Crude oil and feedstock costs continued their retreat this week, as dated deliveries of Brent crude posted yesterday at $80.30 per barrel for December settlement and West Texas Intermediate dipped to $70.30/bbl for November front month. ICE LS gas oil fell around $25 per metric ton to $711 per metric ton, also for November front month. These prices were from London ICE trading late Monday.

Europe

With Group I base oils becoming longer in spite of a number of major turnarounds in progress at this time, prices are perhaps appearing to be weaker, but levels are maintained this week. The range of light solvent neutrals is still between $685/t and $710/t, while SN500 and SN600 remain at $720/t-$745/t. Bright stock is unchanged between $885/t-$910/t, although some sellers have been trying to move prices upwards for this grade claiming that there is still no higher spec substitute in respect of this material, and that continued use of bright stock will prevail for certain types of finished lubricants.

Above prices refer to large cargo sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points, always subject to availability.

European domestic prices for Group I base oils are also static with very few movements reported, and those noted have been for prices to fall rather than rise. There appears to be no shortage of Group I grades around the market, with more than one blender stating that they were spoilt for choice in opting for supplies these grades. Several traders are offering Russian export grades out of the Baltic which are able to compete with the lowest prices being paid for mainstream product.

Sellers have commented that they are finding it extremely hard merely to maintain prices at current levels, and may be facing call for further discounting. How this is to be achieved is a slight problem since with domestic base oil prices almost aligning with distillate fuels and gasoline numbers it would appear that unless crude shifts lower, then there will be very little room for maneuver.

The differential between local prices and export numbers is clearer this week and an assessment is made with domestic prices being around 45/t-100/t higher than export levels, with bright stock having the lowest delta.

No reported source increases from Group II producers, but at the same time these prices have been maintained at relatively higher levels, hence there will not be the same pressures on Group II grades as are happening with Group I base stocks. Sellers appear content with contribution levels from these grades which are now substantially higher in price terms than Group l. Many blenders are looking to next year, and beyond, for contracted supplies of Group II base oils, and are actively approaching known suppliers and traders to finalize forward contracts, at least in volume terms. Pricing is heard to be linked to a number of various reported sources, including U.S. posted prices, and other formulae based arrangements.

Prices are again maintained this week with FCA and truck/barge delivered prices being assessed for the light vis grades, 100N, 150N and 220N, at $885/t-$930/t (755/t-795) with the heavier vis 500N and 600N grades between $965/t-$985/t (825/t-830).

Group III prices are described as stable although there are reports of some partly approved sellers trying to edge up the market by applying small ‘adjustments’ of around 5/t-10/t across all grades. Other sources have confirmed that small increases have been made to fully approved Group III grades, although not all receivers have been subject to these price rises. One supplier has been keen to point out that many contract buyers are actually at the small end of the market, having Group III grades either delivered by truck and barge, or buying FCA from a main storage hub.

For partly-approved grades, FCA euro prices are unchanged with levels between 765/t-770/t ($885/t-$895) for 4 centiStoke grades, 6 cSt material at 775/t-780/t ($900/t-$910), and 8 cSt material between 785/t-790/t ($910/t-$920).

Fully approved Group III base stocks holding ACEA and European OEM approvals are also maintained between 810/t-835/t in respect of 4 cSt, with 6 cSt material between 830/t-875/t, and 8 cSt at around 820/t-835/t, these prices being on the basis of levels FCA Antwerp-Rotterdam-Amsterdam.

The prices above do not reflect prices for material which is delivered in bulk cargoes to larger users. Prices in respect of these trades may be considerably lower than the levels detailed above.

Baltic and Black Seas

Baltic inventories are growing fast with sales not moving ahead as quickly as resellers and traders would like. There are apparently still a number of large enquiries from West Africa sources which are currently being assessed by sellers and receivers but no movement or vessel fixtures have been noted as yet.

Availability remains good with more export barrels becoming available each month, as the Russian domestic markets slow down for the winter months. There are reported large parcels of heavier neutrals being made available for offers to Far Eastern, Middle East Gulf and Indian receivers, but few have been reverting with closed deals. Prices are still deemed too high and may require a bit of trimming before the large deals can be completed.

Short-sea trade cargoes remain a feature of Baltic trade with material moving to Antwerp-Rotterdam-Amsterdam, Scandinavia and the east coast of the United Kingdom this week.

