Group II prices also appear to be coming under pressure. Buyers are aware of the large price difference between Group II and Group I, and with European price levels higher compared to global values, this price delta is coming under scrutiny by the market. At the same time there is increasing length in the Group II market with new offers from the U.S. and Far East appearing daily on the market. These range from small quantities in flexitanks to larger bulk shipments, all of which are eroding the local market for Group II.

The Group III sector is oversupplied at the moment. The sector remains split between those carrying the full array of European original equipment manufacturer approvals, and many others where approvals are either pending or are non-approved. The difference in pricing between the two factions is sometimes blurred with fully approved sales often coming close to partly approved prices. The desire to protect market share is everything at the moment, and this will only further erode prices.

Crude and feedstock prices have remained in a narrow range since last week, although dated deliveries of Brent crude did break through the resistance level of $60 per barrel last Friday, but has since fallen to $58.85/bbl, for December front month. West Texas Intermediate crude is stable at $53.15/bbl for November front month. ICE LS Gas Oil has hovered around similar levels to last week, and is now at a level of $584 per metric ton for November front month settlement.

These prices were obtained from ICE trading in London late Monday.

Europe

European Group I export prices have weakened again, under pressure from growing inventories at a number of plants. Sellers are keen to move parcels of combination Group I grades, rather than moving just one grade, leaving the producer with specific material which is harder to place. Prices are becoming close to feedstock prices and with margins being squeezed further, some producers are looking to cut production again. This could theoretically lead to shortages but producers say the market has some way to go before that happens.

Competition is rife in the export markets where availability from sources like the U.S. continue to pressure European producers.

FOB prices are lower this week, with solvent neutral 150 now between $555/t-$580/t, and SN500 at $565/t-$585/t. Bright stock prices are lower by around $10/t this week. Levels are now at the smallest premium over SN500 prices for some time, and prices may fall even further. Levels are now assessed at $625/t-$660/t in FOB offers.

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

European Group I prices are marked down in line with export moves, with a number of large blenders loyal to Group I supplies, particularly in light of lower Group III prices.

The difference between domestic Group I levels and export pricing is maintained as per last report with both sectors’ prices having moved downwards. The differential is assessed between 85/t-100/t, with local prices being the higher.

At the beginning of this month there were several attempts to raise Group II prices, which were then rescinded, and now there appears to be price pressure building for the same grades. European Group II price levels are the highest in all global markets, attracting surplus material from other regions, meaning possible oversupply.

With demand still sluggish for all base oils, the potential to soak up extra availabilities of Group II base oils is not around, and with Group III prices falling further this week, there is little appetite to make the leap from Group I to Group II, placing a great deal of pressure on Group II prices.

Group II prices are maintained at the moment, with FCA levels remaining at $695/t-$800pmt (645/t-735/t) for the light viscosity grades (100N, 150N and 220N), with 500N and 600N at $775/t-$825/t (710/t-755).

These values apply to a wide range of Group II oils, with and without finished product approvals, from sources in the Far East, the Middle East, Europe and the United States.

Group III numbers are under severe pressure from the number of new suppliers. Buyers can move from one supplier to another seemingly at the drop of a hat. Market shares are being protected, with discounting being made to buyers to maintain relationships and trade.

Prices are in wide and varied ranges with levels for partly approved Group III base oils maintained at 675/t-725/t for 4 centiStoke grades, which appear to be the most plentiful grade around the market. Six cSt and 8 cSt base oils are placed at 680/t-720/t. These prices are for FCA sales ex hubs in Northwestern Europe. These levels may soon succumb to downward pressures, but are maintained this week.

Fully approved Group III prices carry higher values, with levels now at 770/t-830/t for 4 centiStoke base oils, with 6 cSt material at 805/t-880/t and 8 cSt grades at 775/t-845/t, FCA Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic trade remains slow with only a few reported deals being done for Russian exports. Theres also only one smaller cargo reported this week from Kaliningrad into Antwerp-Rotterdam-Amsterdam. Traders and resellers based in the Baltic are hoping that prices will move lower, allowing these players to offer for export cargoes moving into West Africa and mainland Europe. There are a couple of enquiries for large parcels of around 10,000 tons to be moved out of the Baltic for Nigeria in early November.

Prices heard in the small number of offers released during last week remain stable with FOB numbers for SN150 at $470/t-$495/t, and SN500 at $475/t-$510/t. Levels for lower quality bright stock are indicated at FOB levels of around $595/t-$620/t, but these offers are based on flexi-bag deliveries into West Africa and Southern Africa.

Bright stock in bulk ex Gdansk may have drifted lower this week, following the general European trend, and is now priced at $630/t-$655/t FOB.

Black Sea news has changed reports which indicated two large cargoes of Russian export barrels were to load from the Kavkaz, Russia, STS facility. The latest is that one large parcel of around 15,000 tons is currently loading on a prompt basis and will first discharge into a Greek port. The balance of the cargo, which is expected to be around 10,000 tons, will then be dispatched to Singapore. Prices remain competitive with STS numbers around $455/t for SN500 and SN150 indicated around $435/t.

A couple of Group I cargoes from Mediterranean sources have been purchased by Turkish receivers. Prices have been honed lower to make these offers more attractive than from the refinery at Izmir. Mediterranean Group I prices are indicated at $567/t for SN150 with SN500 at $572/t. SN600 is heard around $585/t, with small quantities of bright stock at around $695/t CIF. Izmir refinery has restarted production of base oils and has held prices firm for the latter part of last week.

