Dated deliveries of Brent crude moved close to $60 per barrel early this week but retreated to $58.20/bbl late Tuesday in London ICE trade for November front month settlement. West Texas Intermediate crude breeched the $50/bbl barrier per barrel, and now stands at $51.75/bbl. The crack between these marker crudes widened in recent weeks due to high European demand for crude and U.S. demand constraints caused by refinery closings related to Hurricane Harvey.

ICE LS Gas Oil, a marker for oil products, rose swiftly to a new recent high of $546 per metric ton.

Europe

Offered prices for European exports of API Group I base oils are firmer this week, although potential buyers resolutely resisted caving to them. Increases were seen in a couple deals completed this week. Demand remains high for prompt spot purchases with deep-sea locations being the targeted markets for these availabilities. Availability is not yet short, but continuing demand for large parcels of Group I could cause supply to tighten.

Offers for light solvent neutrals moved upward by some $20 to $30 per ton this week to $680/t-$695/t, while solvent neutrals 500 and 600 rose to $785/t-$800/t. The latter increase was smaller, perhaps due to greater availability of these products. Bright stock is up again, particularly for large parcels of 3,000 to 6,000 tons, and offers underwent a mini-surge to $895/t-$920/t. It is not yet clear if buyers are accepting, though there appear to be few alternatives at the moment.

The prices above refer to large cargo-sized parcels of Group I base oils supplied or offered on an FOB basis from mainland European supply points.

Prices for Group I sales within Europe did not rise this week, but a number of buyers reported receiving supplier notices that markups will be implemented from October 1. The size of these increases has not been revealed, but some buyers said they expect increments of 25/t-50/t for ex-tank sales. Demand is relatively weak in some local markets, such as the Mediterranean and the Balkans, with many buyers are putting off big purchases until the fourth quarter. Others, such as the United Kingdom, Scandinavia and Northern Europe, see strong demand.

The differential between domestic FCA prices and exports narrowed again to 35/t-55/t due to apparent increases in export offers.

A similar picture is emerging for prices on Group II imports to Europe with supply being restricted due to possible delays for replenishment cargoes out of the U.S. Gulf Coast. The ultimate impact remains to be seen because sellers so far appear to be maintaining normal deliveries thanks to volumes in hub storage and on the high seas.

Apart from temporary limitations caused by the closing of Motivas Port Arthur plant on the Gulf Coast, and in the absence of notices about hikes, the status quo could reign – at least for a period of time. Prices for light-viscosity Group II neutrals are now assessed at $660/t-$685/t and 500N/600N are $775/t-$815/t, landed CIF into Antwerp-Rotterdam-Amsterdam. FCA prices are 755/t-790/t for light-vis base oils, and 855/t-890/t for heavies.

Group III values are holding firm in an increasingly competitive market, but suppliers have little hope of implementing markups despite the run-up in crude. The long-term outlook for Group III within Europe is positive as rising demand for 0W and 5W passenger car motor oils should guarantee that Group III demand swells.

Prices for these grades remain unchanged this week: $785/t-$810/t for 4 centiStoke and 8 cSt oils (685/t-705/t for sales made in euros), basis FCA Northwestern Europe. These prices refer to Group III stocks with partial slates of finished lubricant approvals. Fully approved grades are assessed at 780/t-815/t for 4 and 6 cSt grades and 755/t-775/t for 8 cSt, FCA Antwerp-Rotterdam-Amsterdam. Bulk purchases by major customers and appointed distributors earn discounts of $75/t-$100/t.

Baltic and Black Seas

Russian exports from the Baltic firmed this week for the first time in a while. Sellers say their costs for ex-gate purchases have risen, and with base oil values starting to climb in mainland Europe, prices in the Baltic face upward pressure.

No West Africa cargoes are reported this week, and with only two known enquiries floating around the Baltic, Nigerias market may be sated for now. Smaller cargoes are sold into the east coast of the United Kingdom and Antwerp-Rotterdam-Amsterdam, with another inquiry for around 2,000 tons looking to be fixed into Morocco. This movement may be done as a partial cargo on a vessel that would also travel to West Africa.

