European base oil prices are steady, with the exception of bright stock, which due to demand in areas such as West Africa has seen prices move up $10-$20/t. Light solvent neutral grades are still $1010-$1015/t, but there are some enquiries for light grades such as SN 100 and SN 150 from areas in Turkey and also from Middle East Gulf where these grades are reportedly tight. This may start to edge prices up with slightly higher levels particularly at the lower ends of the spreads. Mid vis and heavier vis SN 500 and SN 600 remain at $1010-$1030/t.

With buying interest from Middle East Gulf, West Africa and even receivers in the Far East, bright stock levels have moved upward to $1195-$1230/t.

These FOB prices refer to offers and completed sales for API Group I base oils made available ex mainland Europe and North African supply points, taking account of existing availability for offers and sales.

Domestic sales and offers within Europe remain flat, with a few blenders and buyers looking for offers for new material from next week. Expectations are that the market should appear slightly weaker than a month ago, since activity has been muted and sellers’ inventories in local storage appear to be high. However, with export markets showing an inkling of strength, these positives may be pushed on to local sales next week. At this stage price differentials are revised lower for local sales of Group I grades over export levels at 95-110/t.

Group II activity within Europe is also quiet, perhaps until next week. Prices from the U.S., in particular, have decreased $20-$70/t, with the higher vis grades given the larger discounts. Whether these source decreases will be passed on to some or all export markets remains to be seen, but if these reductions are passed on in full, Group II prices could start to fall below current Group I levels. Another anomaly of Group II pricing is that the heavier vis grades could become lower priced than the lighter vis base oils.

Prices reported for September selling are $1075-$1095/t for light vis products 60N through to 220N, with heavier vis grades at $1095-$1165/t, basis ex tank Antwerp-Rotterdam-Amsterdam-Germany.

Group III levels are being compared to a see-saw. One week, reports suggest that buyers are putting pressure on suppliers to decrease price levels. The next, one supplier suggests the opposite, with prices being pushed 10-15/t upward. One important point remains, however, with buyers quoting Group III grades in Far Eastern markets at levels which are equivalent to 100-120/t less than those being touted in Europe. Given freight economics and storage and handling costs, there is still somewhat of a differential being quoted by buyers in mainland Europe.

Without clarity until possibly Sept. 1, levels are the same, with both 4 cSt and 6 cSt at 965-980/t basis ex-tank or ex-rack Antwerp-Rotterdam-Amsterdam-Germany.

Baltic and Black Seas

Sales of Russian and Belarus base oils have been slow, with some traders describing offers as uncompetitive. However, one buyer appears to have managed to get around the high offers with reports that at least one large cargo bound for Nigeria has been fixed clean. Prices have not been disclosed for the private and confidential transaction, although other comparative levels would assess SN 150 and SN 500 at $972-$984/t, with SN 900 at around $1037/t. All prices are basis FOB, one or two Baltic ports.

There is interest in Russian barrels coming into Middle East Gulf, but freight economics from the Baltic for bulk supplies rule out this arbitrage at this time. However, there may be scope to load Uzbek barrels out of Black Sea if the requirements are confirmed from Middle East Gulf receivers. It has been estimated that a 3,000 ton parcel could be landed into United Arab Emirates at around $1045/t, which when pitted against Iranian barrels, could be competitive.

The Turkish enquiry for three grades appears to have been covered from Mediterranean suppliers, with delivered prices to Gebze at $1025-$1040/t. Potential buyers have confirmed that the large Group II parcel offered into Turkey is competitive on a CIF price, but import duties may render this parcel too expensive. Further enquiries are sought.

Turkish buyers are looking for large quantities of base oils, which may suggest that regular supplies from Iraq and Russia are being interrupted by the ISIL insurgency. No reliable reports can be gleaned, although some Turkish blenders claim to be selling large quantities of base oil and finished lubricants into Kurdistan and Iraq.

Middle East

Trading has picked up in the Middle East Gulf, with a few surprise enquiries for Group I products. There appears to be a short market for supplies of SN 100 and SN 150 with a number of receivers in U.A.E. looking for substantial quantities of these grades. Meanwhile, bright stock is in demand, with some buyers looking east for potential supplies, and others looking to Europe, the U.S and Brazil for alternative supplies.

Locally, Iranian barrels of SN 500 have been lifted in price with demand growing from U.A.E. traders and also exports into Iraq. With sanctions weakening against Iran, traders are confident that within one month they will be able to lift cargoes from southern Iranian ports as before. Prices for SN 500 have been reported at around $1025/t CIF equivalent in local currencies, with re-exports of this material at $1040/t FOB U.A.E. ports.

Demand has boosted local Group I prices, with mainstream quality supplies around $1050-$1065/t basis CIF Middle East Gulf ports. Bright stock offers into U.A.E. have been reported at $1265-$1298/t, although sources for these offers have not been disclosed.

Far East Group I cargoes are being considered by one receiver in U.A.E., who reports that the arbitrage could be open for supply of some 3,000-4,000 tons of bright stock. This grade also appears to be in demand in Far East, hence this material may be sourcing from Indonesia or Thailand.

Group II supplies into Middle East Gulf receivers have moved down $10-$15/t in respect of offers for September deliveries, but with many buyers countering, more material from U.S. is coming on stream with sellers attaching extremely attractive prices to parcels of both light vis and heavy vis grades. Since the Middle East Gulf emphasis tends to be on heavier grades, buyers have seen price decreases at source and are countering with levels that reflect U.S. producers downward adjustments. However, some receivers are applying these counters to already keenly priced offers from Far East suppliers, which is pulling down the perceived prices for Group II into this region to unworkable levels.

Some Far East suppliers are banding light and heavy vis grades together in offers, but U.S producers have not, and are instead maintaining premiums for higher vis products. Offers are $1055-$1080/t in respect of light and heavy grades, although one offer last week reflected levels $10/t lower.

Africa

With legislation abounding in East African countries to curb the importation of substandard base stocks, officials will have their work cut out. Imports of legitimate SN 500 ex U.A.E. traders are reported as being priced at $1180-$1200/t, basis CIF, delivered in flexies into main ports such as Mombasa, Beira, and Dar-es-Salaam.

These same imports are still arriving into South Africa through Durban at similar prices, although local blenders appear to be moving away from these imports to local supplies and in the case of two large blending operations, to Group II grades.

West African enquiries are all over the market from Europe, including Baltic, to the U.S., and to Brazil, with buyers looking for the best deals for heavy Group I material, either in the form of bright stock or various blends of heavy ends being described as SN 900.

Offered prices have not moved significantly, apart from bright stock, with Group I neutrals reflecting the higher Baltic levels, along with mainstream European avails. Delivered prices to Nigerian ports such as Apapa are $1030-$1065/t for light and mid vis solvent neutrals and straight-run SN 900 ex Baltic at $1110-$1135/t. Bright stock offers range from $1175/t to $1235/t, having moved up in response to increasing global demand for this grade.

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.