Refiners have said that the output of the damaged facilities is not great enough for the attack to have impacted global crude supplies.

There are mounting concerns that base oil margins could get squeezed enough for producers to further shift feedstock toward output of alternative products.

For the moment, API Group I availabilities are covering both domestic and export demand adequately enough for prices to remain intact.

Group II values remain stable. The supply-demand situation appears to have settled down after the opening of ExxonMobils large plant in Rotterdam during the first quarter.

Group III prices may be starting to come under pressure from a developing oversupply scenario hitting European markets from new Far East sources.

Crude and feedstock prices have eased a little. Dated deliveries of Brent crude fell to $64.20 per barrel for November front month settlement, around $1 lower than last week. West Texas Intermediate crude is quoted at $57.95 per barrel, now also for November front month. ICE LS gas oil dipped from last week’s peak to $613.25 per metric ton for October front month.

These prices were obtained from London ICE trading late Sept. 23.

Europe

European Group I export prices are unchanged again this week, ignoring the pressure weaker crude and feedstock prices. As base oil margins tighten, some refiners may shift production away from base oils to distillates, where margins are higher. Turnarounds for a couple of major refineries in the Mediterranean may also curb excess availabilities.

Prices remain unchanged, with solvent neutral 150 between $575 per ton and $598/t, and SN500 at $580/t-$605/t. Bright stock is widely available from producers – perhaps enough to cause downward pricing pressure. Counters from buyers are coming in around $5/t-$10/t lower than sellers’ offered numbers with final levels at $660/t-$685/t, basis FOB.

These prices refer to large cargo-sized parcels of Group I sold on an FOB basis ex mainland European supply points, always subject to availability.

Domestic and local European markets for Group I supplies are still relatively appealing to sellers since prices continue to show a healthy premium over export sales. There are also more continuous opportunities to maintain sales into this part of the market, with many of the export arbitrages closed or limited. With the seasonal lull in finished lubricants, activity in this market sector may start to diminish over the next couple of months.

Prices are maintained with the differential between domestic Group I levels and export pricing remaining with domestic levels 85/t-100/t above export levels.

Group II prices around Europe remain stable, but with an increasing number of instances of offers from Far East sources this sector may be heading in a similar direction as Group III. As with Group I domestic sales, demand may start to weaken over the next couple of months for blenders to purchase large quantities of Group II, although steady demand is still being forecast by major suppliers.

Many more exports for Group II base oils are being created by major suppliers using European production and imported material which is stored in hub terminals, to supply affiliates in distant markets like South Africa and South America.

Group II prices are maintained with FCA levels remaining at $700/t-$815/t (625/t-730/t) for the light viscosity grades, with 500N and 600N at $720/t-$825/t (640/t-740/t).

These prices pertain to the full range of Group II oils, including those with full slates of approvals as well as those with partial or no approvals.

Group III values are starting to weaken this week, although many say these are just a reaction to expanding availability. Most prices are under a bit of pressure, and prices are being discounted on spot and non-contracted purchases to encourage buyers to repeat purchases on an ongoing basis.

Theres a wide range of prices for partly approved Group III base oils. Levels are assessed at 650/t-700/t for 4 centiStoke grades with the 6 cSt and 8 cSt base oils at 655/t-710/t. These prices are for FCA sales ex hubs in northwestern Europe.

Fully approved Group III prices are higher in most cases, but in some instances almost in line with partly-approved oils. Levels are maintained this week at 795/t-855/t for 4 cSt base oils, with 6 cSt material at 825/t-915/t and 8 cSt grades at 795/t-870/t, FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic prices for Russian export grades are stable but there are slow sales through sellers and distributors. With low demand for these oils coming into mainland Europe due to good availability of mainstream production, finding markets for these base stocks is becoming increasingly difficult. Domestic demand within Russian and other markets such as Ukraine is starting to wane, hence there may be more opportunities for traders to buy Russian export base oils at lower prices, albeit recent rises in raw material costs.

There are enquiries for at least one other large cargo to move to Nigeria, but negotiations are still ongoing and this cargo, reputed to be aimed to finally load around 15,000 tons of product, may not happen until well into October. Baltic inventory for this supply may not be in place until that time.

There are reports of only one cargo from Kaliningrad, Russia, moving into Antwerp-Rotterdam-Amsterdam, perhaps a few parcels fewer than on the same route six months ago. There are a couple of United Kingdom enquiries for material to load around the end of September which may make up some of the supply slack.

Prices are maintained with FOB numbers for SN150 at $475/t-$500/t and SN500 at $485/t-$520/t. Bright stock ex Gdansk, Poland, is assessed at $665/t-$685/t FOB.

Black Sea activity has been quiet with no reported Kavkaz, Russia, STS supplies hitting the market. However there have been Russian barrels loading out of the Black Sea for supply into Israel and Egypt. Prices for Kavkaz supplies remain at attractive low levels for the range of Russian export grades around $455/t for SN500 with SN150 at $435/t. With European barge prices for HSVGO at around $480/t, the selling prices for the Russian export barrels are far below European feedstock levels which could only mean that Russian refineries use a different cost allocation system to other European refineries.

