Base oils prices almost always track crude oil movements but usually after a lag period that causes base oil pricing curves to be much less pronounced and have fewer peaks and troughs.

Crude prices are certainly spiking now. Dated deliveries of Brent crude climbed to $64.62 per barrel in early Tuesday trading but had retreated later in the day to around $63,75/bbl, in January front month settlement, still up $3.75 from last week. West Texas Intermediate crude rose to $57.00/bbl for December front month, up by around $3. ICE LS Gas Oil, a gauge of refined product prices, has only moved by some $15 per metric ton to around $565/t, still for November front month settlement.

Information gathered this week suggests that base oil prices will face significant upward pressure if crude and feedstock levels remain at today’s levels or move higher. At the writing of this column, few if any offers or deals have shown numbers to have moved.

Europe

Prices in Europe for API Group I light solvent neutral grades are unchanged at $695/t-$725/t, and SN500 and SN600 remain at $765/t-$790/t. Bright stock remains at last week’s levels of $835/t-$865/t, and this grade is still showing sluggish demand for large parcels moving out of Europe. These prices to large cargo-sized parcels of Group I base oils supplied or offered on an FOB basis ex mainland European supply points.

A similar picture is evolving for Group I sales within Europe. There have been no reports of knee-jerk markups, and levels negotiated for November month appear to be holding, bearing in mind that sellers are still disposing of stocks which would have been purchased ex-refinery some time back. The time lag on local selling prices is perhaps more pronounced than those for export sales, which tend to be one-off spot sales.

With plenty of availability within Europe, buyers are relaxed and expect no sharp movements through the end of the year. At the same time, they realize base stock prices could rise if crude and feedstocks climb higher. For now prices on sales within the region are unchanged and the differential for domestic FCA prices over spot export values is maintained at 55/t-75/t.

Group II prices, particularly lighter fractions, face decided upward pressure due to demand rather than crude costs. Lighter-viscosity grades are up 5/t-15/t to $670/t-$695/t, while 500N and 600N are still $770/t-$810/t. These prices are for large bulk cargoes landed CIF into Antwerp-Rotterdam-Amsterdam. FCA or ex-tank prices are revised to around 765/t-795/t for light grades, with heavier oils remaining at 845/t-880/t.

Group III prices within Europe are mainly stable, with 4 centiStoke and 6 cSt grades being landed into northwestern Europe maintained at $775/t-$810/t, on a CIF basis. Sales completed locally in euros to hub storage seem stable while quantities delivered to buyers further afield show higher numbers, perhaps merely reflecting delivery costs differentials. Sources reported prices of 685/t-705/t, basis FCA northwestern Europe. Oils with full slates of finished product approvals are reported at 780/t-815/t for 4 and 6 cSt material and 755/t-775/t for 8 cSt.

These prices refer to ex-rack sales or truck delivered quantities of Group III base stocks not to be confused with deliveries to majors and distributors in large bulk cargoes, which carry discounts of $65/t-$90/t.

Baltic and Black Seas

Baltic trade appears quiet this week with traders and distributors selling Russian export barrels not quite sure as to where they will stand regarding replenishment prices for cargoes selling in December. Uncertainty over the crude run-up is weighing heavily on longer term commitments to sell forward. Validities on offers have been trimmed to around seven to ten days maximum, with some requiring acceptance within 48 hours.

Only one movement from Baltic to Antwerp-Rotterdam-Amsterdam is reported this week, around 5,000 tons heading into storage for re-distribution through FCA and locally delivered sales. There are still a couple of Nigerian Inquiries for which offers have been made, although in one case the initial offer for this supply was made in June, lending a less than credible timetable regarding this supply.

Baltic prices have been established at $690/t-$725/t for SN150, $735/t-$755/t for SN500, $780/t-$795/t for SN900 and $895/t-$925/t for bright stock. It must be added that these prices were offered on a CIF West Africa delivered basis prior to the weekend’s events and are now out of validity. Re-offered levels will be considerably higher.

Black Sea trading appears to be booming one week and sparse the next. There were no reports of new cargoes being assembled on a ship-to-ship basis in Kavkaz, Russia, although the last parcel to load has only just recently been completed. Smaller cargoes of 3,000 to 4,000 tons primarily made up of Russian export SN500 ex Azov for the Turkish market are reported at around $790/t-$795/t, delivered CIF into ports such as Gebze and Aliaga. These prices were reported last week and may now be subject to revision.

