API Group I values are being reviewed by sellers, and some are already offering higher numbers than at the end of last year. Rising feedstock prices are being cited as the main reason, but some producers have not raised prices.

Group II prices are also firm this week as sellers seem to be assessing conditions, including the impact of the European Unions new quota on Group II imports. The new regime could have a number of effects, but they probably will not be understood until the quota is exceeded.

The Group III segment begins the new year with the same surplus. It appears unlikely to disappear any time soon, although several maintenance turnarounds are scheduled for the first quarter, and these could temper the over-supply.

Crude oil prices gave back some ground after spiking above $70 per barrel mark in the wake of Soleimanis death. Dated deliveries of Brent crude dipped to $68.85/bbl, now for March front month settlement, while West Texas Intermediate reached $63.20/bbl, still for February front month.

ICE LS gas oil declined to $620 per metric ton for January settlement. These prices were obtained from London ICE trading late Monday.

Europe

European export prices for Group I oils face some upward pressure as availabilities are relatively tight, particularly for buyers wanting cargoes that include all three main grades. For now values are unchanged, with solvent neutral 150 selling 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.

Prices for Group I sales within Europe also have not had time to adjust, but face the same dynamics as exports. Some blenders in Northwestern Europe have expressed supply concerns following a fire at a major refinery in that region, while others reported making arrangements with alternative suppliers and resellers in Antwerp-Rotterdam-Amsterdam. These are expected to be spot sales, or at least January contracts, until the status of the refinery in question can be evaluated.

The price differential between exports and sales within Europe are unchanged, with exports 45/t-65/t lower.

The Group II segment is marking time since it is too early to assess the impact of the quota system. Supply and demand remain balanced, and prices are unchanged at $745/t-$790/t (675/t-740) for 150 neutral and 220, while 500N and 600N are at $785/t-$825/t (715/t-750).

These prices apply to the wide range of Group II oils, including European and U.S. products 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.

European Group III markets are showing plentiful availabilities to date, but there are a number of large refinery turnarounds planned for this year, and this could tamp down supply. However, producers have planned these maintenance schedules well in advance, and sources within some of the main suppliers have said they plan to increase inventories before production halts. The effects of these temporary closings may therefore be minimal.

Suppliers hope that demand for Group III base oils within the EU receive a boost if the EU quota system shortens up the Group II market. Some Group III grades may be substituted for some Group II grades, and with prices closely aligned, some blenders may look at this option.

Prices are unchanged this week, with partly-approved Group III base oils between 650/t-725/t for 4 centiStoke grades and 665/t-740/t for 6 and 8 cSt, all on an FCA basis ex Northwestern European hubs. Prices for Group III oils with full slates of approvals are 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

As with other markets, Baltic trade has only just resumed this week, and with the Russian Orthodox Christmas celebrations starting on Jan. 7, activity may be limited in this region for the coming few days. There has been some loading activity with a cargo of around 6,000 tons moving from Kaliningrad to Singapore. This is considered to be a contract trade, and may be as an adjunct to cargoes that are loaded out of the STS facility at Kavkaz, Russia, in the Black Sea from the same producer.

Cargoes are also moving to the United Kingdom and Antwerp-Rotterdam-Amsterdam amid suggestions that increased Antwerp-Rotterdam-Amsterdam trade is perhaps as a result of the fire at the Northwestern European refinery.

Prices for Group I Russian exports are unchanged at $465/t-$490/t for SN150 and $470/t-$498/t for SN500, basis FOB. Bright stock which is sold and loaded ex Gdansk, Poland, is at $620/t-$650/t, FOB.

In the Black Sea region, a 5,000-ton cargo of Russian export barrels for receivers in United Arab Emirates is still being considered to load ex Kavkaz. The cargo was booked on a prompt basis, but shipping may have been remote, delaying the loading until this week. The other 12,000-ton cargo for receivers in Greece and Singapore should load this week.

STS prices for Russian export grades are still assessed at around $455/t for large quantities of SN500 and around $435/t for SN150.

A cargo has loaded out of a northeast Black Sea port for receivers in Gebze, Turkey. Prices for this movement continue to be indicated at exceptionally competitive rates $498/t for SN500 and $489/t for SN150, both on a CIF basis.