SN150 prices are up this week to $685/t-$720/t, while SN500 is $760/t-$790/t, SN900 $865/t-$880/t and bright stock $895/t-$945/t, all on an FOB basis.

In the Black Sea, Kavkaz, Russia, once again makes the news this week with another cargo of around 15,000 tons now loading on an STS basis for receivers in Singapore. The economics attached to this movement are hard to understand since prices for heavy Group I oils in the Far East are relatively competitive. Prices for SN500 are estimated at $675/t and SN900 at $745/t, basis STS Kavkaz, Russia.

A number of Mediterranean cargoes are primed to move to Turkish receivers from Italy and Greece, in addition to a 3,000 ton parcel loading out of Kavkaz for Gebze, Turkey. SN500 is assessed at $720/t-$740/t, CIF Gebze. The Mediterranean cargoes of Group I neutrals are now assessed around $730/t-$755/t for SN150 and $820/t-$845/t for SN500/600, CIF Western Turkish ports. Bulk quantities of 4 and 6 cSt Group III ex-Spain are reported by local sources at $785/t-$810/t, basis CIF Gebze.

Middle East Gulf

Despite a lack of Red Sea activity reported this week, Middle East Gulf markets are buzzing with imports and exports of various grades and types of base oil. An Iranian cargo of Group I premium SN500 is ready to load out of Bandar Abbas for receivers in United Arab Emirates. This cargo may also include oils for the West Coast of India and Pakistan, should there not be sufficient storage in Sharjah, U.A.E. Sepahan Oils plant is coming back on stream, so more parcels of SN500 are expected to move to local destinations the U.A.E., Mumbai and Karachi.

Prices are reviewed again this week, and nominal estimates for FOB levels work out to $675/t for premium SN500.

A cargo of around 20,000 tons of Group III base oils from Al Ruwais has been nominated to load in two or three shipments for Mumbai anchorage, probably before the end of this month. The notion for further supplies of Group III base oils moving into Nigeria is on the table and may be considered for loading around the end of October. This news comes from sources in West Africa awaiting the arrival of the first such cargo, which is due to arrive during the second half of October and which is being quoted at $884/t, CFR/CIF Apapa, Nigeria.

Estimates of prices for Group III base oils from Middle East Gulf refiners are raised slightly higher this week due to estimates of landed values into the West Coast of India being increased from previous levels. These prices are calculated on a netback basis using prices reported by receivers in India, yielding estimates of around $665/t-$685/t for 4 and 6 cSt grades loading out of Al Ruwais. Four and 6 cSt oils offered by Neste from Sitra, are calculated to be at $745/t and 8 cSt oils at $715/t-$725/t.

Despite the large volumes being produced within the region, Group III is still moving into the Middle East Gulf from Malaysia, although this material is bound for Iran. This stem from strains between Iran and governments of other countries with Group III capacity.

Sources in Qatar report buying a parcel of Group II base oils from majors in South Korea, and whilst this trade has been a longstanding arrangement, it appears to have been some time since 4,000 tons of Group II reached those shores.

Group II imported from Far East and U.S. sources is still being offered out of storage on an FCA or truck-delivered basis. Prices are unchanged at $810/t-$825/t for light-vis grades and $825/t-$870/t for 500/600N, CIF Middle East Gulf locations, but they do face some upward pressure.

Africa

In West Africa markets, principally Nigeria, there are fewer cargoes this week, perhaps signaling the end to the recent two-month flurry. Nigerian buyers seeing prices start to rise will shy away from further large purchases of Group I. Reports from Apapa suggest that storage tanks are full and that additional purchases may be shelved until inventory in required around year-end, when Nigerian buyers will again look for seasonal bargains.

The U.S. Gulf Coast cargo of Group I grades which was programmed to load around the time of the hurricane has been fixed to load around the end of September. It will reflect lower prices since it was purchased some five weeks ago.

Prices delivered into Nigeria are unchanged this week after adjustments in the past couple reports. CIF/CFR prices for Group I base stocks are $780/t-$795/t for large quantities of SN150 and $865/t-$878/t for SN500/600. SN900 ex-Baltic is assessed at $948/t-$963/t and bright stock at $1,015/t-$1,055/t.

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