Dated deliveries of Brent crude breached the $75 per barrel threshold and posted at $75.95/bbl yesterday, now for July front month. West Texas Intermediate also rose to post at $70.50/bbl, still for June settlement. ICE LS gas oil is firmer at around $665 per metric ton still for May front month. Prices derived are from late London trade on Monday 30th April.

The bullish sentiment is being fueled by the rhetoric between United States President Donald Trump and Iran regarding their nuclear deal, which was reached during the previous U.S. administration. Trump plans to announce May 12 if he will continue to honor the agreement.

Europe

European Group I export prices are climbing rapidly as suppliers are hiking spot prices at every opportunity. Light solvent neutrals have reached $865/t-$890/t, while heavier solvent neutrals are at $920/t-$955/t. Bright stock is back in serious demand for export destinations and is priced at $995/t-$1,080/t.

The above levels pertain to large cargo sized parcels of Group I base oils FOB ex mainland European supply points, always wherever and whenever available.

Local or domestic European Group I prices have seen large revisions for monthly fixed price and index-linked buyers. Increases of anything between 60/t-100/t have been heard, as suppliers consider both replacement inventory costs and raw material increases that have been taking place during April and May.

The differential between export and local sales prices is difficult to discern due to the rate at which export numbers are moving upwards, but an assessment for the differential is pitched between 40/t-75/t, export prices being lower.

Almost all of the main Group II importers in Europe have announced source price hikes that are now starting to filter down to Europe. Whether from the U.S. of the Far East, cargoes are hitting European markets at values $100/t higher than cargoes several weeks earlier.

Local FCA sales are therefore assessed higher at $975/t-$995/t (810/t-830) for light-viscosity grades and $1,055/t-$1,080/t (880/t-905) for heavies. Sellers accounting in U.S. dollars but selling in euros have benefitted from recent exchange rate movements.

Group III prices in Europe are steadily rising, which is only to be expected since these grades have been discounted due to supply surpluses that squeezed margins, in some cases to levels unacceptable to suppliers. Sources say some refiners have now advised they would prefer to reduce output rather than sell at such low returns.

Imported prices this week are up to $980/t-$1,000/t CIF for 4 centiStoke and 6 cSt grades discharging into Antwerp-Rotterdam-Amsterdam and Northwestern Europe. FCA sales in euros however are unchanged at around 885/t-900/t for 4 and 6 cSt oils with partial slates of finished lubricant approvals. Group III oils with full slates of ACEA and European OEM approvals are at 945/t-965/t for 4 and 6 cSt and 885/t-900/t for 8 cSt, basis FCA Antwerp-Rotterdam-Amsterdam.

The latter prices are for FCA or truck-delivered smaller lots of Group III and do not reflect material delivered in bulk cargoes to large users such as major blenders or additive manufacturers.

Baltic and Black Seas

Baltic traders confirmed that there is fresh interest from West Africa for large cargoes to be loaded during May and June. This interest has revived despite steep markups from the Baltic, reportedly because alternative sources such as the U.S. Gulf Coast have become too expensive for the Nigerian market.

Cargoes are also reported moving out of the Baltic to Antwerp-Rotterdam-Amsterdam and the east coast of the United Kingdom, although new landed CIF prices have not yet been confirmed for material loaded after May 1.

FOB levels for the main Russian export grades rose to $820/t-$845/t for SN150 and $885/t-$910/t for SN500. SN900 in bulk is unchanged at an estimated $930/t-$955/t, while bright stock is $900/t-$1045/t, depending on source and loadport.

Black Sea markets including Turkey have been quiet this past week with fewer new cargoes being announced for the region. There are a number of inquiries for May supplies to arrive into Turkish receivers later in the month, but sources report that many Turkish blenders have once again turned to domestic supplies due to exchange rate fluctuations.

Sources suggested that two more large Russian cargoes will be loading STS out of Kavkaz, Russia, during the second half of the month. It is not clear whether these parcels and their availability is due to replenishment capabilities or whether pricing negotiations may have become a little more difficult in light of destination prices not moving quickly. The arbitrage may be closed for material to go into Middle East Gulf or the West Coast of India at this time, and the same may also apply to Far East destinations where prices have not risen with the same pace. With last quoted prices rumored to be around $795/t-$820/t STS Kavkaz, Russia, for SN500, numbers will have to be moved upwards for sellers to accept bids. Levels around $820/t-$850/t have been heard suggested by sellers.

Prices for future Group I Mediterranean supplies are maintained at last week’s levels at around $895/t-$930/t for the light neutrals and $945/t-$970/t for SN500 and SN600, basis CIF. Fully approved Group III base stocks ex Mediterranean are assessed being offered into Gebze, Turkey, at around $985/t-$1,020/t, CIF or an equivalent euro CIF price.

