The opposite can be said for regional and domestic markets, most of which have ceased operating for the seasonal period, and will only come back to life after the New Year holiday.

Group I prices are stable, with limited production and availabilities helping to maintain values. The usual year-end sell-off does not appear to be happening, as many sellers said they are not holding surplus material at this time. A fire at a major Group I producers refinery on the 14 December halted base oil output from that facility, causing customers to look for alternative sources for early next year.

The European Group II market is preparing for the onset of a new quota system that will impose duties of 3.7 percent on most Group II grades after the first 200,000 metric tons every six months. Group III imports are not to be covered by such a system, so imports continue to flood in, supplementing local production and creating a growing surplus.

Crude oil costs climbed this week on positive economic sentiment. Dated deliveries of Brent crude rose approximately $1to $66.00 per barrel for February front month settlement. West Texas Intermediate breached the $60 barrier and is now at around $60.25/bbl, also for February front month. ICE LS gas oil climbed to $611.25 per metric ton for January settlement.

These prices were obtained from London ICE trading late Monday.

Europe

Supply and demand for European Group I exports seem to be in balance. With the seasonal slowdown, there are few inquiries for major export destinations at this moment, and some sellers do not expect this market to pick up any time soon. There are no signs that January will bring anything like a revival to this sector, although there are still routine cargoes being prepared for North Africa and some Turkish receivers.

Prices are unchanged with SN150 between $545 per ton and $580/t, SN500 at $555/t-$580/t and bright stock at $615/t-$650/t. These levels refer to cargo-sized parcels of at least 2,000 tons, sold on an FOB basis ex mainland European supply points, always subject to availability.

Regional Group I domestic prices are also flat, mainly due to the lack of trade over the holiday period. Many blenders closed down or went on to skeleton staffing last week, and will not resume full operations until the week commencing Jan. 6. Most players will have successfully negotiated supplies of Group I for at least the first quarter of next year and in some cases for the full year.

There appears to be a degree of flexibility to contract purchasing, with options to move swiftly to Group II and Group III should circumstances demand it. The price differential between Group I sales within Europe and exports remains at 45/t-65/t, with exports being lower.

A week before the European Unions new Group II quota system takes effect, buyers are asking suppliers questions about implementation, but suppliers have few answers. Apart from the limits on tariff-free quantities, little is known about administration of the system, but importers have said they will continue serving their customers.

Prices are unchanged at $745/t-$790pmt (675/t-740) for 150 neutral and 220N, while 500N and 600N are at $785/t-$825/t (715/t-750). These levels refer to the wide range of all Group II base oils, including grades from Europe and the United States with full slates of finished lubricant approvals and partly-approved grades from the Middle East, the Far East and the U.S., some of which are imported in flexitanks.

Group III oils remain under pressure from oversupply, although the seasonal slowdown has taken out the sting. A clearer picture of the market should emerge in January when play returns to normal. There may be a mini-boost of Group III offtake after a sidelined additive plant in France is expected to resume normal operations, although this will not offset the large quantities of Group III hitting European markets.

Prices for Group III oils with partial slates of approvals are unchanged at 650/t-725/t for 4 centiStoke grades and 665/t-740/t for 6 and 8 cSt, basis FCA ex hubs in Northwestern Europe. Prices fully-approved Group III oils are also unchanged at 740/t-810/t for 4 cSt, 770/t-840/t for 6 cSt and 755/t-820/t for 8 cSt.

Baltic and Black Seas

Baltic prices have remained steady, perhaps due mostly to there being little room for further downward movement. These prices have fallen into step with European mainstream Group I markets, but demand in the Baltic regions receded after the loading of two large parcels for Nigeria.

There are a number of inquiries from United Kingdom receivers for January cargoes, possibly aiming to avoid any duty modifications after the U.K. leaves the EU on Jan. 31. The latest news on this front is that there will initially be no change to duty tariffs for the importation of base oils from EU sources, although this could change if a free trade agreement is not reached before the end of 2020.

Baltic prices for Russian Group I exports are unchanged at $465/t-$490/t for SN150 and $470/t-$498/t for SN500, on an FOB basis. Bright stock ex Gdansk remains at $620/t-$650/t, FOB.

In the Black Sea there are two inquiries for early January loading from the STS facility at Kavkaz, Russia. One of these cargoes will be a repeat of two past movements, which mean a total quantity of around 12,000 tons being loaded for discharge in two ports. The first port will be in Greece and the bulk then moving to Singapore. The second inquiry is for a smaller parcel of around 5,000 tons to be delivered in Hamriyah port in Sharjah, United Arab Emirates. The demand for this supply is possibly due to U.S. sanctions cutting off the flow of Iranian barrels.

Russian export STS prices remain around $455/t for SN500 and $435/t for SN150.

