Group I availabilities are sufficient to allow few opportunities for producers to raise prices. Margins remain less than ideal, and many refiners have curbed production of the Group I slate to the bare minimum, redirecting feedstock to production of distillates.

Group II prices have remained at the same levels for the past few months, but margins are effectively being squeezed because the euro is losing value against the dollar. The market is awaiting a decision by the European Commission about whether to extend or amend a duty waiver for Group II imports.

Prices for Group III oils with full slates of finished lubricant approvals rallied at the beginning of September, but some of these increases have been reduced or were not applied due to competition from Group IIIs with partial slates of approvals. Blenders say they do not need all of their Group III oils to have full approvals since approvals are only needed for certain formulations. Blending operations using Group III have begun carrying two tiers of in order to improve margins.

The number of offers and volume of base oil coming into Europe from the Far East and Middle East Gulf continue to rise, and this is exerting downward pressure on prices.

Crude oil prices costs spiked over the weekend drone attacks on Saudi wells, including one that damaged a main crude source. Dated deliveries of Brent crude rose to $65.50 per barrel for November front month settlement, around $3 higher than last week. West Texas Intermediate climbed to $59.10 per barrel, for October front month. ICE LS gas oil peaked above $620 per metric ton, now for October front month.

These prices were obtained from London ICE trading late Sept. 16.

Europe

Prices for Group I exports from Europe are stable so far this week but could face upward pressure from rising crude costs. As mentioned, the market is not long, and upcoming maintenance turnarounds at two plants could limit some export availabilities, at least for large composite cargoes comprising three or more Group I grades.

Prices for solvent neutral remain between $575 per ton and $598/t, while SN500 is at $580/t-$605/t. Bright stock is longest of Group I grades, but are unchanged at $665/t-$695/t. These prices refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.

Sellers have focused on Group I trade within Europe since prices there are around $100/t higher than exports. Buying interest is waning, however, with the seasonal lull in production of finished lubricants. Still, many buyers say they will stock up now to take advantage of low values.

The differential between Group I sales within Europe and exports is unchanged, with the former 85/t-100/t higher.

European Group II prices are stable but may start to face downward pressure from keenly priced offers from Far East sources. At the moment, values in Europe are higher than in other major Group II markets. Prices in Europe are unchanged this week at $700/t-$815/t (625/t-730) for 100 neutral, 150N and 220N, while 500N and 600N are at $720/t-$825/t (640/t-740).

These prices pertain to the full range of Group II oils, including those with full slates of approvals as well as those with partial or no approvals.

Group III values are varied, with some having been hiked, others discounted and some being sold at exceptionally low rates. Supply-wise, the markets remain balanced with sufficient supplies of material to cover all requirements. There are hints of increasing availabilities coming on to the European scene.

Prices for grades with partial approvals are gauged at 655/t-710/t for 4 centiStoke grades, while 6 and 8 cSt oils are at 660/t-720/t, all on an FCA basis ex hubs in Northwestern Europe.

Fully-approved Group III oils are assessed higher, but it must be noted that this sector is widely divergent with some prices being almost in line with partly-approved oils, and others some $100/t-$200/t higher. Levels are assessed between 795/t-855/t for 4 cSt, 825/t-915/t for 6 cSt and 795/t-870/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic sales are low compared to times gone by, and sellers and distributors have low inventory levels due to a lack of material being brought out from Russian refineries. This may be due to producers selling avails into the local markets rather than supplying the export trade, but more likely is that traders and distributors in the Baltic regions are bidding at prices that producers consider too low.

Large cargoes such as West African supplies are purchased from refiners almost to order, and once these parcels have been cleared from inventory, no replacement barrels are forthcoming.

Cargoes into Antwerp-Rotterdam-Amsterdam and mainland Europe are almost non-existent, with only a couple of pre-Brexit parcels being organized for the east coast of the United Kingdom. There are further inquiries for quantities to move to the U.K., but mainstream options from Europe are also being considered since landed prices are comparable.

Prices for the few cargoes being supplied through Baltic ports are unchanged at $475/t-$500/t for SN150 and $485/t-$520/t for SN500, both on an FOB basis. Bright stock loading from a lower Baltic supply point is assessed at the same level as last reported, $665/t-$685/t FOB.

With more Russian export barrels being diverted to Black Sea supply points, notably Kavkaz, Russia, where the STS supply system continues to load large parcels for sales into export markets such as the West Coast of India, the United Arab Emirates, Singapore and Rotterdam. Prices remain at exceptionally low levels for Russian export grades: $455/t for SN500 and $435/t for SN150.

