European FOB prices for API Group I base oils have remained constant. Light solvent neutral grades are maintained at $1010-$1015/t, along with heavier vis grades at $1010-$1030/t. Bright stock prices have moved little since last week, with levels between $1170/t and $1220/t.

These prices refer to offers and sales for Group I base oils available ex mainland Europe and North Africa.

Local sales within the European mainland, including the United Kingdom, have been muted, as many buyers are away from their desks. The domestic markets are only casting up routine deliveries of Group I, which has been pre-ordered or contracted at previously agreed upon prices. September may bring some new adjustments, particularly if crude and feedstock values continue to fall. Meanwhile, the spread between local prices for Group I grades and lower export levels is maintained at 110-130/t.

Sporadic reports appear to confirm that Group II and Group II+ sales within Europe continue to grow, but in this quiet period, it is difficult to assess exactly how strong this growth is, and how it’s affecting the Group I market. Imports continue to dominate the market, with no reports of any new investment to produce Group II grades from within Europe. Some buyers suggest that prices appear to be narrowing, particularly on Group I light solvent neutrals, with which they are able to compete on a price/quality balance. This may further encourage some producers to close or reduce production of light solvent neutrals, offering to supply third party Group II as a replacement.

Europe appears to be insulated from the Group II oversupply specter which is haunting both the U.S. and the Far East, with ever more production coming on stream, promoting the European arena as a burgeoning market for Group II base oils. Levels are maintained, with light vis products at $1095-$1140/t along with the heavy vis cuts between $1215/t and $1315/t. Prices are all basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III levels remain unchanged, month after month. Looking at European prices for Group III grades compared to other markets, levels for both 4 cSt and 6 cSt base stocks are much more attractive to sellers. Prices are around $100-$130/t higher than source markets in Far East, with a large percentage of the European market serviced by local production.

Prices are maintained almost as previously reported, although both 4 cSt and 6 cSt can be amalgamated between 965-980/t, on the basis of sales made ex-rack from various suppliers.

Baltic and Black Seas

Reportedly, there are many large parcels of Russian base oils being assembled for late August/early September loading. One supplier has given notice to a number of contracted buyers that some 10,000 tons of three grades will be available to be loaded out of two Baltic ports. This parcel appears to have been floated with the inclusion of around 2,800 tons of high quality SN 900, which is in demand by receivers in West Africa. The other grades are 5,000 tons of SN 500, with the balance being made up with SN 150.

SN 500 and SN 150 from alternative sources are being pitched around $975-$990/t, although private deals have been disclosed at $15-$20/t lower than quoted. This may be induced through payment terms, or the lifting of some of the less popular grades along with heavier cuts. SN 900 prices for the available quality are assessed at $1020-$1035/t, although there have been reports of higher levels being demanded by sellers looking to capitalize on this grades short avails.

Black Sea trade has been mixed in reports, with some Turkish buyers stating that they have been exceptionally busy procuring a number of Group I parcels from suppliers in the Mediterranean. There are also rumors of a large slug of a U.S Group II light vis grade being offered into Turkey at exceptionally competitive prices. Levels of $1025/t have been suggested on basis CIF Izmir port. This, or a similar parcel, appears to have been also offered to Middle East Gulf and Indian receivers.

Local trade from Uzbekistan and Russian supplies are slower, perhaps due to the problems in Ukraine, but also due to avails becoming competitive from Mediterranean producers. Prices for mainstream material landed into Gebze are $995-$1020/t for SN 150 and SN 500 grades.

A parcel of Russian SN 500 is available ex Theodosia, with interest being shown by traders looking to place this parcel into Middle East Gulf or the west coast of India. FOB ideas and high freight costs are not helping this movement, although there are rumors that a trade has been completed by one of the large traders in the market at around $970/t basis FOB, or reportedly, $20/t lower.

Middle East

Middle East Gulf business was expected to restart following the Eid holiday period, with Iranian sellers coming back with avails of all grades. However, many buyers in United Arab Emirates have vacated their posts until September and were not available for comment. A parcel of 5,000 tons of SN 500 has been posted for Malaysian receivers, loading out of U.A.E., and with a number of offers to Indian buyers, there are signs of activity creeping back into the Middle East Gulf, with prices around $1010-$1020/t basis FOB.

Buyers in U.A.E. are looking at various Group I grades from the U.S and Brazil, along with parcels of Group II which may ultimately be competitive against the Group I products. Offers for lower-quality Russian material are being heard, but it is not clear where this material is being sourced. Some importers in U.A.E. have suggested that this material may be loading in the Baltic, although freight economics and FOB levels do not support this at this time.

Group II imports, mainly from Far East, have been under scrutiny by Middle East Gulf receivers, with September cargoes being discounted some $10-$20/t across all viscosities. Buyers are also looking forward to receiving offers ex U.S. sources during the last quarter, with production from those sources coming back on stream. Buyers see these additional supplies as having a price-tempering effect on Far East-sourced material, which is said to be going longer by the month. Levels offered for September arrival from Far East sources have been heard at $1045-$1060/t for light and heavier vis grades, respectively, although $20-$25/t counters have been issued by receivers looking to play on the length of this market, also stating that they have little interest in the lighter vis grades but require the heavier material, which is even longer.

Africa

Tanzania is preparing legislation to curb the use of recycled base oils of dubious quality. These products are landed into main ports in containers at around $850-$880/t, some $300/t lower than the latest prices for exports from U.A.E. of SN 500.

South African markets are awash with uncorroborated rumors that the Safor refinery may halt Group I production. With one of its partners -Engen, Total or Chevron – setting up storage and a distribution network for Group II base oils in Durban, this may be transition time.

Further news of European Group I cargoes bound for Durban has been circulated, although one parcel is thought to be loading ex northwestern Europe – not Baltic. The assumption is that SN 500 will be the main grade, although bright stock may be included.

Nigerian buyers have been receiving offers for the large parcels that will be available ex Baltic ports at the beginning of September, with a number of these buyers looking to import heavier SN 900 of good quality. With limited supplies, there will be other parcels of blended material which will have to meet new controls, particularly for furfural extract blends.

Prices have dipped since the last round of offers into Nigeria, with many receivers only accepting fixed prices, refusing to gamble on index linking. Landed prices into Apapa are estimated to be $1030-$1055/t for the range of neutrals, with SN 900 coming in at $1095-$1120/t for straight-run quality material.

Bright stock will be delivered at $1165-$1215/t depending on source and specification.

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