The Volga river system still appears to be navigable as a Volgoneft vessel is carrying a 3,000 ton parcel of Russian export grades to receivers in Gebze, Turkey. Prices are deemed to be exceptionally competitive for this supply, with indications for SN500 at around $498/t and SN150 at $487/t, both on a CIF basis.

Group I offers from Mediterranean sources to Turkish receivers are still on the table, but many have relaxed for the next couple of weeks, not expecting hasty response since the seasonal holidays are still be observed in Turkey. Local prices in Turkey have risen and the base oil plant in Izmir suspended production until 2020 to avoid building inventory. The combination of these two moves begs for an explanation this columnist cannot provide it.

Mediterranean prices are unchanged at $578/t for SN150 and $586/t, CIF Gebze. SN600 may be offered at around $595/t and bright stock around $668/t, on the same basis.

The Turkish market is increasingly being targeted by Group II and Group III sellers using distribution networks to offer Group II oils for $700/t-$745/t and partly-approved Group III oils at $790/t-$825/t ex tank Turkish ports.

Middle East Gulf

Red Sea sources report a Saudi Arabian producer winning the Egyptian General Petroleum Corp. contract to supply cargoes of bright stock during the first quarter. Six cargoes are being lined up, although two are optional for the receiver. Other than these 2,500-ton parcels, this producer is exporting large quantities of both Group I and Group II base oils to India and the U.A.E.

To take the place of Iranian Group I exports, the possibly 5,000-ton cargo identified as loading ex Kavkaz has been primed for U.A.E. receivers. This parcel is on the lower limits of quantities for freight from the Black Sea to Sharjah, although given exceptionally attractive STS prices this movement is still considered well within the bounds of economic suitability. With FOB or FCA prices for premium Iranian SN500 indicated from U.A.E. sources at around $525/t-$540/t FCA, the Russian export barrels may discharge at or around these levels.

There appears to be a void of Group I offers from U.S. Gulf Coast sources for U.A.E. receivers, although this may be a seasonal circumstance, and further offers of Group I cargoes are expected from this source in early January. Indications for SN500 are $589/t, CIF U.A.E. ports. SN150 is assessed at around $579/t and bright stock around $666/t, CIF Hamriyah port, U.A.E.

An exceptionally large base oil cargo has been identified loading ex Middle East Gulf for points “west.” The parcel of some 40,000 tons was loaded by an oil major, and although this supplier has recently taken on a distributorship from Bapco in Bahrain to supply Group III base oils in Europe and the U.S., it is considered that this cargo may have been loaded out of Ras Laffan, Qatar, where the supplier has a gas-to-liquids joint venture with a local company. The Group III may be distributed into the major’s affiliates, and internal prices for such cargoes are not disclosed.

Partly approved Group III base oils ex Al Ruwais, U.A.E., and Sitra, Bahrain, are priced at $650/t-$690/t for all viscosity grades sold into Europe, the U.S., India and the Far East, except that 8 cSt oils sold into India and the Far East bring less of a netback, due to lower local prices. Fully approved oils marketed by Neste from Sitra are at $760/t-$855/t for 4, 6 and 8 cSt. These prices are all nominal FOB prices calculated on a netback basis using selling prices in destination markets, less marketing, handling and freight costs.

Group II prices in Middle East Gulf regions are stable, again because of activity slowing due to holidays and the end of the year. The accounting date is universal across almost all markets, so producers, resellers, distributors and buyers all trying to minimize stocks held in inventory.

Prices are unchanged, with the caveat that some Middle East sources may be offering prices outside these spreads. FCA prices for sales from U.A.E. hub storage are at $745/t-$900/t for 100N, 150N and 220N, while 500N and 600N are at $755/t-$910/t.

Africa

There has been no more news about the possibility of re-starting the El Mex refinery at Alexandria, Egypt, and local sources that costs have been deemed prohibitive.

Routine cargoes are reportedly moving from the Mediterranean coast of Spain or Livorno, Italy, into Mohammedia, Morocco, and some sources say Group I and Group III oils are being imported into this location.

West Africa has gone very quiet in terms of inquiries and trading, although cargoes from the Baltic are en route at this time. One should arrive before the end of this week. It was considered that another large cargo might be supplied out of the U.S. Gulf Coast, but to date there has been no announcement from shipping circles on this possibility.

With firm indications on the cargoes loaded out of the Baltic, and making assumptions on freight costs, prices for the material landing into Nigeria have not changed from previous numbers. Group I prices are at $630/t-$645/t for SN150, $640/t-$655/t for SN500 and $720/t-$745/t for bright stock, all on an FOB basis Apapa port, Lagos, Nigeria. Blended SN900 is indicated at $650/t-$675/t. These apply to cargoes of at least 10,000 tons.

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

Historic and current base oil pricing data are available for purchase inExcel format.