Europe

Offers in Europe for spot Group I exports are unchanged this week, after trending upward during the second half of September. Prices seem stable, and availability has not tightened as some buyers feared it would. Availabilities for large quantities of light solvent neutrals are still questionable, but most producers of these grades have material for prompt offers.

Offers for light solvent neutrals are maintained at $680/t-$695/t, while SN500 and SN600 remain at $785/t-$800/t. Demand for bright stock is still strong, not just for deep-sea locations but also, for example, for sea-borne cargoes to Scandinavia and the United Kingdom. Offers for bright stock climbed slightly to $905/t-$925/t. These prices refer to large cargo-sized parcels of Group I base oils supplied or offered FOB ex-mainland European supply points.

Prices for Group I sales within Europe firmed notionally from Oct. 1 – notionally because some buyers received notices of markups for oil to be lifted during October but then were advised these increases may not be applied unless raw material costs and export prices rise further. This suggests that the premium being applied to local prices is for now sufficient and that suppliers are concerned about maintaining offtake levels.

Demand remains weak in some local markets, with some blenders suggesting they may not need large quantities again until November or December. This is surprising given that Europes main economies are growing strongly. Purchases could have slipped because of a seasonal lull in finished lubricants.

The differential between domestic FCA prices and export values is maintained at 35/t-55/t.

Group II markets around the globe appear to be tightening due to the shutdown – thanks to Hurricane Harvey – of one U.S. plant that is a large source of exports to Europe and Central and South America. With a couple suppliers still invoking force majeure for regular supplies to contracted customers, Group II base oils are much in demand.

A couple U.S. Group II producers announced price hikes the past week. These apply mostly to U.S. markets but may ultimately be passed on to European imports. Tendency for such a move could be offset if Group I values stabilize since some buyers are still able to shift between Group I and II.

For now Group II values in Europe are maintained at $660/t-$685/t for light neutrals and $775/t-$815/t for 500N and 600N, landed CIF in bulk cargoes into Antwerp-Rotterdam-Amsterdam. Resultant FCA prices will be around 755/t-790/t for light-viscosity oils and 855/t-890/t for heavier grades.

Europe is becoming a tougher market for Group III suppliers, who could not have foreseen the speed at which the region would embrace Group II technology. Historically this market used blends of Group I and III base stocks to meet low-temperature performance needs in engine oils for passenger cars and heavy-duty trucks. Many expected this approach to continue holding sway, but the transition from 15W- and 10W-40 to 5W motor oils coincided with a faster-than-expected shift to Group II. New production in the U.S. and Europe will only increase pressure on the use of Group III, though the long-term outlook for Group III remains rosy.

Group II prices are largely unchanged this week although a slight increase in demand for 6 centiStoke oils allowed some suppliers to impose markups for that viscosity grade. Four cSt grades are $785/t-$810/t and 6 cSt some $10/t higher. Local sales in euros are around 685/t-705/t for both grades, on an FCA basis in Northwestern Europe. Group III with full slates of finished lubricant approvals, offered on an FCA basis in Antwerp-Rotterdam-Amsterdam are again assessed between 780/t-815/t for 4 cSt and 6 cSt at 785/t-820/t and 8 cSt at 755/t-775/t. Large receivers can enjoy discounts of $75/t-$100/t on large bulk purchases.

Baltic and Black Seas

Trading around the Baltic was slow the past week, with only a couple smaller cargoes moving from southern Baltic sources to the U.K. and Antwerp-Rotterdam-Amsterdam. No large West Africa cargoes have been announced in recent days, although it is understood that there are still some discussions surrounding parcels that have been under negotiation for more than three months.

Offered prices for Russian export barrels from the Baltic remain unchanged this week, due mainly to few inquiries. Sellers are replacing inventory for shore tanks in Riga, Liepaja and Ventsplis, Latvia, along with Svetly, Russia, perhaps looking forward to a number of large inquiries that have been tabled by traders and Nigerian receivers for second half October lifting. Prices for these cargoes have not been released yet and are expected to slightly higher than previously seen.

Baltic prices are unchanged at $685/t-$698/t for SN150, $760/t-$790/t for SN500, $865/t-$880/t for SN900 offered to West Africa and $895/t-$945/t for bright stock.

A rather oddball Black Sea inquiry came out of the shipping market this week, where traders are looking to load around 8,000 tons of base oils out of a northern Baltic port, not normally associated with base oil shipments, for delivery into Marmara, Turkey. This rather ‘reversed’ trade is being followed with interest.

