Europe

API Group I FOB export price increases were not as pronounced as previously seen, but continue to firm as availabilities remain relatively tight and buyers snatch up material as if prices would continue escalating.

Light solvent neutrals SN100 and SN150 have moved $10/t-$15/t upwards at the lower end of the range, and only around $5/t at the top, to $755/t-$780/t. Similarly, heavier neutrals moved forward to $825/t-$845/t. Bright stock offers for particular export destinations has levels treading water at $920/t-$955/t.

The above levels pertain to large, cargo-sized parcels of Group I base oils offered and sold FOB ex mainland Europe.

Local prices have moved during the month rather than monthly. Many buyers are waiting for Feb. 1, when they believe sellers will succumb to pressure to increase prices. Some smaller lifters received early notice that levels could climb 15/t-25/t and either only be fixed for one week, or index-linked to published levels for the duration of February.

The difference between higher- priced FCA sales and spot export levels are difficult to pinpoint, but assessed at 65/t-80/t.

In addition to the raw material cost increases and production source increases, Group II import prices face additional pressure due to exchange rates, with U.S. $1 equal to around 1.24.

Group II sellers are doing their utmost to remain competitive against Group I alternatives, which is helped by Group I light solvent neutrals being particularly tight.

Buyers said they expect prices to vault by as much as 100/t-150/t and as such have started to take steps to raise finished lubricant prices by up to 30 percent in accordance.

Local prices from distributors were elevated to reflect production costs and rising ancillary costs for imported base oils, to 865/t-890/t for light vis oils and 945/t-980/t for higher vis grades.

Group III prices have also been subjected to source production increases, with distributors trying to move more gradually, rather than be subjected to large variations on subsequent deliveries. Some suppliers have been giving notices about price hikes to local sellers so that the latter can initiate increases in advance.

Imports of 4 centiStoke and 6 cSt grades are $880/t-$910/t CIF landed into northwestern Europe, with local sales at around 830/t-845/t FCA northwestern Europe. Grades carrying full European Automobile Manufacturers Association approvals on basis FCA Antwerp-Rotterdam-Amsterdam may be priced higher, at 865/t-885/t for 4 cSt and 6 cSt grades, and 835/t-865/t for 8 cSt material. With almost all sales being made in euros, these products will also incur the unfavorable exchange rate.

The latter prices refer to FCA or truck-delivered quantities of Group III base oils sold to local blenders, and do not apply to material delivered in bulk cargoes to large users of such as major blenders or additive manufacturers.

One of the long-awaited large cargoes for Nigerian receivers appears to have been fixed firm for end of January loading. This cargo has taken some eight weeks to finally negotiate, or perhaps to find the right vessel. One parcel will be a load of regular Russian export grades from Latvia. The main cargo, possibly bright stock, will load from a southern Baltic port, to complete the total of some 15,000 tons. Another first is the loading of a large, 16,000-ton cargo of Russian exports. Ventspils, Latvia, will serve as a deep-water port for discharge into Sharjah, United Arab Emirates.

However, there are fewer smaller cargoes announced this week, perhaps because many third parties are either taking delivery earlier in the year or have stocks in tank that were purchased at lower prices and now can be sold at higher margins. With the smooth comes the rough, since replenishment cargoes will now be priced higher, and third-party sellers maintain that they are unable to raise local selling levels and may be subject to suppressed margins on their next shipments.

FOB prices have risen, almost in line with mainland European levels, but with fewer movements values are difficult to gauge. SN150 is now assessed at $735/t-$750/t, SN500 at $790/t-$820/t and SN900 at $845/t-$865/t, all on an FOB basis. Bright stocks of varying specifications and quality remain at $895/t-$945/t.

The spike in Turkish and other Black Sea trade calmed this week, with receivers in Turkey saying they are looking for fewer cargoes. There may be a greater reliance on locally produced base oils, perhaps due to exchange rate fluctuations.

After the two large inquiries for loading out of STS at Kavkaz, Russia, this activity has gone quiet with local sources suggesting that small cargoes of 2,000 to 3,000 tons are being assembled into the mother ship, which will carry up to 20,000 tons of material. Weather can be a major factor in this operation, with significant delays being incurred both by feeder vessels and the mother ship.

Greek suppliers have closed another cargo, this time moving into Izmit, with a number of inquiries being issued by sellers for vessels to move material into Derince during February and March. A smaller parcel loading out of Antwerp-Rotterdam-Amsterdam and a Mediterranean port is destined to discharge into Gemlik.

