Dated deliveries of Brent crude remained around the $60 per barrel mark, although there was a short-lived spike at the end of last week when prices rose above $63. A lack of clarity from the OPEC meeting last week may have caused the subsequent retreat. Dated deliveries of Brent crude posted yesterday at $60.90/bbl for February front month, while West Texas Intermediate was at $51.60/bbl also now for February settlement. ICE gas oil has hovered around last week’s level and now records at around $5 per metric ton lower at $570/t for January front month. These prices are from late ICE London trading on Monday.

Europe

Group I export spot prices throughout Europe are weaker, with offers some $10/t-$20/t lower than last week. These cuts are being made in hope of stimulating sales to be lifted before year end, but offers are often being met with derision by some potential buyers and traders saying they can source export barrels from alternative sources at lower, more competitive numbers.

Prices for light solvent neutrals have dipped to between $610/t and $635/t, while SN500 and SN600 were touted at $620/t-$655/t. Bright stock joined the other Group I grades coming under pressure as sellers try to move large parcels. Prices are pitched at $800/t-$840/t.

One trader reported being in receipt of an offer for three grades of Group I base oils from a European producer at some $40/t-$50/t below those prices indicated above. Whether this is connected to a quality issue or merely a seller wishing to clear tanks has not been made clear, but this ‘offer’ is only for material which will be loaded prior to the start of the holiday period. These prices are not included on the ranges above since they appear to be one-off, unconfirmed numbers that may or may not form a completed deal at the end of the day.

The above price levels refer to large cargo-sized parcels of Group I available on an FOB basis ex mainland European supply points, always subject to availability.

Prices for Group I base oils sales within Europe weakened during the past few days. Sellers claim they will not fall further just to move a few extra tons of material, but buyers still have the upper hand should they wish to buy now rather than wait until January. Some players are suggesting that prices may start to move upwards in January, although the majority of sources contacted this week threw doubts on that idea. With poor demand, copious supplies and alternatives in the form of Group II availabilities, there are few reasons why Group I markets should suddenly recover. Some suggest that the widening price gap between Group I and Group II poses a reason to continue using Group I base stocks wherever possible, rather than pay a premium for Group II material.

The differential between local prices and export numbers is unchanged with domestic prices assessed 65/t-95/t higher than export levels.

Group II prices are stable, and are also subject to the general slowing down in the base oil markets at this time. Sellers are not concerned regarding this slowdown since they have made allowances for such a dip in demand, and have programd this move into the supply and logistical plans for year-end trading. Sellers are forecasting that there will be a major move during Q1 next year for many blenders throughout Europe to establish contracted and long-term supplies of Group II base stocks. There are no reported instances of prices moving upwards, but neither are there any suggestions that prices are weakening.

With ACEA 2016 formulations and specifications being applied to many engine oils from December1 this year, the move to Group II is almost guaranteed for next year, and with further developments still to come on the emissions and cold start fronts, there may be an echo of the Group II activity and markets which have been seen in the U.S. being applied within European circles.

Price levels are generally maintained with FCA and truck/barge delivered prices for the light vis grades, 100N, 150N and 220N, between $885/t-$930/t (775/t-815) and the heavier vis 500N and 600N grades between $960/t-$1000/t (840/t-875).

The continuing Group III divide is becoming more and more evident with different pricing, and also differing availabilities between those products having full European approvals and those Group III base oils which are only partly-approved. With planned maintenance to a couple of major European sources for fully approved Group III oils happening during the first part of next year, there are fears that these grades could go short, forcing prices even higher, whilst increasing the price delta between these grades and partly-approved material.

However, at this point prices remain stable with partly-approved grades still between 740/t-760/t in respect of 4 centiStoke grades, 760/t-780/t for 6 cSt material, and 780/t-800/t for 8 cSt base oils, all in respect of FCA numbers. Fully approved Group III base stocks having ACEA and European OEM approvals are maintained with prices between 860/t-880/t in respect of 4 centiStoke grades, 6 cSt material between 885/t-910/t, and 8 cSt at 855/t-885/t, these prices also being on the basis of FCA Antwerp-Rotterdam-Amsterdam.

The prices above do not reflect prices for material which is delivered in bulk cargoes to large or major buyers. Prices in respect of these trades may be lower than FCA levels above.

Baltic and Black Seas

Deep-sea trading out of the Baltic regions is dire with no large export trades being completed. Sellers have declined to buy the meagre offerings coming out of some of the Russian refineries during December with the result that most distributors and resellers have minimal stocks in tank even at this early stage during the ultimate month of the year. There are a couple of contract trades which have been honoured and duly completed, but there have been few spot trades into local markets such as Scandinavia, the United Kingdom and Antwerp-Rotterdam-Amsterdam, this perhaps being a function of traders and blenders running down inventories towards the year-end.

Prices remain stable in most respects with FOB levels around $590/t-$610/t in respect of SN150, and SN500 between $600/t-$620/t. Bright stock ex southern Baltic remains between $795/t-$820/t FOB, with cargoes of this material going north into the Baltic for local markets in those regions.