Greek contract cargoes continue into Derince, Turkey, in addition to a bridging parcel of around 3,000 tons moving down from Aliaga to Derince. Last week sources reported SN150 priced at $745/t-$760/t and SN600 at around $795/t-$825/t, basis CIF. These levels may or may not represent future pricing into this region.

Cargoes of Group III base oils ex Spanish Mediterranean are reported at $785/t-$800/t delivered CIF Gebze for 4 and 6 cSt grades, and with these numbers relatively stable, the offtake and opportunity for expansion of Group III into Turkey and environs becomes greater.

Middle East Gulf

According to reports of a couple of weeks ago, Red Sea suppliers had covered an inquiry from Jordan for Group I grades to be delivered into Aqaba. At that time, traders insisted that this business was still open, and this week came confirmation of their bid to supply into Aqaba by fixing a vessel and sourcing from a Greek producer.

Group I activity in Middle East Gulf regions includes exports from Iranian suppliers and imports from the Red Sea and Mediterranean sources. Iranian premium SN500 is reported loading locally for Sharjah, United Arab Emirates, and for two or three ports along the west coast of India where a regular supply of this material has been re-established. Prices for premium SN500 from Sepahan Oil are $765/t-$775/t FOB.

A 7,000 ton cargo from the Black Sea is due into United Arab Emirates later this month. Pricing information is difficult to obtain, but SN900 and SN500 from the shipment are estimated to be around $875/t and $790/t, respectively.

Export volumes of Group III are reportedly very high, shipments from Qatar to China at an all-time high. Other movements are reported from Sitra, Bahrain, and Al Ruwais, U.A.E., the latter predominantly going into Sharjah, U.A.E., and Mumbai anchorage.

Notional pricing for Group III movements is currently maintained with no reports of intentions to raise prices even after hikes for feedstocks. FOB levels netback to around $675/t-$695/t for 4 and 6 cSt grades loading out of Al Ruwais. Sitra exports marketed by Neste will achieve higher prices since they hold more approvals, but it must be pointed out that realizations may be in line with those at Al Ruwais since operational and feed costs are similar. The price above refers to material delivered on a CIF basis in large cargoes to major buyers or appointed distributors in various locations worldwide, and does not refer to local sales performed by truck or ex-rack.

Far East offers for Group II grades, often in combination with material going into the west coast of India, are higher this week at $660/t-$675/t for light-viscosity grades and 500N and 600N increasing $5/t-$10/t to $840/t-$865/t, CIF Middle East Gulf.

It is understood that the new Saudi Arabian production of group II grades will be available during December or January, and operations to deliver this material to elected receivers both in local and deep-sea locations are already underway.

Group II imported from Far East and the United States is available from U.A.E. storage on an FCA or delivered basis. Prices rose this week and are now assessed at $810/t-$875/t for 100N, 150N and 220N, with 500N and 600N also slightly higher at $865/t-$935/t, delivered throughout Middle East Gulf locations. Prices will vary on distances from primary storage, quantities being shipped, method of delivery.

Africa

There are a reports of another large cargo of Group I grades loading out of Norteastern Europe and the Mediterranean to deliver some 10,000 tons of material into Mombasa, Kenya. This cargo follows a similar movement around two months ago perhaps suggesting that the new governmental rules and regulations on rogue base oil imports and hence fraudulent finished lubricants is having the desired effect. Material from the same sources is finding its way into Durban, South Africa.

Receivers in Morocco have not completed purchasing arrangements yet, pushing back supplies of Group I from Spanish or Italian sources into December.

Nigeria remains quiet, with only one 10,000 ton cargo reported loading out of the U.S. Gulf Coast, although the dates for this cargo suggest that it may be a parcel that was delayed by Hurricane Harvey and might still await loading. A number of buyers are still discussing requirements of 4,000 to 6,000 tons with Baltic sources. The decision by a few large Nigerian importers to defer purchases until December may have been a mistake since it now appears that future supplies may carry a hefty premium over previous levels.

Sellers now confirm price hikes for cargoes into Nigeria, and this, combined with information that previous estimates estimates of increaases may have been understated, leads your columnist to raise assessments of Russian export grades by $30/t-$50/t.

Offers from last week have been withdrawn and re-offers will have to be put into place from sellers. Baltic sources now expect to have to increase offers to reflect levels delivered into Nigeria at CIF/CFR levels of $895/t-$910/t for SN150, $925/t-$940/t for SN500 and $1,055/t-$1,075/t for bright stock. SN900 may not be so affected and may still be offered at $995/t-$1,025/t.

Prices reported are for API Group I base oils delivered CIF/CFR to Apapa, Lagos or Port Harcourt, Nigeria.

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