Group I levels are under the microscope because of margins being squeezed and aggressive countering from buyers. Group II prices are still being eroded but perhaps not as fast as over the past six weeks. In the Group III segment, all grades are under downward pressure as supply increases.

The rate of downward movement has abated somewhat, and there are signs that the market may be stabilizing. Some API Group I producers have tried vainly to raise prices, but this is still an uphill task since supply is increasing after completion of maintenance turnarounds. Some refiners are shifting feedstock to production of fuels instead of base oils.

Crude and feedstock prices appear to have leveled off or weakened slightly over the past week. Dated deliveries of Brent crude dropped around $1.50 to $70.75 per barrel, now for July settlement. West Texas Intermediate crude fell to $61.70, for June front month. ICE LS gas oil rose by some $10 per metric ton to $641 per metric ton, still for May front month. These prices were obtained from ICE London trading late Monday.

Europe

European Group I export prices are stabilizing, though buyers appear reluctant to subscribe to higher prices that are being asked by suppliers. Given that traders and major buyers still have a variety of purchasing options when it comes to Group I cargoes, this alone will tend to suppress values, or at least curb chances that they will reach levels that sellers call acceptable.

Availabilities are improving again after the turnaround season, so buyers can still play one or more suppliers against each other. Demand is said to be rising however, with some of the traditional arbitrage opportunities opening up again, for example to the Middle East Gulf, the West Coast of India and West Africa.

The one anomaly around the Group I market appears to be that bright stock is more available than it was previously, perhaps due to increased output. Or it may be that demand for bright stock was overstated, leaving larger than normal availabilities of this product around the European market.

Group I prices are maintained again this week at $550/t to $575/t for light-viscosity solvent neutrals and $575/t-$600/t for SN500. Because of length of supply, bright stock prices are adjusted downwards by $15/t-$20/t to $730/t-$765/t.

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

Domestic prices are stable. A number of sellers are talking of markups, but many blender have said that such talk won’t really bring about increases. Buyers did allow that downward pressure has eased and that margins are tight, but they also noted that availabilities are flush and that falling Group II prices are pressuring Group I. Spot purchasing has become the norm, giving buyers ultimate control over transactions.

Demand appears to be improving, with a number of buyers explaining that they are looking to increase purchases over the next few months.

The differential between prices for sales within Europe and export is maintained this week with domestic levels being levied between 65/t-90/t higher.

Group II levels are starting to bottom out, with fewer discounts being offered. In markets such as the U.S., where much of European Group II base oils have been sourced, prices have risen across the board, while in Europe prices have fallen and come into line with Group II levels in the U.S. and the Far East. The importing of lower priced material in flexitanks has diminished to a large extent, with the arbitrage between the U.S. or the Far East and Europe closing for all but a small number of imports.

Group II numbers are unchanged with 100 neutral, 150N and 220N at $740/t-$850/t (655/t-755) and 500N and 600N at $770/t-$890/t (680/t-790). The ranges are narrowing due to the lack of smaller quantities being imported from Far East and U.S. sources, and cognizance of this will be taken in the next report, when the upper and lower limits for prices can be more accurately defined.

Group III prices are weaker going into May due to abundant availabilities for grades with both full and partial slates of finished lubricant approvals. Confirmation has been attained that some fully approved grades have been discounted to maintain market share with a number of major buyers.

Prices for partly-approved Group III grades are being nibbled at in the face of competitive offers appearing unsolicited from suppliers without any formal requests being made by buyers. Price levels are lowered this week to 670/t-720/t for 4 centiStoke grades and 680/t-735/t for 6 and 8 cSt. These prices are for FCA sales ex hubs located in Northwestern Europe.

Fully-approved material is also sometimes being discounted at the lower end of the ranges. Levels are now assessed at 795/t-860/t for 4 cSt, 810/t-875/t for 6 cSt, and 800/t-865/t for 8 cSt, all basis FCA Antwerp-Rotterdam-Amsterdam.

The levels above do not include prices for material delivered in bulk cargoes to large or major buyers, which will be lower.

Baltic and Black Seas

Baltic trade has picked up with one large cargo of 15,000 tons being loaded from two ports for Nigerian receivers. This is the cargo that was identified here some time back and has taken a while to come to fruition. There are also a number of short-sea trade cargoes notified this week, an area which has been rather neglected of late, but with traders moving a couple of parcels of Baltic Russian export grades into the east coast ofthe United Kingdom, the extension to EU membership has apparently yielded an opportunity to continue trading on the current tariff basis. There are also a couple of parcels moving to Antwerp-Rotterdam-Amsterdam for contracted buyers in mainland Europe.

Supplies into shore storage from Russian refineries may be starting to falter due to reported contamination problems with certain supplies of Urals crude. The extensiveness of this problem is not yet clear, but rumors say that a number of refineries have ceased to accept this crude and are looking at alternatives to bridge the supply gap.

The effects of this action are not clear, but should refineries cut back exports for this reason or any other, then Baltic base oil markets may be affected.

Prices this week remain as previously reported at $475/t-$500/t for SN150 and $485/t-$520/t for SN500. Bright stock ex Gdansk is reckoned to be lower this week, and is assessed at $730/t-$760/t FOB.

