Crude oil and feedstocks are marking time, with dated deliveries of Brent crude posting at $72.15 per barrel in respect of October front month, almost identical in price terms to last week. West Texas Intermediate crude is lower, hovering around $66.35 per barrel, around $1 down from last week’s level, for September front month. ICE LS gas oil is showing at $647 per metric ton for September front month settlement, a little lower than last week, echoing the weaker sentiment surrounding some crude and feedstock price levels. These prices were established in late London ICE trading on Monday 20th August.

Europe

European Group I export prices are showing lower this week, with further price pressure mounting due to greater avails for all API Group I grades and restricted demand perhaps due to seasonality, but also due to a lack of firm export requirements from traditional markets such as West Africa, Middle East Gulf and India. These markets have been open to alternative supply sources where prices have presumably been keener. Where sales have been confirmed for export trades, the prices have been described as weaker with some buyers able to successfully obtain lower numbers due to producers being keen to move product out of refinery storage.

Light solvent neutrals are assessed between $735/t and $755/t, along with heavier grades SN500 and SN600 between $825/t and $860/t. Bright stock prices have been adjusted downwards and are now quoted between $875/t and $900/t.

Above prices refer to large cargo sized parcels of Group I base oils FOB out of mainland European supply points, always subject to availability.

Domestic Group I business throughout the local European regions has not been involved in real price adjustments as yet, although sources this week confirmed that they are in discussions with sellers to bring prices into line at the end of the month. Many blenders are looking for much lower numbers in response to fundamentals showing signs of weaker levels, and also with Group I availabilities becoming longer price pressure may be brought to bear on these grades, with more and more Group I grades only being suitable for export sales.

This week prices remain on hold, but by next week or the week following, it is expected that levels will have to be re-adjusted downwards, but with the differential between local prices and export numbers being altered due to the lowering of export prices. The differential is assessed this week to lie between 85/t and 125/t, although this higher range will possibly be only temporary.

European Group II prices are maintained again this week, since unlike Group I grades, this market is relatively snug with healthy demand and incremental off-take being forecast for the remainder of this year. Some imports will fall away after the opening of the Rotterdam facility, but most players involved anticipate a balanced market after that event, since it is not anticipated that the unit will go into full production from day one.

FCA and truck/barge delivered prices remain unchanged with light vis grades between $875/t and $920/t (745/t-785), with heavier vis 500N and 600N between $955/t and $975/t (815/t-820).

Availability of partly-approved Group III base oils continues to grow, although reports over the past few weeks have seen the market quieter than the previous few months, probably echoing the holiday sentiment. FCA prices are once again left unchanged with levels remaining between 760/t and765/t ( $875/t-$885 ) in respect of 4 centiStoke grades and 6 cSt material around 770/t-775/t ( $885/t-$890). Eight cSt grades are selling between 775/t and 785/t ($895/t-$900). These prices apply to partly-approved Group III base oils being sold out of hub storage in northwestern Europe.

Material carrying full ACEA and European original equipment manufacturer approvals also remain between 805/t and 820/t in respect of the 4 centiStoke grades, 6 cSt material around 810/t-830/t, and 8 cSt at 815/t-835/t, these prices pertain to levels FCA Antwerp-Rotterdam-Amsterdam.

Prices are based on ex-rack or truck delivered smaller lots of Group III base oils, and do not reflect prices for material which is delivered in bulk cargoes to larger users, for example major blenders or additive manufacturers. Prices in respect of those trades may be considerably lower than levels above.

Baltic and Black Sea

Baltic trade was busy last week, with the announcement of a large parcel of both Russian export grades and also a large quantity of bright stock being loaded out of Poland destined for Nigerian receivers in Apapa, Lagos. In addition a local cargo out of the Baltic going into Antwerp-Rotterdam-Amsterdam was confirmed. The Nigerian cargo is the first for around a month sourcing from the Baltic and may suggest that prices from this region are once again showing a competitive edge versus material coming out of U.S. Gulf Coast suppliers.

Suggestions are that bright stock prices from Poland are keen, whilst still attractive to the sellers of this grade. FOB prices, whilst not disclosed on a direct basis, are expected to be around $695/t-$720/t in respect of SN150, and between $765/t and $795/t for quantities of SN500. Bright stock levels are assessed at around $860/t FOB.

In the Black Sea region Turkish buyers continue to have problems with foreign currency amidst the economic meltdown the country could be facing. The fall in the value of the Turkish lira made importing base oils a very expensive business and may prevent completion of some trades into these markets. Both Group I imports from Mediterranean and Russian supply sources could be affected, in addition to Group III imports from Mediterranean and Middle East Gulf supply points.

Shipping enquiries for material to move into Turkish ports diminished greatly over the past couple of weeks, perhaps suggesting importers are not in a position to have their banks transact base oils into Turkish markets.