Due to limitations on avails of base oils coming out of a southern Russian refinery, quantities of Group I grades going into Turkey have decreased. One shipment on a river vessel is entering the Black Sea at Azov and making its way to Yarimca with around 2,000 to 3,000 tons of SN500. Prices for this grade are expected to be around $720/t-$740/t on a CIF basis, echoing the low numbers attached to STS material out of Kavkaz, Russia.

Another river parcel is moving out of the Volga for receivers in Varna.

Along with a number of Mediterranean cargoes into Turkish receivers, one Greek-sourced cargo has been fixed for 3,000 tons of Group I SN600 and SN150 to go into Gebze, Turkey. Prices are assessed at $740/t-$765/t for SN150 and $830/t-$855/t for SN600, CIF. Bulk quantities of 4 cSt and 6 cSt Group III from Spain are reported by local sources at $785/t and $810/t respectively, delivered CIF Gebze.

Middle East Gulf

Red Sea reports indicate that another inquiry has been floated for receivers in Aqaba, Jordan, for some 2,000 tons of Group I base oils. Traders in the United Arab Emirates are keen to offer this quantity of Iranian premium SN500 to cover the requirement. The inquiry is also being attended by local Red Sea suppliers. Other shipping news informs of the usual contract deliveries of material being organized out of Yanbual Bahr or Jeddah, Saudi Arabia, for receivers in Oman and U.A.E.

Other than the contract deliveries of Group I grades ex-Saudi Arabia, imports of Group I are few, with Iranian base oils coming back to the market after the successful completion of the turnaround at Sepahan Oil. Although this refinery was out of action for five weeks, some exports have still been possible from buffer stocks held in tank to cover regular receivers in Pakistan and the West Coast of India.

Prices for premium SN500 are pushed higher this week to around $730/t, basis FOB Bandar-e Emam Khomeyni, a level verified by calculating netback prices for the same material offered and delivered into Mumbai anchorage.

Three or four cargoes of Group III, totaling 40,000 to 50,000 tons, are reported loading out of Al Ruwais, U.A.E. The largest, around 20,000 to 30,000 tons, will be delivered to the U.S. Gulf Coast in mid-November for resale by U.S. distributors. Another 10,000 tons will move into Northwestern Europe, and the balance will proceed to Mumbai anchorage for a number of Indian receivers.

FOB Group III prices are unchanged this week based on netback calculations using CIF/CFR prices reported by receivers on Indias West Coast. Four and 6 cSt oils loading from Al Ruwais are assessed at $665/t-$685/t. Oils from Sitra, Bahrain, which carry more approvals, are priced at $745/t for 4 cSt and 6 cSt and $715/t-$725/t for 8 cSt. These delivered CIF prices apply to large cargoes sold to major buyers and appointed distributors.

The Middle East Gulf is awaiting the streaming of a Group II upgrade and expansion at Luberefs plant in Yanbual Bahr. The project seems to be on schedule and due to begin producing during the fourth quarter, and U.A.E. sources have apparently already placed inquiries for material.

Group II imported from other regions is available from U.A.E. storage on an FCA or truck delivered basis. Values edged up this week to $785/t-$845/t for light-viscosity grades and $885/t-$945/t for 500 and 600 neutrals, CIF Middle East Gulf locations.

Africa

Mediterranean and North African sources report renewed activity for cargoes sourcing out of Portugal, Spain and U.K., for destination ports in Morocco, Algeria, and Egypt respectively.

West Africa markets report little new activity this week other than news that a large cargo fixed around late August has now been cleared to load out of a U.S. Gulf Coast supplier following a delay caused by hurricane damage. This is the 15,000 ton cargo mentioned here previously, and sources within Nigeria confirmed prices reflected in the original contract have been maintained. Thus this cargo will land into Apapa on very favourable terms.

There are no new inquiries for Baltic parcels this week, although sources did say they were waiting to see where prices were heading since some receivers are under the impression that markdowns loom.

Prices delivered into Nigeria remain unchanged this week, although it should be noted that the parcel from U.S. Gulf Coast may be priced at around $30/t-$50/t below the numbers published here this week, due to the time delay in loading. CIF/CFR prices for Group I base stocks are $780/t-$795/t for significant quantities of SN150, with SN500/600 landing $865/t-$878pmt. SN900 ex-Baltic ports is assessed at $948/t-$963/t, with bright stock at $1,015/t-$1,055/t.

All prices for Nigeria are in respect of Group I base oils delivered CIF/CFR Apapa, Lagos or Port Harcourt.

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