Black Sea reports include the news that Turkish buyers are being forced to consider imported cargoes from Mediterranean and Russian sources due to limitations of supply from the local refinery at Izmir. Production has restarted after the extended turnaround, but stored stocks have been depleted. This lack of supply of Group I base stocks has initiated a spree of material being assessed for import from what were regular suppliers in the past. Imports are not a pleasant option given the state of the local currency, but as one source said, traders and blenders have no choice if they wish to continue in the business.

Mediterranean sources have made offers to Turkish buyers for material to go into shore storage in Gebze and Derince, while other sellers have included offers for material loading out of Antwerp-Rotterdam-Amsterdam for the same market. The two cargoes identified last week have been confirmed, taking around 10,000 tons of Group I grades into the Turkish market for resale ex tank, and also for in-house blending

Offers CIF Marmara have been heard at $553/t for SN150 and $578/t for quantities of SN500. There are also reports of bright stock being offered ex an Italian source at around $790/t CIF, as part of a larger cargo containing solvent neutrals.

Two parcels totaling around 12,000 tons of Russian export grades ex STS Kavkaz, Russia, have been loaded. The first parcel is for Turkish receivers in Gebze, and the second is to be delivered into Rotterdam, possibly for onward supply to a South American destination. Other parcels of around 16,000 tons total are being assessed for the United Arab Emirates and the West Coast of India and will possibly be completed this week. Prices for these grades are assessed at around $465/t-$485/t for smaller quantities SN150 and $480/t-$495/t for SN500. As predicted last week, these quantities are now of greater interest for Turkish receivers given the problems at Izmir.

Middle East Gulf

Red Sea shipping reports describe inquiries for base oils ex Yanbual Bahr to be delivered into Algerian ports. This is an interesting supply of Group I and Group II grades. Reports also continues of large cargoes moving from Saudi Arabian ports to the West Coast of India, along with Sudan, Pakistan, and the U.A.E. A Korean-sourced cargo is moving into Yanbu with what is imagined to be a parcel of Group III base oils from an associate supplier in that region.

Busines in the Middle East and other countries with Muslim populations will slow over the next four weeks with the advent of the Holy Month of Ramadan.

Rumor has it that Iranian products are still being moved out of the Middle East Gulf using what is termed the gray market. Its workings are largely unknown, but sources in the U.A.E. and India suggested that material is still arriving into various ports from Iran, either directly or through secondary ports and storage.

Receivers in the U.A.E. are looking at cargo options again from from the Black Sea to substitute for Iranian base oil barrels that cannot now be legitimately accessed. SN500 is priced at $585/t and SN900 at $625/t, basis CIF for quantities delivered in the U.A.E. A cargo of some 5,000 tons of Group I grades has been sold ex Le Havre, France, going into the U.A.E. This may be an in-house cargo providing approved base oils for lubricant blending.

Notional prices for Group III grades with partial approvals ex Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged this week in light of steady selling volumes in key markets, though it is anticipated that these prices will come under pressure from increased supply. Prices are assessed at $695/t-$735/t for 4, 6 and 8 cSt oils. Shipments of 8 cSt to India or the Far East will produce lower FOB values due to local selling prices.

FOB prices for branded Nexbase Group III base oils carrying full European OEM approvals ex Sitra are at $855/t-$900/t for 4, 6 and 8 cSt grades delivered into European and U.S. markets.

Nominal FOB numbers are based on netback prices extracted from regional selling levels, less marketing, handling and freight costs. FOB levels for Neste products will carry the same numbers as partly-approved material sold by Bapco, given that the physical product from Sitra refinery is one and the same, but that the Nexbase brand holds full approvals.

Pprices around the Middle East Gulf for fully approved Group II imports from the Far East and the U.S. are at $875/t-$910/t for 100N, 150N and 220N and $885/t-$925/t for 500N and 600N, all on an FCA basis from U.A.E. hubs.

Africa

The Mediterranean market for North Africa is particularly active with buyers in Morocco , Algeria, and Egypt all taking supplies of Group I and Group II from sources located around the Mediterranean. Supplies are being made from Spain, Italy and Greece as well as the potential supply from Yanbual Bahr and Jeddah, Saudi Arabia, into Algeria.

West Africa trade has revived with announcement of two cargoes being fixed for receivers in Lagos, Nigeria. One parcel is being sourced ex the U.S. Gulf Coast with around 14,000 tons of base oils being loaded for Apapa, Nigeria, while another cargo of 15,000 tons of Russian export grades and Polish bright stock has loaded ex Baltic.

Receivers in Cote d’Ivoire and Guinea have issued an inquiry for 6,000 to 7,000 tons of Group I grades to load ex Livorno for delivery into Conakry, Guinea, and Abidjan, Nigeria, during the first half of June. This is a sizeable cargo for these destinations and perhaps suggests that instead of using the auspices of the Ghana supply contract that a stand-alone vessel can be accommodated at these two ports.

Group I prices for material currently landing into Nigeria are maintained at $670/t-$680/t for SN150 and $680/t-$690/t for SN500, with bright stock at $900/t-$945/t. SN900 is indicated at $700/t-$720/t. All prices are basis CIF/CFR Lagos.

The prices above refer to large cargoes of at least 10,000 tons in total, landed into Nigerian ports such as Apapa.

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