Dated deliveries of Brent crude strengthened the past week by some $3.50 per barrel to $78.15/bbl, now for November front month. West Texas Intermediate crude breached the $70 barrier to post at $70.10/bbl, for October settlement.

It is not clear exactly what is driving these increases. OPEC production has risen to 32.79mbpd, due mainly to a rise in Libyan and Iraqi output, and additionally, U.S. production is back on the increase, all of which is lending a fragility to the latest rises.

ICE LS gas oil increased $20 per metric ton to $697/t, still for September front month. These prices were established in late London ICE trading on Monday.

Europe

European Group I export prices are mostly unchanged this week. Demand is sluggish, and while fundamentals are rising, there is little appetite for base oil prices to do likewise. Light solvent neutrals remain between $735/t and $755/t, while SN500 and SN600 softened slightly to $810/t-$835/t and bright stock remained at $875/t-$900/t. These prices refer to large cargo-sized parcels of Group I base oils sold on an FOB basis ex mainland European supply points.

Group I sales within Europe have been a bit of an enigma as many blenders expected prices to dip when summer ended. Instead resellers and traders appear to be holding on to prices that have been in place since the middle of July. Some sources had assumed that right amount of buyer pressure might pull down values. Demand is wavering, with many blenders now opting to include Group II grades in their slate, limiting the use and storage for Group I grades that previously were at the forefront of almost all blending activities.

Prices are unchanged this week. The differential between local prices and export numbers is at 85/t-125/t.

Group II oils continue to show strength in Europe, with supply and demand neatly equalling each other. Trade appears to be picking up as existing customers increase off-take quantities and new buyers trying to establish relationships with suppliers.

Suppliers might be expected to take advantage of a relatively tight market to raise prices, but instead most seem content witt current levels, perhaps mindful of the increase in supply looming with a large Group II plant scheduled to come on-stream in the Netherlands next year.

A healthy list of orders is reportedly taking shape for September. Prices for FCA-based sales and truck or barge deliveries are unchanged at $875/t-$920/t (745/t-785) for light neutrals and $955/t-$975/t (815/t-820) for 500N and 600N.

A similar scene was described for Group III base stocks as demand is steady for all Group III grades including those with full slates of finished lubricant approvals and those with just partial slates.

FCA prices remain as per last week: 765/t-770/t ($885/t-$895) for 4 centiStoke grades, 775/t-780/t ($900/t-$910) for 6 cSt and 785/t-790/t ($910/t-$920) for 8 cSt. These prices pertain to partly-approved Group III base oils being sold out of hub storage in Antwerp-Rotterdam-Amsterdam.

Group III base oils carrying full ACEA and European OEM approvals are priced at a premiums, although those premiums may be shrinking, perhaps because partly approved oils are becoming more acceptable. Fully approved Group IIIs are 795/t-810/t for 4 cSt, 800/t-820/t for 6 cSt and 810/t-825/t for 8 cSt, all on an FCA basis at Antwerp-Rotterdam-Amsterdam.

These prices are based on small lots sold ex-rack or for truck delivery and do not apply to material delivered in bulk cargoes to larger users. Prices for the latter may be considerably lower.

Baltic and Black Seas

Base oil trade in the Baltic for Russian and Polish exports resembles the Group I scene throughout the rest of Europe, with only a few regular fixtures and inquiries for cargoes to come into Antwerp-Rotterdam-Amsterdam or the United Kingdom. There does appear to be another large inquiry for a cargo to be loaded during September for Nigerian receivers, but information on quantities and cargo breakdown are hazy at the moment. Interestingly, some of the feeder cargoes operated out of the Baltic to Antwerp-Rotterdam-Amsterdam and other Northwestern European discharge ports are growing in size, perhaps because receivers have more storage capabilities than in the past.

Netted back from offers on CIF delivered prices into West Africa, Antwerp-Rotterdam-Amsterdam and the U.K., FOB prices in the Baltic are estimated to be holding up relatively well at $680/t-$700/t for SN150, $755/t-$775/t for significant quantities of SN500, $795/t for SN900 and $845/t for bright stock, all on an FOB basis.

