These cargoes have been sold at comparatively low numbers, which suggests that these were transacted for inventory, tax savings, or pure cash flow reasons, and the prospective buyers (or perhaps traders) received prices which may not be repeated in the New Year.

These prices refer to heavy solvent neutral material being shipped from both the Baltic region and the Med/Black Sea area, in the range of $610 to $625 per metric ton, basis FOB. The exact quality of these grades is not known, but it is reportedly of lesser quality than prime European production.

Mainland European API Group I production is still being monitored between $710 and $785/t, basis FOB mainland European ports. The top end of this band is established by one major selling SN 600 in the Mediterranean at this price, along with quantities of bright stock rumored to be priced between $900 and $910/t. Others have sent prices lower, with some mainstream producers announcing prices around $755 to $765/t, basis FOB for early January lifting. Some bright stock has reportedly been talked around $860/t, FOB, but this is unsubstantiated.

The mood is sombre among some refiners, taking cognisance of falling crude and feedstock prices, and the lower base oil realisations these bring about. Crude just managed to come off the floor this week, around $72 per barrel for both WTI and Dated Brent — the floor being the notional resistance barrier of $70.

Low sulphur vacuum gas oil continues to show weakness as a prime feedstock, and is currently trading lower around $4.30 over Dated Brent, or around $530/t. This is not entirely due to low base oil demand on this material, but also in response to the relatively poor uptake in the gasoline markets in Europe and the U.S. As a pure market indicator, ICE gas oil futures are showing short and medium term weakness, with a spread of only $14 from front to third month. Third month is trading at a lowly $615/t.

Although reports suggest that some Iranian SN 500 was sold as high as $775/t, basis FOB Bander Abbas, there is mounting pressure on all Iranian Group I base stocks due to low demand in the traditional purchasing areas such as India and U.A.E., and competition coming from Russian and other European supplies. Prices in the area are assessed at $720 to $775/t basis FOB, but the majority of quoted prices are at $755/t, or below.

Red Sea production has also bowed to European and Iranian Group I pressures, dropping some $25/t from prices which were established some weeks ago.

Group II/II+ grades appear to be withstanding the price pressure being experienced by all Group I grades and are still commanding healthy premiums, particularly over the solvent neutral grades. Prices are estimated in the spread of $845 to $985/t, a little higher than last week due to small price hikes taking place in the manufacturing centers in the U.S. and Far East.

Group III numbers are also showing a degree of strength, due to increased demand in the Middle East Gulf areas and also in the European mainland. Whether these attempted price improvements will be sustainable remains to be seen. With the Petronas Malaysian unit coming back on stream this week, Group III production is once again in full flow.

Prices are increasingly difficult to assess, since Group III material can be shipped in small quantities. For example high vis grades in drums to some locations are commanding higher price levels, whilst low vis grades shipped in bulk to large buyers can be subjected to the same overall price controls as Group I material. A sensible wide spread would maintain numbers between $860 and $1,200/t, depending on the factors outlined above.

There have been a flood of base oil enquiries from West Africa, but not all from the traditional consumers. For example two enquiries for rerefined base oils have come from Cameroon and Mali. At the same time the more traditional enquiries for heavy neutrals and bright stock are much more in evidence than has been witnessed of late. A rumor of an enquiry for Group II material has come from Senegal, although the actual destination has not yet been disclosed.

Prices are starting to reflect the new European FOB levels for Group I material and, assuming freight levels to be maintained, these are estimated to be $825 to $840/t for heavy neutrals, and $970 to $995/t for bright stock, all basis CFR West African ports.

North Africa has seen some unusual imports of Russian material from the Baltic going into Mohammedia in Morocco. Exports from Algeria and Egypt have restarted after what many described as heavy-handed cutbacks to production which affected the amount of material made available for both domestic and export sales.

What should be a quieter, more laid back time of year for base oil business is not taking place in the EMEA region, with a number of prime players jockeying for position to take contract business under tenders which will be issued shortly after the New Year. Perhaps the attraction of this type of business is that the producer has control over a core business which can forecast production levels. At the same time it can be used as a platform from which to increase trade at the margins, which will protect market share, which perhaps may now be deemed as the ultimate tool in continuous and profitable base oil production.

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.