As noted in this column recently, report over the past few weeks, Group I markets in Europe have been beset by a perfect storm of supply disruptions. A number of plants simultaneously underwent maintenance turnarounds and are only releasing pre-purchased and contracted barrels; spot sales have halted for at least the next couple of months. At the same time, some Russian refineries that recently completed turnarounds have not yet resumed export sales.

The situation for Group I is severe, but it is too early to know what the long-term effects will be or the effect Group II and III oils.

Values for crude oil and base oil feedstocks retreated this week due to weakening fundamentals. Dated deliveries of Brent crude posted around $64.30 per barrel in late Monday trade for May front month. West Texas Intermediate crude dropped to $60.75/bbl, still for April front month. ICE LS gas oil was $570 per metric ton, still for March front month, little changed from last week.

Europe

European Group I export prices are varying enormously this week due to some offers being pitched $50/t-$100/t higher than levels seen last week. These are not universal increases, but are sporadic and are linked to those few suppliers able to offer sizeable parcels of Group I for prompt sale.

Light solvent neutrals are now reported between $780/t and $850/t, while heavier grades are $845/t-$950/t. Bright stocks are being treated more sanely at the moment and are little changed from last week at $945/t-$1,000/t.

The big question is whether buyers should accept these new highs. There is no sign of the shortfall resolving soon, though it is possible that higher prices could bolster trade. Intra-company sales or trades with affiliates may not be affected in the same manner as spot export business.

The ranges above pertain to larger cargo-sized parcels of Group I being offered on an FOB basis from mainland European supply points.

Group I prices for trades within Europe have been largely unaffected by the activity in export markets, but if export prices remain higher, suppliers will be tempted to divert barrels in that direction. Contracted business based on index linked prices will be affected almost immediately. Trades containing fixed prices and volume-related purchases could come to an abrupt stop at the end of March.

Concerns are rising about availability and pricing of shipments expected from the Baltic Sea into Antwerp-Rotterdam-Amsterdam, Scandinavia and the United Kingdom. Many buyers are maintaining that prices should not rise at this time, but their comments reveal worries that they may.

The spread between exports and prices on intra-regional sales is too difficult to gauge this week, so this column will not offer an estimate until the scene becomes more clear.

As mentioned above, it remains to be seen how the escalation in Group I values will affect Group II oils. Perhaps Group II prices will remain near current levels, high enough to satisfy suppliers even though those grades often carry a premium, or suppliers could try to maintain that spread. Some sources suggested that now is a golden opportunity for blenders considering a switch to Group II grades.

FCA prices for Group II are unchanged this week: $900/t-$920/t (725/t-740) for light-viscosity oils and $970/t-$990/t (780/t-800) for heavier grades.

Imported Group III prices are also unchanged here at $890/t-$920/t on a CIF basis for 4 and 6 centiStoke grades being discharged into Northwestern Europe. Prices for local FCA sales are 855/t-870/t for 4 and 6 cSt grades, while Group III oils with full slates of finished lubricant approvals are at 885/t-900/t for those same grades and 865/t-880/t for 8 cSt on an FCA basis Antwerp-Rotterdam-Amsterdam.

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

Baltic and Black Seas

A week earlier the supply scene in the Baltic was improving, but now the situation has become tighter, with little or no base oils moving to export from Omsk, one of the main supply sources in Russia. It has been difficult to get a handle on what is happening to prices in this region, and with one uncorroborated report suggest that values have been hiked by amounts simialr to increases in Western Europe, at least for spot supplies. If true, then many traders and export receivers will be a quandary of whether to buy or wait to see how the market pans out. There was word that a couple Nigerian cargoes are under offer, although FOB or CFR prices have not been disclosed.

For now, Baltic prices are treated here in the same manner as Western Europe, with widening spreads. Solvent neutral 150 is assessed at $730/t-$825/t, SN500 at $800/t-$895/t. SN900 at $855/t-$920/t FOB and bright stock at $930/t-$1050/t, all on an FOB basis. Further definition will be added to these numbers when more information about supply and FOB pricing becomes available.

The large Black Sea cargo reported loaded STS out of Kavkaz, Russia, appears to have sailed for discharge in Singapore, scuppering the assumption that it would go north to Rotterdam for re-shipment. However it has been noted that another parcel of some 6,000 to 8,000 tons could be loaded for Rotterdam this week. Other Black Sea trades record a parcel sourced from Antwerp-Rotterdam-Amsterdam going into Varna, Bulgaria.