Prices remain flat this week and remain assessed at around $640/t-$670/t in respect of SN150, SN500 continues to range between $665/t-$695/t. SN900 is indicated at around $725/t, with min 90 VI bright stock ex southern Baltic remaining at around $865/t-$880/t FOB.

Lackluster trading is the feature of the Black Sea base oil scene with Turkey once being the main element in the marketplace. Turkey has all but halted the importing of Group I base stocks from Russia, Uzbekistan, and European Mediterranean, in addition to large quantities of Group III arriving from European, Middle East Gulf and Far Eastern sources.

Since the advent of economic woes in Turkey, much of the import activity has been mooted and with staggering increases to raw material costs, even the local producer has given notice of large swinging increases to base oil prices. This same producer is also going into turnaround for about a month this is also being cited as a reason to increase selling prices for base oil.

There are still some European sourced Group I base oils going into Turkey with indication prices into Derince and Gebze, Turkey, from Greece assessed at around $735/t-$755/t in respect of the light solvent neutrals and between $785/t-$810/t for the quantities of SN600/SN500, basis CIF Turkish ports.

The latest Kavkaz, Russia, STS parcel is apparently loading, and with estimated prices for the Russian SN500 grade now sub $600/t, there are many options for locations in Middle East Gulf, Far East and India.

Middle East Gulf

Saudi Arabian exports make up the bulk of Red Sea trade, along with supplies of Group I base stocks delivered into Aqaba and Sudan. Cargoes are mainly bound for the west coast of India and Middle East Gulf receivers, and additionally some material is being discharged into Pakistan. Cargoes will potentially comprise of both Group I and Group II grades.

Iranian cargoes have come to light again this week with a large parcel moving into Hamriyah from Bandar-e Emam Khomeyni (BIK), and again sources have declared that new sanctions will not prevent base oils being exported. Prices in respect of SN500 grade may have dropped, perhaps in response to offers of material from Black Sea and European Mediterranean. SN500 levels are now assessed at around $785/t-$800/t basis FOB. Material originating from outside Middle East Gulf is under consideration for United Arab Emirates receivers with Mediterranean, Black Sea, Baltic and U.S. sources all potentially active in the supplies of Group I base stocks.

Group III base oil exports from Al Ruwais and Sitra have notional FOB price levels attached which are being increased slightly. Prices around the markets appear to be stable with just a couple of suggestions of small increases, but these movements are being advised further down the supply chain, so it becomes difficult to determine at which exact point the increments are being applied.

Notional FOB levels are therefore increased a little this week to between $810/t-$845/t FOB Al Ruwais and Sitra in respect of 4 centiStoke and 6 cSt partly-approved Group III base stocks. Fully approved base oils holding U.S. and European approvals from Sitra refinery are estimated to netback between $865/t-$895/t in respect of 4, 6 and 8 cSt material which moves to western destinations. Eight cSt material being exported to eastern destinations will produce lower netbacks due to lower local selling prices.

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

Cargoes of Group II base oils are moving into Middle East Gulf markets from Far East and Red Sea suppliers, but delivered prices are not released for large supplies of Group II base stocks. Local prices on basis FCA or delivered by truck or flexi, have moved upwards with levels now in respect of fully approved light grades 100N/150N/ 220N between $1055/t-$1095/t, with 500N/600N between $1125/t-$1165/t. These prices refer to Middle East Gulf delivered small quantities of less than 25,000 tons per load, but with a total quantity of up to 300 tons per offtake.

Africa

South African shipping agents have confirmed that another large cargo has been commissioned by a major for discharge into Durban.

West African are expecting the announcement of further parcels to load out of U.S. Gulf Coast for discharge into Apapa, Lagos. Also in the running are a couple of potential supplies to be made out of the Baltic which some contacts have indicated will be completed in the next few days or early next week. The Baltic cargo may involve loading a large slug of bright stock ex southern Baltic in addition to further Russian Group I export grades ex Ventspils or Riga.

Price levels in respect of offers for material into Apapa port are re-assessed, and new levels applying to these and future offers for large cargoes of Group I base oils are between $695/t-$745/t in respect of the range of light solvent neutrals SN150-SN180, SN500/600/650 between $730/t-$775/t and bright stock at around $925/t-$965/t. SN900 ex Baltic, as an indication only is assessed at around $825/t-$865/t.

These prices 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.