Black Sea trading is reportedly muted at this time, probably reflecting the problems within Turkey, which plays an important part in that market. Few cross-trades are being reported from Azov or other ports exporting Russian and Uzbek base oils. Areas such as Romania and Bulgaria are also quiet, at least for sea-borne cargoes of base oils, although the summer lull may still be playing a part in those regions.

There are no reports of Group I cargoes from Mediterranean sources, again indicating potential problems with foreign exchange rates and availbility of U.S. dollars for Turkish receivers. Mediterranean prices are estimated at $765/t-$780/t for light solvent neutrals and $845/t-$875/t for SN500 and SN600, basis CIF.

There are also no reported STS activities from Kavkaz, Russia, although local sources indicate that another large shipment is being assembled for receivers in United Arab Emirates during September.

Turkish imports of partly approved Group III oils sourced from U.A.E. appear to be priced around $885/t-$920/t, but fully approved material from a Mediterranean source may carry a premium. Turkish sources said the premium is small. In any case, these prices are ony the subject of offers and are not confirmed for cargoes concluded.

Middle East Gulf

No new Iranian Group I base oils cargoes are reported this week. U.S. sanctions appear to be biting, although technically they should not yet affect the export or import of petroleum products. Parties associating or doing business with Iran do face the threat of being declared company non-grata by U.S. authorities. One Group I cargo from Black Sea was reported, and another said to be under discussion for September loading.

Group III base stock exports from the three producers within Middle East Gulf also look to be taking a holiday this week with no logged cargoes for this week or next. Notional FOB prices are maintained this week at $785/t-$810/t for partly approved 4 and 6 cSt oils from Al Ruwais, U.A.E., and Sitra, Bahrain. Fully approved oils from Sitra are estimated to netback at $845/t-$875/t for 4, 6 and 8 cSt grades moving West to Europe, the U.S. and elsewhere in the Americas. Exports of 8 cSt oils to India and the Far East may show lower netback levels because of lower selling prices in those markets. Far Eastern prices for 8 cSt are $75/t-$100/t lower than values for the same oils going into Western markets.

The numbers above refer to FOB levels established on a notional netback basis using published freight rates, advised local selling prices and notifications of bulk CIF/CFR cargo prices from various sources.

Group II base stocks both from Yanbual Bahr, Saudi Arabia, and imports from the U.S. and the Far East have yet to make a major impression in the Middle East Gulf, but a number of blending operations throughout the region are looking to upgrade to Group II in the near future.

Prices for Group II base stocks on an FCA basis or for delivery by truck or flexi are unchanged, with heavy-viscosity grades from Al Ruwais being offered at $875/t. Corresponding values for fully approved Group III are also unchanged at $995/t-$1,040/t for 100N, 150N and 220N and $1,085/t-$1,125/t for 500N and 600N. These prices pertain to small quantities of less than 25,000 tons.

Africa

West Africa receivers have announced a couple new cargoes of Group I base oils coming into the region from Europes Mediterranean coast and the U.S. Gulf Coast, respectively. The first of the parcels consist of the basic contract cargo for Tema in Ghana plus 3,000 to 4,000 tons bound for Guinea and Cote d’Ivoire. This parcel will be loaded out of Livorno.

The cargo from the U.S. Gulf Coast is 12,000 tons. There are the usual rumors that it includes some Group II grades, although receivers and agents in Nigeria deny it and will probably confirm in time that the cargo is 100 percent Group I.

Prices remain unaltered for Group I base oils being landed into Apapa port in Lagos, Nigeria, with SN150 to SN180 assessed at $755/t-$785/t, SN500, SN600 and SN650 at $830/t-$855/t and bright stock at $920/t-$940/t. These prices are for large parcels of at least 10,000 tons delivered on a CFR or CIF basis into Apapa.

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