The Group II segment has calmed since the launch of ExxonMobils new plant in Rotterdam, Netherlands, and here, too, values are firming, thanks partly to hikes imposed by importers from the United States and the Far East.

The surplus of Group III availability to Europe may be shrinking amid reports that imports from the Middle East could lessen during the next quarter when a large source closes temporarily for maintenance. Russian and Far East Group III base oils continue to create a presence in European markets. Some suppliers have tried to boost prices, but they are hampered by plentiful availability.

Refiners will have welcomed the tumble that crude oil costs took over the weekend since it has the potential to rescue margins, which have been squeezed over the past months. Dated deliveries of Brent crude dropped to $62.80 per barrel, some $6.50 lower than last week, now in respect of August settlement. West Texas Intermediate crude slid to $54.60 per barrel, but for July front month. ICE LS gas oil dipped around $45 this week to $571 per metric ton, still for June front month settlement.

These prices were obtained from ICE London trading late Monday.

Europe

Offer prices for Group I exports from Europe increased some $5 to $10 per ton this week, but buyers were keen to point out that feedstock costs will now be lowered and margins may be improved for sellers, thus allowing a degree of flexibility when it comes to final pricing. Actual selling prices are unchanged at $550/t-$575/t for solvent neutral 150 and $575/t-$600/t for SN500. Bright stock remains at $700/t-$740/t, amidst reports of the new EGPC tender out of Egypt for the third quarter, which will be supplied ex European sources. The tender is for a possible total of 11,000 tons of this grade to be delivered between July and September.

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

Prices for sales within Europe have been pushed slightly higher at the beginning of June, but buyers are commenting that sentiment remains weak and they are confident that negotiations during this week will yield prices which are comparable to those applicable in May.

There are few issues with availability therefore prices are not expected to rise significantly, if at all. There are also reports of a couple of large Russian cargoes having been moved down into Antwerp-Rotterdam-Amsterdam from the Baltic which may dilute attempts by mainstream sellers to move levels higher.

The differential between regional and export pricing remains as last reported, with domestic levels posting 65/t-90/t higher.

Group II prices appear to have found their new level and are stable with few external pressures being brought to bear. There are no reports of sellers trying to hike number upwards, perhaps aware that this market has recently seen some realignment, and that any attempted moves to push levels higher may open a Pandoras Box of negotiations that may start another drift.

There are still reports of some blenders taking smaller quantities of Group II grades in flexitanks imported from the Far East or the U.S., which, whilst not as attractive as perhaps two months ago, are nevertheless lower priced than ex tank number within mainland Europe

Prices for Group II are at $730/t-$840/t (645/t-745) for 100 neutral, 150N and 220N and at $760/t-$880/t (670/t-780) for 500N and 600N.

Group III prices are reported lower this week with an abundance of offers and availability of oils with both full and partial slates of finished lubricant approvals. Certain suppliers of fully approved Group III base oils continue to heavily discount in particular circumstances, perhaps looking to stave off any chance of losing market share to oils that may not carry the same approvals.

Prices for partially approved oils remain unchanged and are assessed at 665/t-710/t for 4 centiStoke grades, with 6 and 8 cSt at 675/t-720/t, all for FCA sales ex hubs located in Northwestern Europe. Some sellers have tried to impose markups for June, citing higher raw material costs. These have largely been dismissed by buyers, who have options when it comes to purchasing Group III stocks.

Fully-approved Group IIIs are assessed at 710/t-840/t for 4 centiStoke product, 800/t-865/t for 6 cSt and 775/t-835/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam . These wide pricing bands are due to some major discounts being applied to fully-approved base stocks, taking some of these prices close to those for partly-approved grades.

The numbers above do not include prices for material delivered in larger bulk cargoes to major buyers or distributors. Prices for those trades may be around the lower ends of the FCA ranges referred to above.

Baltic and Black Seas

Baltic prices remain at established low levels with a number of distributors and resellers finding it hard to purchase suitable replacement stocks of Russian base oils due to limitations on availability and price. Russian domestic markets are demanding at this time of year, and other alternative sales are possible to buyers in Ukraine and Eastern Europe, where in both cases prices are higher, yielding better returns.

There are talks of a further large cargo being organized for Nigeria, but currently stocks are unable to fulfil the quantities required for the parcel.

Prices are maintained with FOB levels in respect of SN150 between $475/t-$500/t and SN500 between $485/t-$520/t. Bright stock ex Gdansk remains assessed between $700/t-$725/t FOB.

Black Sea trades on basis of the above supplies going into Turkey have faltered with most of the availability of SN150 and SN500 moving in large parcels ex Kavkaz, Russia, to the west coast of India. STS Kavkaz, Russia, prices in respect of these supplies are reckoned to be around $485/t in respect of SN500, with confirmed prices CIF the west coast of India for SN500 at $545/t-$555/t.

