Buyers have admitted expecting markups on the back of the crude run-up, but they may have received a reprieve as crude prices retreated despite OPEC members trying to talk the markets higher in advance a forthcoming summit.

Dated deliveries of Brent crude posted at $62.25 per barrel in late trading in London yesterday for front month January settlement – around $1.50/bbl lower than a week ago. West Texas Intermediate also fell to $55.75/bbl, still for December, whilst ICE LS Gas OIl has dipped to $558 per metric ton, down some $10/t.

Crude markets reacted after the International Energy Agency cut its forecast for global demand. That same report predicted the United States will become the global leader on oil and gas production by 2025, thanks to shale producers.

The effects on base oils remain to be seen, since some grades had not been adjusted to the latest crude run-up. There are also other factors, as some buyers say the market is too flush to support markups and that availabilities are likely to increase as refiners draw down on inventories before the end of the year.

Europe

Prices for light solvent neutral grades in Europe rose around $5/t-$10/t this week and are now assessed between $705/t and $730/t, while SN500 and SN600 remaining at $765/t-$790/t. There are many large inquiries for bright stock, but none of these appear to be evolving into firm deals. Bright stock offers are firmer, but these are being countered by buyers, and an estimate is that values will pan out at $845/t-$870/t.

The prices above refer to large cargo-sized parcels of Group I base oils supplied or offered on an FOB basis ex-mainland European supply points.

Prices for Group I sales within Europe appear stable, values agreed to for November still being applied to ex-rack and truck or barge deliveries. Buyers are awaiting the start of December before asking sellers about possibilities for spot Group I purchases that might be arranged to be in transit at year end. The weakening of crude costs meant resellers were less compelled to hike prices since they did not have to worry about costs of replenishing.

Intra-Europe prices are maintained, so the differential between regional FCA prices and spot exports remained at 55/t-75/t.

Group II base stock prices are best described as stable to firm, with a subtle emphasis on the latter. This means that prices are not being hiked whether because of supply disruptions from Hurricane Harvey in the U.S. or by healthy demand, but there remains a firmer flavor in the pricing for these grades, with any additional offtake volumes often incurring a premium.

Sellers seem to be protecting market share, perhaps trying to maintain sales volumes in anticipation of ExxonMobils opening of a Group II plant at Rotterdam, scheduled for the end of 2018. Prices are unchanged this week, with light neutrals at $670/t-$695/t and 500N and 600N at $770/t-$810/t. These prices are for large bulk cargoes landed CIF into Antwerp-Rotterdam-Amsterdam. The resultant FCA and locally delivered prices are 765/t-795/t for light grades and 845/t-880/t for heavies.

Group III prices within Europe were steady though Middle East Gulf producers were said to be seeking better netbacks. Prices for volumes landed into Northwestern Europe remain $775/t-$810/t, basis CIF for 4 centiStoke and 6 cSt grades. Local sales in euros show prices at 685/t-705/t FCA northwestern Europe, while grades with full slates of finished lubricant approvals are 780/t-815/t for 4 and 6 cSt material and 755/t-775/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

These prices refer to ex-rack sales or truck delivered quantities as opposed to large bulk cargoes delivered to majors and distributors, which would be discounted $65/t-$90/t.

Baltic and Black Seas

Baltic trading remains subdued this week, with few cargoes reported being loaded either for deep-sea exports or for short-sea trade deals into Antwerp-Rotterdam-Amsterdam, Scandinavia and the United Kingdom. There are a number of inquiries for cargoes of various sizes and grade composition, but most of these are aimed at loading during December, perhaps with a mind for lower year-end prices. Sellers and distributors in the Baltic have stated that they will not be drawn into discounts.

FOB levels remain at $690/t-$725/t for SN150, $735/t-$755/t for SN500 and $780/t-$795/t for SN900, while bright stock is being offered at $895/t-$925/t. Upward pricing pressure may have diminished but not completely disappeared.

Markets around the Black Sea appear unaffected by weather so far, with river traffic still carrying Russian exports into Azov. Shipping sources reported a new time-charter inquiry for a vessel to act as floating storage at Kavkaz, Russia, for a few months, indicating that the large cargoes moving out of that operation to Rotterdam, the Middle East Gulf and India are set to continue. Cargoes of 3,000 to 4,000 tons of Uzbek exports are also in evidence this week with possibilities to move into receivers in Derince and Gebze, Turkey. Russian SN500 is priced at $790/t-$795/t, delivered CIF into Gebze.

