Group III prices are stable at the moment, though it may be too early for new levels to have been established. The grade could face upward pricing pressure in coming months as a couple plants are scheduled to undergo maintenance turnarounds.

Crude oil and feedstock prices rallied the past few days as dated deliveries of Brent crude rose to $58.00 per barrel, now for March front month, while West Texas Intermediate increased to $48.60/barrel for February settlement. ICE LS gas oil climbed almost $50 to $542 per metric ton, still for January front month. All of these prices came from ICE London trading late Monday.

Europe

API Group I export prices throughout Europe are deemed unchanged due to the lack of tangible evidence of any new deals. Some suppliers reported that stocks are low. Light solvent neutrals are between $595/t and $620/t, while SN500 and SN600 are $610/t/t-$625/t. Bright stock has been in demand for coverage of a contract to Egypt and for inquiries for Nigeria. Still, prices remain at $800/t-$840/t in most offers heard so far, although one seller quoted a value some $40/t higher.

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

Prices for Group I sales within Europe have not had time to respond to new developments. Most buyers contacted this week said that they were waiting to see how the markets responded to various drivers.

Buyers appeared not to be overly concerned regarding immediate future avails of Group l, with some citing that they believed that Russian material would become more available in January and February, filling any void which may appear from mainstream suppliers within Europe. One party also mentioned that as a large blending group, they were looking at importing Group I base oils from U.S. sources if prices started to rise again within Europe. This concept has not been effected for some time, although based on U.S. export prices, the arbitrage may be open for cargoes of a certain size to move eastwards.

Prices are unaltered this week but with the differential between domestic prices and export numbers narrowing a little due to the notional firming on export numbers. The premium is assessed between 55/t-85/t. Domestic levels obviously being the higher of the two.

As was forecast during December, European Group II prices are coming under mounting pressure from within and also from new imported quantities coming on to the market from U.S. and Far East, where in both cases the local markets are perceived as weaker, with the European scene remaining attractive in terms of margins and netback. This scenario may only be temporary, since with the production coming on-stream from the Rotterdam facility within a matter of weeks, this may have a dampening effect on possible new imported volumes.

The pressure from within has been caused by the ever growing differential between Group I and Group II prices at a time when Group II suppliers have been pushing buyers to make the changeover to the new grades, post ACEA 2016 being implemented. Currently the new specifications will only apply to a limited number of automotive lubricants, hence many blenders are being tempted to remain loyal to Group I with the current clear incentive on price.

Values for lower-viscosity oils are adjusted slightly lower due to January levels seen and heard at the end of December, with FCA and truck- or barge-delivered levels for 100N, 150N and 220N at $880/t-$910/t (775/t-810) and 500N and 600N maintained at $960/t-$999/t (850/t-885).

The two-tier structure for the Group III remains entrenched but is further complicated due to variations in between viscosities. Prices for some partly-approved Group III grades have been tweaked upwards due to a slight tightening in supply terms. The supplies of Group III grades coming out of Russian have been limited for a number of reasons, leaving the field to other suppliers of these products.

Prices are now established between 745/t-760/t for 4 centiStoke grades, with levels of 770/t-790/t for the 6 cSt material, and 790/t-800/t for 8 cSt base oils. All basis FCA Antwerp-Rotterdam-Amsterdam sales. There remains a considerable differential between these grades and the fully approved base oils.

Fully approved base stocks holding ACEA and European OEM approvals are now assessed between 870/t-905/t for 4 cSt, 895/t-925/t for 6 cSt and 875/t-910/t for 8 cSt, all on an FCA basis from Antwerp-Rotterdam-Amsterdam.

The prices above do not reflect prices for material which is delivered in bulk cargoes to large or major buyers, which may be lower.

Baltic and Black Seas

Baltic markets appear to be intent on replenishing stocks which were run down prior to the year-end, with fewer cargoes actually moving out of the region. Baltic distributors and resellers are perhaps looking to take advantage of the feedstock price dip which occurred during December, thus yielding lower refinery gate prices. This window of opportunity may be limited with crude and feedstock levels starting to rise, and buyers limited in shore storage in the Baltic ports.

Prices are defined as stable with few offered cargoes for spot trades coming out of the region due to the lack of substantial quantities available. FOB levels remain around $580/t-$599/t in respect of SN150, with SN500 between $585/t-$600/t. Bright stock ex southern Baltic has perhaps firmed a little to reflect prices between $820/t-$855/t FOB.