Black Sea and East Mediterranean trading has picked up a little this week with a couple of local Uzbek cargoes going into Turkish receivers, and finally the news that the United Arab Emirates parcel which has been the subject of discussion for the last two months has been finally been loaded out of the STS operation at Kavkaz, Russia,. Some 8,000 tons has reputedly been loaded for discharge into U.A.E., where sources have been extremely keen to proclaim the accuracy of their knowledge against some doubts which were expressed by a party involved in the writing of this report. Prices are only indications based on Black Sea reports on Russian pricing, and also U.A.E. reports from sources. The numbers are assessed at around $685/t-$700/t basis CIF U.A.E.. in respect of the SN500 grade, which could netback to around $600/t-$620/t, basis STS Kavkaz, Russia.

European Mediterranean Group I base oils continue to be offered into Turkey, but there are not many buyers rushing to procure these grades at this time, given a combination of year-end inventories, local avails and prices, and financial negatives, many Turkish receivers have been reticent to buy material, even at extremely attractive prices. Some Greek suppliers have instead sent cargoes to receivers in northwestern Europe due to prices being attractive.

Unconfirmed prices heard in offers from Mediterranean sources are between $625/t-$640/t in respect of quantities of SN150, with SN500/600 at around $635/t-$650/t. Bright stock which is not discounted to the same extent is also offered Spain or Italy at around $845/t-$870/t.

Red Sea reports a number of fixtures and cargoes loading out of Yanbu and Jeddah, with one enquiry for a large parcel to move to the Baltic port of Riga. This is an unusual movement to say the least, and further information is being sought on this potential cargo. Vessels already chartered out of Red Sea ports have accounted for large parcels of Group l, and perhaps Group II, base oils to go into U.A.E. with 20,000 tons + already booked. This may be followed by another 20,000 tons to be delivered prior to year-end.

Middle East Gulf

Following on from the Red Sea reports, Middle East Gulf receivers are expecting large quantities of Group I and some Group II base stocks coming into the U.A.E. during December. Sources have advised that although ideally they would want low stock levels at Dec 31, the prices being offered were too attractive to turn down, and with trade forecast to experience an upturn early next year, traders and some blender decided that the time was right to make these purchases. Group I imports figure very high on the quantities of base stocks coming into U.A.E. and other Middle East Gulf ports during December. In fact the quantities being imported will be the largest seen for some time, and may be in excess of 60,000 tons total for the month taking all grades and varying specifications.

Group I from Iran has also resurfaced with a large parcel (by Iranian standards) of 7,000 tons moving to Sharjah and the balance discharging into Mumbai port. This material is loading out of BB and is being transported by an international shipping line, obviously not breaking any rules under the new sanctions. Sources have volunteered that prices in U.S. dollar equivalent will be in the region of $695/t CFR Sharjah port, and around $725/t CIF Mumbai with the resultant FOB levels after netback in respect of quantities of SN500.

Group III export notional FOB levels are maintained between $815/t-$850/t ex Al Ruwais and Sitra in respect of 4 centiStoke, 6 cSt and 8 cSt partly-approved base oils Material marketed by Neste holding U.S. and full European approvals from Sitra refinery is tweaked upwards due to higher selling prices afforded for these grades in Europe. FOB levels are put between $910/t-$940/t in respect of 4 centiStoke, 6 cSt, and 8 cSt material which moves to European, U.S. and other western markets. 8 cSt grades moving eastwards are lower due to selling prices in those markets being around $100 less.

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

Group II supplies ex Yanbu into Middle East Gulf are planned for December arrival with players confirming that they are going to have to stock both Group II and Group I base oils, but Group I will still reign supreme in this region, at least for the time being. With increasing price variations between the two groups many Middle East Gulf blenders will remain committed to Group I base stocks.

Prices in respect of fully approved products ex hub storage U.A.E. on basis FCA or delivered by truck or flexies, are estimated to be priced between $1085/t-$1030/t for the light grades 100N/150N/ 220N, with 500N/600N between $1155/t-$1195/t.

These prices refer to Middle East Gulf delivered small quantities of less than 25,000 tons per load, but often with a total quantity of up to 300-500 mt per offtake. Prices may vary with destination and distance from hub supplies.

Africa

African regional markets are all very different with, for example the relatively sophisticated market of the South African states, using a variety of different base oils from Group I through Group II and Group III, all of which play a large part in these regions. East Africa also aspires to adopt European standards, with Tanzania and Kenya moving fast to become regional forces in the finished lubricant stakes with more and more imported base stocks being used for local blending and production of these lubes. A Group I Mediterranean cargo is currently being primed for receivers in East Africa

North African markets have a closer affinity with the European scene with many blenders in Morocco, Tunisia, Libya, Algeria and Egypt heavily dependant on European Mediterranean production of Group I in the main, but now with some operations starting to import Group III grades at the same time.

West African markets have traditionally been the mainstay of imported Group I cargoes moving into Nigeria, Ghana, Cote d’Ivoire and Guinea.

Another large parcel ex U.S. Gulf Coast appears to be perhaps the final movement for 2018 for material going into Nigeria, with some 15,000 tons being worked on a two-port load basis in USG for discharge into Apapa. The arrival for the cargo will probably be into January, creating an ideal situation for both sellers and receivers of not having the cargo in-tank at year-end.

Nigerian CIF/CFR offered price levels are assumed to remain as per last and are indicated between $730/t-$745/t in respect of the range of light solvent neutrals SN150-SN180, with the heavier grades SN500/600/650 between $790/t-$805/t and bright stock at around $885/t-$920/t. SN900 is indicated at around $815/t-$830/t CIF/CFR.

These prices are in respect of large parcels of minimum 10,000 tonstotal 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.