Both Group II and Group III base oils are being sold ex-tank in Gebze, Turkey, but there is news that a larger bulk cargo of Group II base oils has been offered directly to Turkish blenders at steeply discounted prices.

Prices for Group II base oils ex-tank are indicated at around $795/t-$840/t, with partly approved Group III grades established at $785/t-$845/t. Prices are dependent on sale terms and a commitment to quantities being lifted or delivered.

Middle East Gulf

Red Sea reports this week indicate that a small cargo of 2,500 tons of base oils is to load out of Yanbu destined for Alexandria, Egypt. This parcel is assumed to be servicing the EGPC Q4 bright stock contract. Offers of Group II have also been made to receivers in Turkey from the same source. Cargoes for the west coast of India and United Arab Emirates are also planned for November loading out of Yanbu and Jeddah. A cargo of around 17,000 tons of Group I and Group II base oils from Yanbu and Jeddah will make a delivery into a many as six ports in the Red Sea, Pakistan and Middle East Gulf.

There are reports of Iranian cargoes of Group I SN500 and SN150 moving out of Bandar-e Emam Khomeyni (BIK) and BB for the west coast of India. There are still no substantiated reports of shipping and quantities, although sources based in U.A.E. have indicated prices for Iranian SN500+ at around $510/t FOB. Cargo sizes are reputed to be in the order of around 3,000-6,000 tons.

The offer into U.A.E. for the Group I cargo ex Kavkaz, Russia, has been withdrawn, although a 10,000 tons cargo loading out of the U.S. Gulf has been tabled for either the U.A.E. or Mumbai. Prices are indicated at around $542/t CIF U.A.E. for large quantities of SN500 and around $527/t for smaller quantities of SN150. There is also a suggestion that this cargo may comprise of a quantity of bright stock which has been suggested at around $695/t delivered.

Group III FOB prices ex Al Ruwais and Sitra are lower this week in response to the market pressures anticipated in Europe and the U.S.

Notional FOB prices are reset at $665/t-$700/t this week for the three Group III viscosity grades of partly approved base oils moving into Europe or U.S. markets. The 8 cSt grades going east will achieve lower contributions, often by around $100/t due to lower local selling prices. Partly approved Group III base oils are sold on an FOB basis from Adnoc at Al Ruwais, and FOB and CIF by Bapco from Sitra. A new cargo has been identified as moving to Brazil out of Al Ruwais, thus expanding the global nature of the supply of Group III base oils from this important source.

Branded Nexbase Group III base oil also loading out of Sitra refinery in Bahrain, marketed by Neste, will contribute higher notional netbacks due to these oils achieving higher selling prices because the Nexbase brand holds the full range of European OEM approvals. Practically these base oils will be sold to Neste at the same prices as the non-approved or partly-approved grades sold by Bapco and Shell. Notional netback levels are adjusted lower this week, placing numbers at $775/t-$875/t for 4 centiStoke, 6 cSt, and 8 cSt grades be delivered into western markets.

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

Group II base oil prices are maintained this week, with the possibility of lower levels.

Prices FCA ex U.A.E. hub storage continue to be assessed at $795/t-$910/t for the light viscosity grades 100N/150N/ 220N, with 500N/600N ranging between $810/t-$925/t.

Africa

Mediterranean and North African base oil markets have witnessed a number of movements for base oil cargoes this week, with material bound for Egypt, Israel and Morocco, loading out of Italian and Spanish ports. A large 6,000 tons parcel is to re-load on an STS basis from Cyprus and discharged into Alexandria, where apparently final preparations are being made to re-start the refinery which has been down for the last two years. The parcel of around 15,000 tons of Group I grades available ex an Algerian port has moved off the radar.

South African shipping reports confirm that a cargo of around 11,000 tons will two-port load out of both hub and refinery storage in the Mediterranean prior to proceeding to Durban to discharge. The cargo will possibly comprise of both Group I and Group II base oils for distribution into South African markets.

With one definite cargo fixed to deliver 5,000 tons of two grades of Group I base oils ex a United Kingdom refinery into Lagos, this is an unusual loading. Normally this seller would load quantities for Apapa out of Sicily, although perhaps logistics and supply mean a U.K. loading.

Another three enquiries for large parcels of Group I grades are in the market for cargoes to load for Nigeria. One is for 10,000 tons to load out of Livorno around the end of this month with three grades of Group I base oils aboard. Another two 10,000 tons parcels are on the table for Baltic supply. The Baltic parcels will possibly comprise of Russian origin base oils, and also bright stock which will be loaded in Poland. Another cargo for November is being sought out of the U.S. Gulf, where FOB prices remain competitive against sources in Europe and the Baltic.

Without knowledge of the U.K. parcel and ahead of information on the Baltic and Mediterranean sourced cargoes, prices are mostly maintained this week for Group I base oils, indicated at $675/t-$695/t for SN150, SN500 at $665/t-$685/t, and bright stock perhaps coming a little lower at $720/t-$745/t. SN900 is indicated at $675/t-$695/t. Prices are for cargoes of minimum 5,000 tons being delivered into Apapa port, Lagos, 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.