Mediterranean prices are expected to follow European export numbers on an index-linked basis plus freight, yielding delivered values of $810/t-$825/t for light neutrals and $870/t-$890/t for SN600, basis CIF.

Middle East Gulf

In days gone by, Group I base oils were the main stocking grades talked about in Middle East Gulf circles both in terms of exports (from Iran and Saudi Arabia) and imports (from the U.S. and Europe). Markets have changed, though, and the Middle East Gulf is now a large hub for production of Group III grades that are supplied to almost all regions.

The supply of Group I out of Iran into areas such as the United Arab Emirates has declined while large swathes of Group III are now loaded out of Bahrain, Qatar, and Abu Dhabi.

But relatively large quantities of Iranian Group I SN500 are again being lined up for export into the U.A.E. and the West Coast of India, while at the same time there are numerous inquiries for large parcels of Group I base oils to be loaded out of U.S. Gulf Coast and Baltic sources for discharge into either U.A.E. or Mumbai anchorage. These renewed movement are fascinating, since many forecast that Middle East Gulf regions would be making the quantum step to Group II and that Group I requirements would be met locally by Iran and Saudi Arabia.

The large cargo of Group I grades loading out of the Baltic appears to be a new venture possibly afforded only by the scale and size of the cargo and the ensuing economics on freight. This material will have to compete directly with Iranian SN150 and SN500, although SN900 and/or bright stock may face less competition.

Prices for Iranian exports are thought to have risen to around $830/t-$845/t for premium SN500, so imported material will have to come in at or below that level. Your columnist is checked prices with sources in the U.A.E. One cargo of 5,000 to 7,000 tons is reportedly loading for shipment to the U.A.E. and India.

Group III inquiries, which can be relied upon to become actual cargoes, show a startling quantity of some 33,000 tons to come out of Al Ruwais, U.A.E. to be discharged into other U.A.E. ports and Mumbai. U.A.E. receivers appear to be using Group III base oils not only for blending with Group I material, but also as a substitute for Group II base stock in the production of transformer oils.

FOB netback prices for Group III grades are higher this week, with material from Al Ruwais assessed at $820/t-$835/t for 4 and 6 cSt grades. Base stocks coming out of Sitra, Bahrain, without finished lubricant approvals or with only partial slates of approvals are estimated to have FOB levels, while fully approved products from Sitra are at $855/t-$875/t for the same grades.

Saudi Arabian producers have not yet set a new date for the start-up or availability of the new Group II production from the Yanbual Bahr refinery. Inquiries this week to contacts in the kingdom yielded no substantive comments.

Prices for other Group II oils from Far Eastern and U.S. sources increased again this week. Offers for 100N and 150N are believed to have included values of $790/t, while 500N and 600N were offered at $895/t-$920/t, CIF Middle East Gulf. Prices for local U.A.E. sales of Group II on an FCA or delivered basis are also assessed higher at $925/t-$965/t for 100N, 150N and 220N, with 500N and 600N now rising to $995/t-$1040/t.

Africa

South African receivers will take another cargo loading out of Antwerp-Rotterdam-Amsterdam and the United Kingdom, which have become common sources. The shipment in question is due to arrive around mid-March.

The large parcel of Baltic grades announced above will make landfall around the end of February or beginning of March and will discharge into Apapa. At the same time, a smaller cargo of Group I grades ex-Italy will arrive a few weeks earlier with around 7,000 tons of product.

The waste oil inquiry into Nigeria has been notably difficult to respond to, with few players in this game willing to give up valuable waste material, especially since collection would need to be organized. Tankage for the collection of used oil is at a premium in Nigeria, and users of lubricants that have been dumped are keener to burn this material than to store and re-process.

Sellers offering light-viscosity rerefined base oils have said that responses to their first offers have been positive since these base oils have already been tested successfully in Nigeria. These products are being offered in flexies ex-Europe on a CIF basis at delivered prices some $200/t-$230/t below the current market rates for virgin SN150.

Prices for Group I base stocks going into Nigeria are unchanged from last week, based on loadings negotiated some time back and current FOB prices that apply to new cargoes being loaded during February and March. Offers still contain prices of $875/t-$890/t for SN150, $935/t-$955/t for SN 500 and $1045/t-$1075/t for bright stock. SN900 is being indicated at around $995/t.

These levels are for CIF/CFR offers for material delivered from sources in Europe, including the Baltic, and for oils from the U.S.

The prices above refer to parcels of at least 6,000 tons of Group I oils delivered on a CIF or CFR basis to Apapa port in Lagos.

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