Mediterranean cargoes from Greece and a loading out of the U.K. are also primed with material bound for Turkey. Greek material is assessed at $755/t-$765/t for SN150 and $795/t-$815/t for SN500, basis CIF. Group III oils are reported at $795/t-$820/t for 4 and 6 cSt delivered CIF Gebze, but local sources said prices have started to climb.

Red Sea traffic reports only one significant cargo moving through the Suez Canal to Alexandria, Egypt, from Yanbual Bahr, Saudi Arabia, perhaps containing bright stock to cover the EGPC tender.

Middle East Gulf

In years past, Middle East Gulf trade featured frequent cargoes of Group I base oils being shipped from Europe and the U.S. to lube blenders in the United Arab Emirates. These large cargoes of Group III are traveling from Bahrain, Qatar and the U.A.E. to points East and West around the globe.

In addition, large slugs of Group I base oils from Iranian producers are once again moving into traditional receivers in Pakistan and on the west coast of India. This trade resumed after sanctions against Iran were lifted against Iranian exports. Premium Iranian SN500 is reported slightly higher this week at $775/t-$785/t, basis FOB Bandar Abbas.

A Black Sea cargo will be reaching the U.A.E. in another week, discharging 7,000 tons of Russian exports. Local sources suggested these prices will land at around $865/t and $765/t respectively for light and heavy grades, exceptionally keen prices.

Movements of Group III are reported from Sitra, Bahrain, and Al Ruwais, U.A.E., with around 30,000 tons per month from the latter discharging into India. As mentioned in this column two weeks ago, Neste and Bapco reached a new arrangement for the marketing of Group III from Sitra. (See article in this issue.)

Group III producers are rumored to have started raising prices for deliveries into the U.S., Europe, India, the Far East and the U.A.E. Notional pricing for these products is therefore boosted by $30/t-$50/t so that FOB levels net back to $710/t-$640/t for 4 and 6 cSt grades loading out of Al Ruwais. Sitra exports marketed by Neste carry a premium above those levels.

Offers for Group II grades from Far East sources abound in the Middle East Gulf at the moment, perhaps because suppliers are trying to beat the new production that will soon be available from Yanbu. Light grades are offered at $660/t-$675/t and 500N and 600N at $840/t-$865/t, CIF Middle East Gulf.

Group II imports from the Far East and the U.S. are available on an FCA or delivered basis. Prices are assessed at $810/t-$875/t for 100N, 150N and 220N, with 500N and 600N at $865/t-$935/t, delivered throughout Middle East Gulf locations. Prices vary depending on distance from primary storage, quantities shipped, and whether delivered by tote or truck.

Africa

Moroccan receivers appear to have elected to take perhaps their last cargo for this year from Eni at Livorno, Italy – some 3,000 tons of three Group I grades loaded earlier this month. Other North African trade is quiet other than the bright stock cargo moving into Egypt.

The biggest news in West Africa is that a 30,000 ton cargo of Group III from Al Ruwais is due to arrive imminently and that receivers are standing by to handle this rather larger than normal shipment. It is not clear yet which tank farm will be accommodating this quantity or whether the cargo is being split between various locations.

Otherwise Nigeria remains quiet as a number of buyers said they plan to open negotiations for cargoes in December with Baltic, Mediterranean and U.S. suppliers. It appears there may be marginal increases from some suppliers for December cargoes, but no firm announcements have been seen or heard in current offers.

An unusual West Africa base oil cargo has been reported loading out of Leixoes, Portugal, for Luanda, Angola, consisting of up to 6,000 tons of Group I grades. The Portuguese tie between the two countries and operating companies may explain this move.

Price hikes have been announced by one Baltic supplier for a cargo into Apapa, Nigeria, with a new offer reflecting values of $910/t-$920/t for SN150, $935/t-$955/t for SN500, and $995/t-$1,025/t for SN900, basis CIF/CFR in Nigeria. Bright stock offers are up to $1,070/t. These prices are for Group I delivered CIF/CFR Apapa, Lagos.

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