Offers for Mediterranean Group I base oils continue to be sent to Turkish buyers, but they still prefer to take smaller quantities from the local refinery at Izmir. This is the case even against the producers raising prices by around $30/t, but these quantities can be purchased in small loads and in local currency.

Mediterranean offers have prices indicated at $574/t for SN150 and $585/t for SN500. SN600 is seen offered at $595/t and smaller quantities of bright stock at $740/t, basis CIF.

Group II and Group III base oils are available on an ex-tank basis in the main Turkish ports of Gebze and Derince, Turkey. Supplies of these base oils are reportedly expanding as distributors representing the major producers and suppliers look to establish Turkey as a large potential market.

Middle East Gulf

Little news emerged from the Red Sea this week, but it is safe to assume that large cargoes of both Group I and Group II will be loading from Yanbual Bahr and Jeddah, Saudi Arabia, going into the West Coast of India and the U.A.E.

Iranian Group I cargoes are missing from the market this week. Iranian and U.S. relations took a turn for the worse as Iran refused to meet with U.S. officials who had offered discussions on the nuclear deal and other sanction points. Some European Union countries have offered monetary assistance to Iran to offset the loss of revenue from crude exports, which are down some 80 percent from pre-sanction days.

Base oils are still reputed to be coming out of Iranian ports although not evidenced by this report or any other shipping circles. FOB prices for premium Iranian SN500 are around $545/t based on information from U.A.E. sources.

Group I activity is quiet in the Middle East Gulf other than quantities being routinely supplied from Yanbu and Jeddah. Offers for another cargo to load ex Kavkaz for receivers in Sharjah have been heard with prices indicated at around $550/t for SN500 and $530/t for smaller quantities of SN150. These prices will undercut Iranian levels, although the Iranian barrels will carry a slightly higher specification.

Trade of Group III base oils ex Al Ruwais, U.A.E., and Sitra, Bahrain, is quiet this week, maybe due in part to an Al Ruwais turnaround that may have curbed new supplies moving to distributors in Europe and the U.S. There have been no intimated changes for prices delivered into hubs for September.

Values for partially approved oils are at $685/t-$725/t for all three Group III viscosity grades, though contribution levels are lower for 8 cSt going into India and China.

Fully approved grades marketed by Neste from Sitra will have higher netback levels. Prices in European markets increased by $10/t-$15/t in from Sept. 1, so notional FOB or netback levels are raised to $785/t-$895/t for 4, 6 and 8 cSt grades. With most of the European supplies for these base oils being made from Porvoo, few instances of supplies from Bahrain are seen going into the European markets.

Nominal netback values are based on prices for regional sales, less marketing, handling and freight costs.

Group II prices in the Middle East Gulf are unchanged for imported material sourced from the U.S. the Far East, Saudi Arabia and now Europe. This material is resold within Middle East Gulf regional markets and is priced at $775/t-$880/t for 100N, 150N and 220N, while 500N and 600N are at $785/t-$900/t, FCA ex U.A.E. hub storage.

Africa

Reports from North African markets have identified another cargo of around 3,500 tons loading out of Italy and discharging in Mohammedia, Morocco. This is a cargo with the three standard Group I grades on board, and replaces production lost when the refinery at Mohammedia closed a couple years ago. The Egyptian third-quarter bright stock tender will wrap up this month with one cargo going into Alexandria and a supplementary cargo being supplied before the end of the month.

West Africa has awoken after the summer holiday period, and three large cargoes from various ports are due to arrive into Apapa port in Lagos during late September or early October. The largest of these parcels consists of 13,000 tons of Group I grades loading out of the Baltic. The second is moving from Antwerp-Rotterdam-Amsterdam plus an Atlantic or Mediterranean port, suggesting it was not possible to load all required grades out of a single load port. The final cargo will be 7,000 tons loading out of the U.S. Gulf Coast for Apapa.

Prices for these cargoes have not been disclosed yet, but based on FOB levels from each of the source ports, it is safe to assume that they remain at previous levels: $695/t-$720/t for SN150, $695/t-$720/t for SN500, $875/t-$910/t for bright stock and $715/t-$725/t for SN900. The Nigerian market is relatively stable, and prices have remained roughly flat over the past few months.

These prices refer to cargoes of at least 10,000 tons delivered into 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.