Crude prices have risen mainly due to lower inventories in the United States and mounting effects of resuming sanctions against Iran. Dated deliveries of Brent crude posted yesterday in London at $77.35 per barrel for September front month, some $3.50 higher than last week. West Texas Intermediate climbed some $5 to $73.90/bbl for August settlement.

ICE LS gas oil also moved up to $660 per metric ton, around $20/t higher than last week, still for July settlement.

Europe
Export prices from Europe for API Group I base oils were more or less flat this week, with only a couple small tweaks to the higher end of light solvent neutral spreads. The spike in demand seen over the past few weeks appears to have abated, as sources reported normal bouts of activity for this time of year.

Prices for light solvent neutrals are now between $785/t and $810/t, which is $5 to $15/t lower for the top end of the range, while values for heavier grades are unchanged at $885/t-$925/t. Bright stock is also unchanged at $945/t-$965/t.

The above levels pertain to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points.

Group I sales within Europe have begun their seasonal slowdown as lubricant blenders slide toward the August holiday recess. Prices have barely changed since July 1, when some players expected that discounting would take place. Buyers are now concerned that rising crude and feedstock costs could exert upward pressure on base oils.

Some said finished lube prices cant be raised for a few months because of a spate of hikes applied during the first half of this year. One source contended that higher prices have driven down retail sales.

The differential between prices for intra-regional sales and exports is now 50/t-75/t.

Group II growth appears to continue throughout all the European markets, and although prices are steady, there is the background awareness that if raw material costs start to increase, then prices may have to reflect that factor. The first moves may come from U.S. producers of Group II grades where crude and feedstock levels have already moved upwards by some 15 percent the past couple weeks.

FCA and delivered prices are assessed as stable at this point in time and are therefore maintained at $875/t-$920/t (745/t-785) for light neutrals ranging from 70N to 220N and $955/t-$975/t (815/t-820) for 500N and 600N.

Group III prices within Europe are stable to firm with producers trying to push prices higher at every opportunity. Distributors are already paying higher CIF prices, which will translate to upward pressure on the levels that they charge.FCA sales in euros are moved slightly higher this week to 770/t-785/t for 4 centiStoke oils, 790/t-810/t for 6 cSt and 790/t-800/t for 8 cSt.

These prices are Group III oils with partial slates of finished lubricant approvals. Group III oils with ACEA and European OEM approvals continue to carry a premium and will be priced at 805/t-830/t for 4 cSt, 825/t-850/t for 6 cSt and 830/t-855/t for 8 cSt, all on an FCA basis at Antwerp-Rotterdam-Amsterdam.

These prices are based on ex-rack or truck-delivered smaller lots of Group III base oils and do not reflect prices for material delivered in bulk to large users such as major blenders or additive manufacturers. The latter may be priced $30/t-$50/t lower, both for fully approved and partly-approved products.

Baltic and Black Seas
Prices out of the Baltic are steady with Russian exports going only short-sea trade cargoes this week. There are rumors of larger cargoes being worked for Nigeria, but no confirmation was gleaned from sources. Availability of Russian export grades appears secure for the moment as there seems little threat of sanctions that would affect them.

One supplier has tried to impose slight markups for heavier grades, such as SN500, claiming a shortage could develop during the next month. Other sources have indicated no problems, suggesting that the issue is only affecting the producer in question.

SN150 is priced at $740/t-$775/t, SN500 at $830/t-$850/t and SN900 at $855/t-$870/t, based on CIF/CFR offers netted-back to provide FOB indications. Various offerings of bright stock are at $845/t-$920/t, depending on quality, source and loadport.

Two more large cargoes of Russian exports have been reported on an STS basis ex Kavkaz, Russia. One parcel of 9,000 tons is being talked about loading during first half July, another of around 7,000 tons is being arranged for mid-July. Once again, destinations for these cargoes are not released as yet, though it is rumored one will sail to Rotterdam and the other to the United Arab Emirates or the Far East. Prices are considered to be below $800 on an STS basis for SN500.

Receivers in Gebze and Derince, Turkey confirmed that they are purchasing more cargoes of Group I base oils from sources in the Mediterranean. Whilst the loadports have not yet been disclosed, Greek and Italian sources are favorite for such cargoes. Prices remain as previously indicated at $795/t-$825/t for light solvent neutrals and $890/t-$920/t for SN500 and SN600, basis CIF.

