Dated deliveries of Brent crude posted around $55 per barrel late yesterday in London ICE trade, this being for November front month. West Texas Intermediate crude has risen to $49.50/bbl, an increase of some $1.30/bbl the past week. With European demand rising in response to the U.S. scene, and with U.S. demand somewhat stifled by the shutdowns at several refineries in the U.S. Gulf Coast, the crack between the benchmarks has widened to $5.50/bbl, the largest differential seen for some time. ICE LS Gas Oil rose some $10 per metric ton this week to $524/t.

Some market sources contend that U.S. demand for base oil imports should be spiking, too, but this does not appear to have happened yet; there have been few if any inquiries for Group I to move from Europe to the U.S., but with one major U.S. refiner and European importer of Group II base stocks declaring force majeure last week, Group II supplies may soon tighten in Europe and elsewhere.

Europe

European Group I export prices generally rose this week, with a number of suppliers increasing offer prices by $10/t-$20/t. Buyers are countering by noting that crude is up only minimally over the last month and arguing that crude values were inflated before that. Demand appears to be coming not from the U.S. as many expected, but from other destinations such as West Africa. Indeed the whole African continent appears to have awakened with inquiries for large European parcels to go into South Africa and West and North Africa.

Prices light solvent neutrals are up $10/t to between $695/t-$710/t, while SN500 and SN600 have climbed to $775/t-$795/t and bright stock to $885/t-$905/t. These prices refer to large parcels of Group I base oils supplied or offered on an FOB basis from mainland European supply points.

Intra-European Group I prices are unchanged this week, as sellers said they will stand pat until the end of this month and then review spot export values. Demand is cool as many buyers are not rushing to replace inventories that presumably ran down prior during summer. Some insist they have stocks to last the next couple of months and that they hope to see markdowns for year-end sales. Top-up quantities will be required, but major purchases may be avoided.

The differential between regional ex-tank or FCA prices and exports narrowed this week to 55/t-85/t.

Group II imports are receiving lots of attention now because of disruptions at U.S. refineries, including one normally exports to Europe. Pre-hurricane inventories have so far prevented supply from tightening, but a pinch could yet be felt. A number of large Group II users have been heard shopping for alternatives in case the problem persists. It seems logical to expect price hikes, but so far there has been no sign of them.

Prices for light-viscosity grades remain between $640/t-$665/t, while 500 neutral and 600N are still $775/t-$815/t, landed CIF into Antwerp-Rotterdam-Amsterdam. FCA prices ex-supply hubs remain 755/t-790/t for light-vis grades and 855/t-890/t for heaavies.

Group III oils are showing admirable resilience given a steadily increasing over-supply within this product group. Prices appear to be holding up, and some suggest this may be because a new supplier expects to soon have finished lubricant approvals. There have certainly been no reports of discounts, and sellers are using the lousy euro-to-dollar exchange rate to argue in support of existing values.

Prices for 4 centiStoke and 6 cSt grades remain at $785/t-$810/t, or 680/t-705/t for local sales made in euros, basis FCA Northwestern Europe. These prices refer to stocks with partial slates of approvals. Fully approved grades FCA Antwerp-Rotterdam-Amsterdam are assessed at 780/t-815/t for 4 cSt and 6 cSt grades and 755/t-775/t for 8 cSt. These prices refer to local markets where material is being sold or delivered ex-tank. Bulk deliveries to large receivers and distributors may be $75/t-$100/t lower.

Baltic and Black Seas

Baltic prices for Russian exports do not appear to have risen, perhaps because sellers feel pressure to hold the line in order to complete large sales to West Africa. Two more large cargoes were announced this week, totaling 25,000 tons of Group I bound for Nigeria. Another parcel of around 15,000 tons is still under negotiation, as are two smaller cargoes. Smaller cargoes are running from Baltic ports into the east coast of the United Kingdom containing Russian export grades and rerefined oils. A cargo of around 4,000 tons is booked from Kaliningrad, Russia, into Antwerp-Rotterdam-Amsterdam to replenish stocks for FCA sales into mainland Europe.

SN150 remains at $675/t-$690/t, SN500 at $745/t-$770/t and SN900 at $845/t-$860/t, while large quantities of bright stock are being offered at $895/t-$945/t, all basis FOB.