As indications only at this stage, prices in respect of Group I base oils are maintained for Mediterranean supplies with light solvent neutrals around $765/t-$790/t with SN600 and SN500 remaining between $850/t and $885/t CIF.

No further announced parcels loaded out of Kavkaz, Russia, following the raft of material flowing through that source over the last few weeks.

Group III imports for partly-approved grades may be priced at around $840/t-$865 /t; however, fully approved material from a Mediterranean source will be noticeably higher, perhaps curbing the enthusiasm to make purchases of fully approved material where partly-approved grades may be available at lower prices. Continued importing of these grades may become increasingly difficult should the situation in Turkey escalate further.

A Sudanese enquiry for up to 6,000 tons of Group I grades is taking options on supply either from Red Sea or from Mediterranean sources. No further news was gleaned regarding the Aqaba requirement, suggesting receivers may have managed to cover this requirement in other ways or from alternative sources. Saudi Arabian suppliers appear to be loading Group II material for the west coast of India which will follow up cargoes already delivered into that region.

Middle East

No reports of any further availability of Iranian Group I base oils were received this week, with sources in United Arab Emirates stating that supplies of the major grade SN500+ from the Sepahan refinery appear to be missing from the market. The absolute threat from the United States to any parties dealing or trading with Iran locally or internationally appears to have been sufficient to discourage the attempt to purchase base oils from that source. Even the Iranian SN500+ grade which was available delivered into local U.A.E. ports in Sharjah has been either withdrawn or pulled from the market. This supply was reported last week to be available and was priced in local currency at around U.A.E. Dirhams 3,800/t.

In addition to the part cargo loaded out of Al Ruwais for discharge into Gebze, Turkey, in Turkey, it appears another stand-alone parcel was loaded in early August to discharge into Gebze, Turkey, any day now. All elements of this deal were put into place prior to the economic problems unfolding in Turkey, and the interest is to see if further quantities of Group III base stocks can move from the Middle East Gulf to Turkish receivers in the future.

FOB numbers formed on a purely notional basis are maintained between $775/t and $800/t basis FOB Al Ruwais and Sitra in respect of all three grades of partly-approved Group III base stocks. Fully approved Group III material from the Sitra refinery, under the Neste banner, is estimated to netback higher at between $835/t and $865/t.

As before, 8 cSt material exported to India and Far East may show lower netback levels due to lower selling prices. Levels are estimated to be around $75/t-$100/t lower than those quoted above.

The numbers above refer to FOB levels established on a notional netback basis using published shipping freight rates, and taking into account advised local selling prices, plus notifications of bulk CIF/CFR cargo prices from various sources.

News of Group II base stocks moving from Yanbu to Italy is still awaited with no further action apparent at this time. In Middle East Gulf, prices of Group II base stocks FCA, delivered by truck or flexi from U.A.E. sellers are maintained as last week’s new levels with sources in U.A.E. confirming offers for relatively small quantities from Al Ruwais are competing against imported grades These offers are based on truck deliveries at around $875/t in respect of the heavier vis grade. Prices in respect of the fully approved light grades 100N/150N/ 220N are maintained around $995/t-$1,040/t, with 500N/600N between $1,085/t and $1,125/t. These prices refer to Middle East Gulf delivered prices pertain to small quantities of less than 25,000 tons per load.

Africa

The cargo of around 8,000 tons loading out of Rotterdam and Sicily identified last week in this report was confirmed through shipping agents in Durban for arrival into that port during second half September. This major sourced cargo is only one of many which has established a trading pattern for the supply of mainly Group I grades into the South African market.

West Africa markets other than Nigeria confirmed that in addition to the Ghana requirement of around 5,000 tons, a further 4,000 tons of Group I base oils will be delivered to receivers in Guinea and Cote d’Ivoire, taking advantage of the economies of scale. The freight rate for a 9,000 tons cargo will be much more competitive than for two stand-alone parcels of 5,000 tons and 4,000 tons.

The Nigerian scene confirmed the two-port Baltic load for some 12,000 tons of Group I exports. The bulk of this will consist of bright stock out of the southern Baltic, with the addition of Russian export grades yet to be established. Whilst the pricing for these products may have been part of a special arrangement, it has been acknowledged that prices paid on an FOB basis were in line with European and other Baltic supplies.

Prices are re-assessed and are adjusted downwards in respect of Group I base oils landed into Nigeria. Light solvent neutral SN150 is now gauged between $755/t and $785/t, SN500 between $830/t and $855/t and bright stock now indicated as landed between $920/t-$940/t. SN900 from the Baltic was estimated landed at around $880/t, although no confirmation this grade was loaded on the Baltic supply has yet been confirmed. These prices apply to the most recent supply ex Baltic and are in respect of large parcels in excess of 10,000 tons total 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.