Offers from Mediterranean sources are believed to have risen, perhaps due to local prices from the refinery at Izmir remaining relatively high or because of a general review of prices by a Greek refinery. Group I grades are still competitive against the local Turkish prices, giving these suppliers an edge when looking to expand trade into the Turkish market. Mediterranean Group I offers were heard at $589/t for SN150 and $598/t for SN500, both on a CIF basis at Gebze, Aliaga or Derince. SN600 is around $612/t and bright stock around $682/t.

Group II and Group III grades are being offered on FCA terms ex tank in Turkish ports with last prices heard between $710/t-$760/t for the range of Group II grades, some $10/t-$15 higher than previously established. Partly-approved Group III base oils are at $799/t-$835/t, also a shade higher than last reported.

Middle East Gulf

Red Sea shipping sources report that some form of contract of affreightment has been arranged for the supply of a number of cargoes of bright stock for Egyptian General Petroleum Corp. in Alexandria. These parcels of 2,500 tons each will load either from Yanbual Bahr or Jeddah, Saudi Arabia, and sail through Suez to discharge in Alexandria. Other cargoes of Group I and Group II base oils are planned for the United Arab Emirates and India for loading during January.

With U.S. sanctions still biting hard against Iranian exports of crude and petroleum products, the outcome of any Iranian counter measures to the killiing of Soleimani remains an unknown. Vessels shipping cargoes out of Saudi Arabia, Kuwait, Bahrain and the U.A.E. could again be targeted as the pass through the Straits of Hormuz. Group III exports and Group I and II imports could be affected.

Prices for Iranian premium SN500 continue to be nominally indicated by sources in Iraq and the U.A.E. at around $520/t-$540/t, basis FCA Iranian facilities. This is on the basis of local delivered prices, less associated transportation and handling costs. The reality of this situation is that no cargoes are emanating from the southern Iranian ports, making it difficult to confirm these numbers.

Group I offers from traders based on U.S. Gulf Coast supply have been withdrawn for the time being as sources cite shipping concerns. Freight rates have increased as protection and indemnity clubs push up insurance rates. Until the offers were withdrawn, prices were being indicated at around $589/t for SN500, $579/t for SN150 and $666/t for bright stock, all on a CIF basis ex U.A.E. ports.

There are rumors that receivers in the U.A.E. are actively looking at further cargoes from Kavkaz and the Baltic, as well as European Mediterranean suppliers.

Prices for Middle East Gulf exports of Group III base oils ex Al Ruwais, U.A.E., and Sitra, Bahrain, are unchanged but shipping costs are rising both because of new IMO 2020 fuel regulations and the Iranian situation, and this could cause upward pressure. FOB levels remain at $650/t-$690/t for all viscosity grades of partly approved Group IIIs being sold into Europe, the U.S., India and the Far East, except that 8 cSt grades sold into Indian and Far Eastern markets will bring lower FOB prices due to lower local selling prices.

Fully approved Group III oils ex Sitra are estimated at $760/t-$855/t for 4, 6 and 8 cSt grades. Notional FOB prices on a netback basis are calculated using prices derived and informally assessed from regional selling levels, less marketing, handling and freight costs.

No changes were reported this week to Middle East Gulf regional Group II prices, but they could also be impacted by shipping costs. Values are at $745/t-$900/t for 100 neutral, 150N and 220N and at $755/t-$910/t for 500N and 600N, all on an FCA basis ex U.A.E. hub storage.

Africa

Mediterranean and North African markets are busy with a number of cargoes arranged before the end of 2019 loading and discharging into ports in Israel, Egypt and Morocco. The second bright stock cargo for Alexandria is due to load this week ex Red Sea.

With the arrival of large cargoes of Group I base oils, West Africa is in receiving mode with no new developments on further parcels being arranged. One vessel has arrived carrying a Baltic cargo, but there is no confirmation of any U.S. Gulf Coast cargoes, although sources have said that there may have been a parcel loaded at year end that has not been confirmed as yet.

Supply of smaller cargoes into Guinea and Cote d’Ivoire is being considered at this time, possibly to load out of Italian Mediterranean ports. Additionally, the Ghana tender supply is due to be arranged from a Mediterranean source later this month, with the last parcel being delivered into Tema port as part of a cargo en route to South Africa.

Prices for Group I base oils are unchanged at $630/t-$645/t for SN150, $640/t-$655/t for SN500 and $720/t-$745/t for bright stock. Blended SN900 is indicated at $650/t-$675/t. These prices apply to cargoes of at least 10,000 tons being delivered into Apapa port, in Lagos, Nigeria, and selling on an FCR basis.

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.