The uncertainty of the Turkish market is returning with further elections scheduled for the end of June. There had been signs of a recovery starting in Turkish markets but this may be short-lived depending on the political fallout from the election results.

Currently local prices continue to be offered on a similar basis as last reported, with Izmir once again the favored source for Group l base oils for regional blenders.

Mediterranean offers in respect of quantities of Group l base oils, basis CIF Marmara ports were heard during last week at $565/t for SN150 and $580/t for SN500. Bright stock is indicated at $775/t CIF. Offers from northwestern Europe/Antwerp-Rotterdam-Amsterdam have been made and accepted by Turkish importers, with further parcels being considered by the same sellers and receivers.

Middle East Gulf

Red Sea marine sources report a number of large cargoes being loaded and further parcels being planned out of Yanbu and Jeddah for June delivery into Dar-es-Salaam, the west coast of India and United Arab Emirates. A further 5,000 tons parcel of Group III base oils is confirmed moving into Yanbu from South Korea.

With Ramadan finishing and the start of the Eid al Fatr holidays commencing, Middle East markets are subdued this week with Iranian sources not contactable. There are no reported exports of base oils from southern Iranian ports such as Bandar-e Emam Khomeyni or Bandar Bushehr, although sources in U.A.E. and India have confirmed that they are receiving and using Iranian base stocks from imports of this material.

U.S. sanctions appear to be affecting crude and other petroleum product export movements, but base oils have not been mentioned in any of the local news flashes which highlight the Iranian problems.

As replacement product, receivers in U.A.E. have drawn negative on the trial to take a cargo of Russian base oils which would load ex Kavkaz, Russia, in the Black Sea. There appear to be problems with the economics of making this deal work, although with alternatives drying up, for example options to load out of U.S. Gulf Coast or USAC do not appear to be an option, and Far eastern FOB prices do not allow the opening of an arbitrage between these two points.

Prices CIF U.A.E. are targeted at around $545/t in respect of SN150 and $555/t for SN500, but these levels have not elicited positive responses from sellers.

In the Group III market, there is an announcement that Adnoc will take the Al Ruwais unit down during August for routine maintenance. This will last around one month, but will not affect supplies for distributors in regional global markets. Steps will be taken to stockpile material to take account of the production interruption.

In calculating Group III base oil FOB prices ex Al Ruwais in U.A.E. and Sitra in Bahrain notional numbers are maintained although there were comments from some sources to suggest that producers and marketers were trying to move these levels higher by selling into regional markets at increased prices.

FOB numbers remain assessed between $685/t-$725/t in respect of the range of 4 centiStoke, 6 cSt and 8 cSt base oils. Eight cSt grades moving to India and China will show lower FOB levels which may be around $100/t below those above, due to local selling prices.

Group III base oils being marketed by Neste which carry the full range of approvals including those applying to European OEMs which are available ex Sitra refinery, will provide higher FOB levels due to premium selling prices in destination markets. Levels will be between $845/t-$875/t in respect of 4 centiStoke, 6 cSt, and 8 cSt grades delivered into the European and U.S. markets.

Nominal FOB prices on a netback basis are based on prices extracted from regional selling levels, less marketing, handling and freight costs.

Group II prices for Middle East Gulf regional markets have risen slightly with selling levels in respect of base oils sourced from Far East and U.S. and holding full global approvals, selling FCA ex U.A.E. hub storage, in ranges between $865/t-$900/t in respect of the light vis grades 100N/150N/ 220N, with 500N/600N between $875/t-$920/t.

Africa

North African markets main news this week is the issuance of the latest EGPC tender in respect of requirements for Q3. The nationalized company will require four cargoes of 2,500 tons each of bright stock during the period of the contract with an option for a further 1,000 tons of the same grade to be added to one of the cargoes being delivered during August.

Moroccan receivers are to take delivery of a relatively large cargo of around 6,000 tons of Group l and Group III grades which will load on a possible two port basis out of Italian and Spanish ports. There are also rumors that a one-port load is being considered from a Spanish source.

Following the Baltic cargo for Nigeria, another parcel is being negotiated from similar sources, although at this time suppliers are short of the total quantities to cover the requirements needed to qualify for the freight savings attributed to a cargo of minimum 10,000 tons.

The vessel carrying the base oils for Conakry and Abidjan, and thence the remaining part-cargo into Tema, will be arriving in the next few days to effect discharge.

Group l prices attributed to cargoes moving into Nigeria are beginning to have pressure applied to raise numbers due to higher FOB levels from all sources. Future levels are now established between $680/t-$695/t in respect of SN150, SN500 between $695/t-$700/t, and with bright stock supplies being longer with more material available, prices will possibly remain between $885/t-$925/t. SN900 levels are to move higher to between $720/t-$740/t. All prices are on the basis of CIF/CFR Apapa, Lagos.

The prices above refer to large cargoes of minimum quantity of 10,000 tons in total, landed into Nigerian ports.

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