Middle East Gulf

Red Sea reports large parcels being assembled for loading out of the Saudi Arabian ports of Yanbu and Jeddah for destinations in Middle East Gulf and also Far East There also appears to be a smaller enquiry for Aqaba. The previous Aqaba requirement for Group I grades was supplied ex Italian Mediterranean, but this smaller enquiry may be for Group II material.

In the Middle East Gulf regions Iranian Group I cargoes have re-appeared with a number of parcels out of the southern Iranian ports being fixed for United Arab Emirates, and the west coast of India. The threat of sanctions from May 12, or soon after, may have brought things forward and heightened export activity, although reports from Iranian sources are that there does not appear to be any undue concern regarding the possibility of having export trade curbed again.

Other receivers in Hamriyah and sister companies in Mumbai have acknowledged that there could be a shortage of Group I material should sanctions from the West appear, but also highlighted that there were also a number of alternative sources for Group I grades such as Saudi Arabia, the U.S. and also Far East.

The Group III train rumbles on with exports from Middle East Gulf figuring in almost all global markets. Material continues to emanate from Al Ruwais and Sitra into various markets. An estimated 100,000 tons+ per month may now be flowing out of Middle East Gulf from the three combined producing sources.

Notional FOB prices are moved upwards this week in response to calls from producers for marketers to look for higher returns on the products being sold. This push will no doubt be relayed to distributors in various regions, and the markets may see a mild resurgence of Group III prices bring these levels back up to what once could be described as acceptable netback and hence contribution levels.

Feedstock costs remain in the ascendancy, and although each producers has direct and exclusive access to refinery production, ultimately crude costs are rising and must be accounted for.

Levels are currently assessed at around $855/t-$880/t basis FOB for 4 and 6 cSt grades of partly approved Group III ex Adnoc in Al Ruwais and Bapco in Sitra. ‘Nexbase’ branded base oils, sold under the Neste banner also from Sitra refinery may carry a higher value, which is estimated at around $890/t-$920/t FOB. FOB levels are established on a netback basis using published shipping freight rates, and taking into account advised CIF prices from a variety of sources.

Group II exports from Yanbu are prominent in offers for India and also for some Middle East Gulf receivers. Sources in U.A.E. have corrected a statement in the report which suggested that there could be competition between Group II and Group III supplies with these oils sometimes being used as feedstocks for the same final purpose.

Group II grades are reputedly being primarily aimed at the automotive blending operators, some of whom require approved base oils for formulations which are given out by major branded lubricants. The losing parties out of this new supply scene appear to be the sellers operating from Far Eastern sources, some of whom have said that they are not in the Group II trade to compete against offers from ‘local’ producers based in Saudi Arabia.

Established supplies of Group II base oils from within Middle East Gulf, originally sourced mainly out of out of U.S., are still being supplied ex U.A.E. on an FCA, truck or sometimes tote delivered basis, and are assessed with prices which are revised for the light grades levels at around $945/t-$985/t in respect of 100N/150N/ 220N, with 500N/600N between $1080/t-$1120/t. These prices are based on imported material being resold ex rack, by truck or by tote or flexitank.

Africa

After a quiet spell with few new cargoes being announced, North African trades from European Mediterranean sources appear to have come alive, with a number of parcels being offered in to Morocco, Algeria and Egypt from Iberian and Italian sources. These are all Group I cargoes with the original supplies for many of the receivers in North Africa, with the exception of the Egyptian supply, coming from the Moroccan refinery at Mohammedia, Casablanca, which is now no longer producing petroleum products.

It would appear from records that supplies of large Group I cargoes going into Nigeria, is being alternated between a cargo from the Baltic followed by a U.S. Gulf Coast parcel, then reverting back to another from the Baltic regions. This week another large U.S. Gulf Coast cargo of some 12,000 tons of Group I grades has completed loading for discharge into Apapa before the end of May. Further enquiries have been issued for supplies from both sources and even against a rising price market imports into Nigeria continue as a necessity.

Receivers in Nigeria are concerned as to the rate of price rises and the ability of local markets to absorb these cost increases fast enough to be able to cope with replacement stocks arriving into tank. With limitations on tankage in many installations it can become critical to move ullage to accommodate incoming inventory, since having discharge delayed can lead to expensive demurrage with the performing vessel having to wait days, and sometimes longer before the cargo can be discharged into shore tanks.

Prices for Group I base oils landing into Nigeria during May are deemed to be higher than previous for obvious reasons. Levels now being indicated by receivers are $923/t in respect of light neutrals which may be either SN150/180, with SN500/600/700 being suggested, but unconfirmed at between $985/t-$999/t. A quantity of SN900 on offer for May loading ex Baltic is at $948/t, lower than established last week. Bright stock from various sources, in USG, and also mainland Europe is being offered in a large range between $995/t-$1100/t. These prices refer to large parcels of Group I base oils delivered into Apapa port, 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.