Middle East Gulf
One cargo of Group III base oils has been offered delivered into Varna, Bulgaria, sourced from a Middle East Gulf refinery. It is assumed that this material will compete against Group III availabilities from Russian sources if the trade is successful. Prices are awaited.

On the table are inquiries for Group I to go into Sudanese receivers and for around 4,000 tons of the same to go into Aqaba, Jordan. Sources reports that these cargoes may be supplied from Mediterranean producers, although Saudi Arabian sources may still figure in these requirements.

Trade in the region would normally be expected to return to normal levels after Ramadan and the subsequent Eid holidays, but business is slowing further now with the approach of summer, and there are few Group I movements. Shipments of Group II and III continue, however, now that the region has become a hub for those grades.

Middle East Gulf Group I exports are confined to Iranian cargoes, mainly of SN500, which serve to supply receivers in the U.A.E. and the West Coast of India. This week few availabilities have been heard loading out of Bandar-e Emam Khomeyni and Bandar Bushehr, suggesting that the product is either being redirected to other markets, or that the domestic scene within Iran is consuming more base oil production than previously seen. U.S. sanctions may also be having an effect.

Receivers in Mumbai reported receiving cargoes ex Iran during the latter part of June and that prices were very attractive compared to other Group I sources. Iranian premium SN500 is estimated prices at $845/t-$865/t delivered into the West Coast of India.

Middle East Gulf sources report that 20,000 tons of Group III are to load out of Al Ruwais, U.A.E., during the first half of July. This figure may be on the low side as additional parcels are being announced daily. Far East markets are being targeted by sellers from the U.A.E. and Bahrain, with attractive initial prices being offered to establish the trade in those regions.

After being adjusted last week, notional FOB prices for partially approved Group III oils are maintained at $820/t-$850/t for all the three main grades being marketed out of Al Ruwais and Sitra, Bahrain. Fully approved Group III from Sitra is anticipated to netback at around $855/t-$885/t. This figure is dependent on how costs are allocated and may be reflected in higher margins rather than higher netback shows.

Bulk cargoes of Group II ex Yanbu are moving in a number of directions, to India, the Middle East Gulf and, based on rumors, even into Turkish markets.

Imported Group II being re-sold ex hub storage in the U.A.E., are available on either FCA, truck- or flexi-tank-delivered basis and are priced higher this week, although sources have said that Group II exported to India and then re-exported into the U.A.E. would be lower in price than direct offers. This anomaly is puzzling to say the least.

Prices for 100N, 150N and 220N are at $1,035/t-$1,070/t and 500N and 600N at $1,130/t-$1,175/t. There are further reports of a heavier material from Al Ruwais, now offered at $895/t ex-tank in vehicle quantities.

Africa
Once again there are reports of a large number of cross-Mediterranean cargoes being delivered, under offer, or at the inquiry stage for receivers based in North African markets in Morocco, Algeria, Tunisia, Libya and Egypt. Sources are located mostly in Italy, Spain and Greece, although offers have been invited from Baltic and Northwestern European suppliers.

West African buyers are once again trying to look at the U.S. Gulf Coast as a source for Group I availabilities, although it has been suggested that this market currently is not long with these grades and may not be able meet requirements. Other sources on the U.S. East Coast are also being canvassed by traders, but with Group I grades looking to be shorter at this time, U.S. sources may not be in a position to oblige. Baltic and other European sellers may therefore enter the frame, since a large number of cargoes are reportedly being required for Nigerian receivers. The figure mentioned this week has been put in excess of 50,000 tons of Group I products for July and August.

Prices for Group I base oils going into Nigeria remain as advised in the last report, with no new fixtures and cargoes announced this week. Once again as indications only, SN150 is assessed at $855/t-$880/t. SN500 will land at $955/t-$975/t and bright stock between $980/t-$999/t. SN900 ex Baltic supply has been estimated at around $935/t.

These prices refer to large parcels of more than 5,000 tons of Group I base oils delivered CFR or CIF into Apapa port, Nigeria.

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