Mediterranean-produced Group I base oil offers are still arriving into Turkish buyers, but with a dull market locally there is little need to take larger than normal parcels of Group I. Preference remains to take smaller quantities from the local refinery at Izmir, even where prices are higher due to the Turkish lira’s exchange rate against the dollar. The problem occurs when the refiner has to purchase crude in U.S. dollars and can only sell in local currency.

Mediterranean offers include prices at $574/t for SN150 with SN500 at $584/t. SN600 is seen offered at $595/t, with small integral parcels of bright stock at $740/t CIF.

Small quantities of Group II and Group III base oils remain available on an ex-tank basis in Turkey, and reports are that sources in the Far East and Middle East Gulf have been supplying parcels of both in bulk and in flexies to traders who resell. Some of the main distributors also represent major producers and suppliers who are active in establishing Turkey as a future potential market for Group II and Group III base stocks. There are also direct representations from suppliers in Europe and the Red Sea who are looking to open up markets for new production of Group II and also for the resale of Group III base oils from Far East-based affiliated companies.

Middle East Gulf

Red Sea sources report that the Jordanian requirement for around 3,000 tons of Group I grades to be delivered into Aqaba, has been covered by a supplier out of Jeddah and Yanbual Bahr, Saudi Arabia. Another large parcel of around 15,000 tons has been assembled from these ports for discharge into the West Coast of India. There is also a shipping inquiry for a prompt cargo to load a small quantity out of Yanbu for Egypt, which may be the final supply of bright stock under the current third quarter contract to Egyptian General Petroleum Corp.

There are no signs of Iranian Group I in the region as Iranian relations with Saudi Arabia and the United States have further deteriorated. An announcement that the U.S. will be sending defense systems and troops to Saudi Arabia can only escalate tensions. Washington ratcheted sanctions to further curtail trade out of Iran.

Sources in the United Arab Emirates insist base oils are still moving out of Iranian ports although these may only be small vessels carrying hundreds rather than thousands of tons delivering into local receivers who will pay cash in local currencies. Prices for these ghost supplies of premium Iranian SN500 are said to be selling for the equivalent of $545/t FOB.

Offers for a Group I cargo to load ex Kavkaz for receivers in Sharjah, U.A.E., are heard at around $550/t for SN500 and $530/t for smaller quantities of SN150.

This column recently reported that the Adnoc plant at Al Ruwais, U.A.E., was undergoing a maintenance turnaround. This was in error and based on a misinterpreted information. The plant is not undergoing a turnaround now but has one scheduled in 2020.

Prices for Group III oils ex Al Ruwais and Sitra, Bahrain, are maintained this week, although some downard pressure is developing due to increased supply and reduced demand levels in key markets such as China. Prices for partly approved grades marketed by Adnoc and Bapco are at $685/t-$725/t for all three viscosity grades. Eight cSt oils going into India and Far East locations will yield lower contribution levels due to lower selling prices in these regions.

Nexbase brand Group III marketed from Sitraq by Neste yields higher netbacks they carry a full range of European OEM approvals. Notional FOB prices are unchanged at $785/t-$895/t for 4, 6 and 8 cSt grades that may be delivered into European or U.S. markets. The incidence of Bahrain material ending up in Europe are few because Neste supplies that market mostly from its refinery in Porvoo, Finland.

Nominal FOB prices on a netback basis are based on prices derived from regional selling levels, less marketing, handling and freight costs.

Prices for Group II imports from the U.S., the Far East, Saudi Arabia and now Europe are unchanged at $775/t-$880/t for light grades and $785/t-$900/t for 500N and 600N, all on an FCA basis from hub storage in the U.A.E.

Africa

The news from North African markets is that the new fourth quarter EGPC tender closed last week and will be announced before the end of September. Quantities and the number of cargoes are down from previous tenders, perhaps indicating that the refinery in Alexandria,which has been closed for more than two years, may be about the restart. But some sources report the plant will not reopen and that requirements are down merely because of fluctuations in demand forecasts.

South African shipping sources reported that another large cargo of mixed Group I and Group II base oils will arrive in Durban during November to discharge around 12,000 tons of product. This cargo will load out of two Mediterranean ports and will include 5,000 tons of Group I grades that will be delivered to Ghana under the Tema contract.

No more cargoes are reported headed to Nigeria from the U.S. Gulf Coast, and only one additional cargo from the Baltic – a shipment with just 4,000 tons of Group I bound for Apapa port in Lagos. The quantity of the cargo is questionable, since the freight costs for 4,000 tons will be considerably higher than for the typical quantities of 7,000 to 15,000 tons.

The three large previously reported from the Baltic, the U.S. Gulf and Antwerp-Rotterdam-Amsterdam have all loaded and are en route to Apapa, arriving next week or in early October. The total quantity of base oils arriving into Nigeria will be in excess of 25,000 tons.

Prices for oils in the 4,000 shipment could be higher because of the freight costs, but prices in Nigeria are competitive, so for now they are assessed as unchanged. Group I values are calculated at $695/t-$720/t for SN150, $695/t-$720/t for SN500, $875/t-$910/t for bright stock and $715/t-$725/t for SN900.

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