Black Sea base oil trade is once again a mixed bag with shipments leaving for Antwerp-Rotterdam-Amsterdam, although in much smaller quantities than previously noted. A small cargo of some 3,000 tons of material is being bridged into Antwerp-Rotterdam-Amsterdam from Kavkaz, Russia, presumably for ultimate sale to South America. Other Group I parcels are seen moving out of Turkey into Bulgaria, and Group III parcels coming into Turkey for mainstream blenders complete a complex scene.

Kavkaz, Russia, material is also primed for Gebze, Turkey, and with prices for smaller parcels of SN500 estimated at around $745/t, basis STS, delivered CIF prices in Gebze are being suggested at $790-810/t. Group I cargoes from Greek and Italian suppliers are now assessed at $720/t-$735/t for SN150 and $798/t-$825/t for SN500/600, CIF western Turkish ports. Bright stock offers from an Italian source are reckoned to be $915/t-$935/t, CIF Turkish ports, when co-loaded with other quantities of solvent neutrals. Bulk quantities of 4 cSt and 6 cSt Group III ex-Spain have been reported at $765/t-$785/t, basis CIF landed into Gebze or other Sea of Marmara ports.

Middle East Gulf

After the large cargoes loaded out of Saudi Arabia for Oman and United Arab Emirates, Red Sea activity has been sparse with no further reported inquiries from Sudan or Jordan.

Group I cargoes, mostly for premium SN500, have been moving out of southern Iranian ports during the past week, with large parcels going into the West Coast of India and Pakistan. Local receivers in Sharjah, United Arab Emirates, report taking quantities of 2,000 to 3,000 tons of SN500 for inland distribution and also for flexitank sales into East and South Africa. Sepahan Oils refinery is reportedly on schedule in nearly completing a restart after a month-long maintenance shutdown.

Prices have apparently firmed again this week, with spot sales into Mumbai anchorage netting back numbers which would reflect FOB levels around $655 for premium SN500.

Shipping inquiries are circulating for large parcels of Group III to ship from Al Ruwais, U.A.E., to Mumbai and the Far East. The 12,000 ton parcel mentioned last week for Nigeria has been loaded and is now on the high seas. This is the first Group III shipment to West Africa, so sellers are waiting keenly to see if the region develops a regular requirement for this grade. Shipping agents based in Nigeria have indicated what may be the landed price for these Group III products, and it comes to around $893/t CFR/CIF Apapa, Nigeria.

Prices for Group III base oils out of the Middle East Gulf are steady this week in the absence of any prompt sales into India or Europe. FOB levels are reckoned using netbacks from prices levied to receivers on the West Coast of India, and come out to $645/t-$675/t for 4 cSt and 6 cSt grades loading out of Al Ruwais. Neste material from Sitra, Bahrain, commands more due to more complete approvals – around $725/t for 4 cSt and 6 cSt, and $695/t-$700/t for 8 cSt.

Group II trade is back to this region with a couple of cargoes split-delivered between Mumbai and Middle East Gulf receivers. With a new large business in Hamriyah, U.A.E., producing large quantities of transformer oils, imports of light Group II grades from Far East suppliers have risen. Other smaller blending operations are using Group II for passenger car motor oils. U.S. offers were withdrawn after the hurricane but may be re-instated at a later date.

Imported Group II is still offered out of storage in U.A.E. on an FCA or truck delivered basis. Prices are steady at $810/t-$825/t for light grades and $825/t-$870/t for 500N/600N, CIF Middle East Gulf locations.

Africa

The Group III shipment into Nigeria has sparked speculation about whether local blenders will make premium engine oils using Group II base stocks or blends of Group I and III. The consensus seems to be that companies will choose the latter approach because of the large dependence on Group I and the infrastructure in place.

A U.S. Gulf Coast cargo of Group I that was scheduled to load around the time that the hurricane has apparently still not been loaded, and one source said a substitute cargo was being sought from Europe.

After adjustments last week, prices for Group I being delivered into Nigeria are maintained this week. SN150 is $780/t-$795/t for quantities of 1,000 or more tons, SN500/600 is $865/t-$878pmt, SN900 is $948/t-$963/t and bright stock $1,015/t-$1,055/t.

All prices for Nigeria are for Group I base oils delivered CIF/CFR to Apapa, Lagos, or Port Harcourt.

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