Base stocks from Azov and the Mediterranean continue to flow into Turkish ports such as Gebze, Derince and Yarimca. Values for them remain as reported last week, since negotiations and loading took place prior to the latest movements in the European arena. No fresh offers have been heard for Mediterranean oils going into this market, suggesting a possible pause in proceedings.

Most of these cargoes are contracted quantities, but many are also indexed and adjust automatically. Light neutrals are assessed at $795/t-$820/t, while SN600 and SN500 are $860/t-$875/t, basis CIF. Group III trades reflect prices in mainland Europe, with 4 and 6 cSt grades having full approvals at $880/t-$920/t, basis CIF.

Middle East Gulf

Red Sea reports indicate a tender had been issued for a shipment into Aqaba, Jordan of 4,000 to 5,000 tons of Group I base oils, which may be sourced from Antwerp-Rotterdam-Amsterdam or Leixoes, Portugal. Prices will be interesting since these are two of around four locations that can offer exports right now. New inquiries have been floated for a number of cargoes to move out of Yanbu to discharge into the West Coast of India and also United Arab Emirates. It is assumed that these are shipments of the new Group II production by Luberef at Yanbu, Saudi Arabia.

Iranian Group I exports appear to have been removed from the market, with receivers in the U.A.E. and elsewhere in Middle East Gulf relying on U.S. material. That supply may dry up, though, and with availability from Europe tight, Russian oils from the Black Sea may be one of the few alternatives.

Shell confirmed last week that one of two production trains at its Pearl gas-to-liquids joint venture in Qatar is operating at reduced rates during a maintenance turnaround. The company said it will continue meeting contractual base oil sales, which go mainly to intra-company affiliates.

Prices for Group III oils from Al Ruwais, U.A.E., calculated on a netback basis from values for shipments discharged into India, U.A.E., the U.S. and Europe, are assessed at $780/t-$795/t for 4 and 6 cSt. Oils marketed from Sitra by Bapco and its distributors are estimated at similar levels. Neste barrels from Sitra, which have more approvals, may netback at $810/t-$825/t, basis FOB.

Apart from one shipment into the U.A.E., Middle East Gulf receivers have yet to take up Yanbu Group II. Buyers in Gulf Cooperation Council countries say they are paying “routine” prices, although these oils have not been supplied in bulk by sea-going vessel.

Prices in Far East offers are unchanged at around $785/t for 100 neutral and 150N and $880/t-$895/t for 500N, CIF Middle East Gulf. There were no indications for 600N from these offers. Local sales within or from U.A.E. for Group II base stocks on an FCA or delivered basis are also unchanged at $895/t-$920/t for 100N, 150N and 220N and $1,000/t-$1,045/t for 500N and 600N.

Africa

Another large parcel has loaded for shipment to Durban, South Africa from Northwestern Europe and the U.K. South African agents confirm that the 14,000 ton parcel will arrive during the second half of April.

North African receivers in Morocco and Egypt have accepted cargoes of various Group I grades, particularly bright stock covering a tender by EGPC. Further Group I cargoes are being sought for Mohammedia, Morocco, from suppliers in Portugal who may have availabilities, although prices are not yet disclosed for this supply.

Nigerian buyers have expressed disappointment at the lack of offers being received from sellers sourcing out of U.S. Gulf Coast and Baltic regions. Two reports have been heard of prices which have been “indicated only” during the past week for supplies of one cargo to go into Apapa. This cargo would consist of around 10,000 tons of Group I grades, and prices have escalated by more than $80/t compared to the last cargo, which was delivered during February from the U.S. Gulf Coast. Local receivers said the Nigerian market cannot accept prices of that level because local lubricant markets are unable to absorb them.

Prices for Group I going into Nigeria are not yet finalized, but they face upward pressure due to markups in source markets. Current values are estimated at $945/t-$985/t for SN150, $1,060/t-$1,085/t for SN500 and SN600 and $1,095/t-$1,150/t for bright stock. SN900 if available, loaded ex Baltic, is indicated at around $1,020/t.

These prices refer Group I base oils delivered into Apapa port in Lagos and are based on tentative offers heard this week.

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