Black Sea trade has been slow at the start of the year, with few cargoes coming out of the Russian ports, perhaps due to cold weather restrictions on the river system, but also because of a lack of buying interest from traditional markets in Turkey. Turkish importers have remained quiet, relying on local production rather than opt for Mediterranean or even Uzbek imports which have now been priced relatively higher in dollar terms than local supplies in Turkish lira, which are now priced at around $50/t-$75/t lower than potential cargoes from Greece.

Prices in respect of European Mediterranean Group I base oils are being re-offered, but with little buying response from importers. Prices remain between $595/t-$620/t for quantities of SN150 and with SN500/600 also between $595/t-$620/t. Sellers have commented that these levels may be revised upwards during the next few days, perhaps ruling out the possibility for these trades to take place.

However, at the same time there are rumored reports that local prices will also rise, reflecting new feedstock levels, which may alter the landscape yet again.

Middle East Gulf

There are moves to import further quantities of Group II and Group III base stocks into Turkey, with new Group II offers coming to buyers from Red Sea sources. These new offers are in addition to the established distribution networks representing major suppliers of Group II within Europe. Group III offers for partly-approved material are being made by Middle East Gulf suppliers as well as contracted supplies of fully approved material from European and also Middle East Gulf sources.

Cargoes of Group I and Group II base oils ex Yanbu and Jeddah are reported moving to traditional destinations in Middle East Gulf and the West Coast of India, with further reports that there are new negotiations for future trade of bright stock to Egypt from Red Sea sources, although the current awarded contract will be covered by traders using Mediterranean sourcing,

Middle East Gulf Group I trades have traditionally comprised of Iranian export barrels, Saudi Arabian imports, and the opportunity driven cargoes from Europe and U.S. as and when the arbitrage became effective.

Iranian exports appear but all to have ceased with only smaller parcels being taken by local shipping into United Arab Emirates ex the southern Iranian ports. U.S. sanctions have curtailed exports of Group I base oils, with receivers in the west coast of India now relying on imported material from alternative sources. Some offers from U.S. sources have been implemented to buyers in U.A.E., but these cargoes appear to have been deemed uncompetitive against recent imports from Black Sea, which may be repeated when weather allows.

Group III trade continues unabated with production from all Middle East Gulf sources running almost at optimum levels. FOB netback values in respect of exports have been increased slightly this week after reports of higher selling prices in various different markets. Levels are re-assessed between $795/t-$875/t ex Al Ruwais and Sitra in respect of the range of 4, 6 and 8 cSt grades, in relation to partly-approved base oils. Material holding full European ACEA approvals ex Sitra refinery are also assessed higher, now between $925/t-$970/t representing 4, 6 and 8 cSt material moving to European, U.S. and other western markets. The 8 cSt grade being traded to India and Far East will show lower netback results due to lower selling prices in those markets.

Prices refer to notional FOB levels established on a netback basis using published freight rates, local selling prices, and additional notifications of bulk CIF/CFR cargo prices from various representative and reliable sources.

Group II base oils, all of which hold full OEM approvals, being sold on the basis ex hub storage in U.A.E., either FCA or delivered by truck or flexies, are assessed according to local sources to range between $1,075/t-$1,010/t for the light grades 100N/150N/ 220N, with 500N/600N between $1,055/t-$1,125/t. These levels are adjusted lower than last reported due to price erosion in source markets which may have the effect of reducing price levels enabling these base stocks to remain competitive.

These prices refer to small quantities of less than 25,000 tons per load, delivered around Middle East Gulf. Prices may vary with destination and distance from hub supplies.

Africa

South African reports are that further cargoes of Group I grades supplied by a major ex either one or two European refinery sources will be arriving into Durban port during Q1 of this year. This activity appears to be extending the established practice of augmenting local supplies of Group I base stocks to meet market demand in the South African regions.

West African trade is quiet at the moment with the imminent arrival of three large cargoes of Group I base oils programmed for Nigeria. One cargo ex U.S. Gulf Coast and two others ex Baltic are due for arrival into Apapa in the next couple of weeks. With no new parcels being nominated for this market, it would appear that buyers are sitting back awaiting to see which way the Group I markets evolve, before completing any further deals. There are a number of enquiries on the table for Nigerian imports, but some are flaky in that they rarely come to fruition.

CIF/CFR prices in respect of large cargoes of Group I products moving into Nigeria are maintained as per last report, with levels indicated between $720/t-$750/t in respect of the range of light solvent neutral grades SN150-SN180, with heavier vis SN500/600/650 between $750/t-$785/t and bright stock between $920/t-$955/t. SN900 remains indicated at $815/t-$845/t CIF/CFR.

Again there are reports of re-refined base oil being offered into Nigerian buyers in flexi-bags with prices believed to be in the region of $675/t delivered, in respect of a high VI SN150 product.

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