in the December Clearance Sales.

What happens in this gap between the two ends of the pricing spectrum is up for interpretation, but the reading is that the higher prices, leading to lower prices, will fill this space sooner rather than later, thus taking the whole pricing model to new lower levels. It would appear that, like lemmings or a plague, it just takes one deal to be completed at new low levels, irrespective of grade and quality, for the whole of the market to be affected.

Another interesting development which has been seen from more than one source, is that certain mainstream producers may be looking to take advantage of lower priced, lesser quality base oils to supplement their primary production. They are looking to buy relatively small quantities of secondary Russian or CIS grades from the Baltic and Black Sea to incorporate in certain formulations where high spec base oils are not necessary, such as some types of hydraulic oils for example.

Bright stock still remains highly priced relative to SN 150 and SN 500, but cracks are appearing which may give way to sub $1,000/ton levels coming very soon for this grade. However the solvent neutrals have slipped at a faster rate, not just maintaining, but significantly increasing the differential between bright stock and other grades.

Group II material patiently awaits the impending introduction of ACEA 9 which will be seen as a significant step for marketers of this base oil. The next ACEA level (to be announced in December) will utilise new grades of base oil, all of which will meet the higher specification levels required. It remains to be seen where the prices for these grades will be pitched, but these oils will certainly command a large premium over Group I stocks. A Korean cargo has been booked to come into the Mediterranean, as we are looking now for the entry of Malaysian production to come on stream in the EMEA region.

Prices in the Middle East are still really in limbo, with very few cargoes moving either deep-sea or locally. There are many enquiries, but few real buyers, with some companies buying small cargoes or even flexitank lots to keep production going until prices have fallen to buyers notionally acceptable levels. Demand for finished lubricants in this area is decidedly waning, and with little cheer for the coming New Year, it is expected that finished demand will play a much more important role than in previous times.

West Africa is still tempting some traders with requirements, but again few deals appear to have been finalised with receivers. Even with utilising heavy neutrals instead of bright stock as a tempting price inducement, reticence remains paramount within the buying fraternity.

The interest right now is to see how far price levels will fall before flattening out, with one producer stating on Friday that crude and feedstock product levels had apparently stabilised and there could be an approaching period of calm in the market … then of course Monday happened.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products based in East Grinstead, U.K. He can be reached directly at pumacrown@email.com.