Constricted avails within Europe have been brought about by many factors, not least of which has been the break in supply chain from Russian refineries. This has produced a snowball effect which has impinged on mainstream supply points within mainland Europe where typically a number of seasonal turnarounds has also affected quantities of base oils, particularly for export sales.

Producers are concentrating on contracted and regular buyers, but also attaching higher prices to offers and sales. The shortages are being felt in areas such as West Africa, where most of the supply into areas such as Nigeria is on a spot basis, and where receivers are presently scouring the globe for alternative sources.

Crude prices are stabilizing in response to the latest geopolitical fundamentals regarding Ukraine. Dated Brent is around $107.60 per barrel in late Tuesday trading for front month settlement. ICE gas oil is selling at $899 per metric ton, barely resisting the critical $900 pivot.

Group I base oil prices in Europe are being marked up, and with availabilities restricted for prompt spot business, the scene is set for further upticks. Group I light vis solvent neutrals have moved to $1010-$1040/t, depending on other grades being purchased concurrently. SN 500 and SN 600 have been lifted to $1025-$1060/, with demand far outstripping availability.

Bright stock, such as SN 900 ex Baltic, is particularly short and in demand due lack of support from other supply sources such as the U.S. and Brazil and lack of alternative supplies for regions such as West Africa. Bright stock has been heard offered at $1200/t, but most deals have been completed at around $1155-$1180/t, although suppliers have reported that these levels are no longer available.

The prices above refer to offers and sales of bulk cargoes which may be sourced ex mainland Europe or North Africa depending on availability of each grade.

Domestic and local European sales are buoyant, with demand for Group I perhaps the highest its been for some months. This has coincided with a tight supply situation throughout Europe, and with local sales commanding a premium over export cargoes, many producers have diverted whatever availabilities they have at their disposal to the internal and national European markets where higher realizations and contributions are present. The effect of this has been to further deprive the export markets of material. Unless buyers are prepared to pay the premium, offers are being withheld.

Prices for domestic ex tank and truck-delivered base oils have risen, although the differential between export prices and local sales have diminished to between 45/t and 60/t.

With source increases from producers in the U.S. and the Far East, European Group II import prices look certain to move up. This is apart from the effect of the Group I situation, which has kindled Group II levels to assume increments in line with those of Group I. This, which is being referred to as a double whammy, has meant that Group II levels have advanced by $20-$30/t so far, but with additional positive pricing factors still in the pipeline, these levels will likely rise another $15-$20/t.

Light vis grades currently stand at $1080-$1115/t, with the heavier 500N and 600N grades now at $1185-$1270/t in respect of sales basis ex tank northwestern Europe and Mediterranean storage.

European Group III sales are again reported as positive, but limited Group I avails may slightly curtail the expansion of Group III sales, at least in the short term. The opposite scenario, in which many are predicting that these grades will go long across Europe within the next year or so, is still hanging in the wings, but some of this potential oversupply may be absorbed if Group I availability returns to normal.

Levels have increased, with local producers seizing the Group I initiative more so than importers. Supplies of 4 cSt are now reported at 940-955/t, with 6 cSt material between 950/t and 960/t on the basis of trucks loading ex tank Antwerp-Rotterdam-Amsterdam.

Baltic and Black Seas

Baltic regions are showing a glimmer of normalcy, but while replenishment stocks are being received, they are being pre-sold before reaching shore tanks. Some sellers prefer to hold stocks where ullage allows to take full advantage of the low prices of a few months ago that have since been hiked to new highs.

With SN 150 and SN 500 offered in snatch quantities at $960-$975/t basis DAF Latvian border, limited offers have been made at $1030-$1045/t basis FOB Baltic ports, but with no reported avails of SN 900, or at least no reports of unsold SN 900, many buyers are looking for alternative sources for this material for West Africa receivers.

Turkish buyers in the Black Sea have been enquiring for SN 500, but with most mainland European sources dry and logistical problems still affecting Crimean load ports, supplies are sporadic. Uzbek and Turkmeni grades are available, although the heavier vis SN 500 is not available from either source. SN 150 ex Fergana and SN 180 and SN 350 from Turkmenbashi are being priced at $990-$1010/t basis CIF Gebze.

Middle East

In the Middle East Gulf, SN 150 and SN 500 ex Iran are available and have not moved up from around $995/t and $1010/t, respectively, on basis FOB United Arab Emirates load ports, with offers of bright stock at around $1240/t on same basis. Unlike Europe, the Middle East Gulf regions appear to be flat lining on Group I prices, with no availability problems affecting demand.

With no European or Russian imports into Middle East Gulf regions, local prices would have risen, but the opposite appears to be the case: only some imports of prime quality SN 150 and SN 500 from Saudi Arabia are moving up $5-$10/t, to $1070-$1080/t CIF Oman and U.A.E.

Group I base oils still play a major part in U.A.E. trade and blending, whereas Qatar, whilst still using some quantities of Group I, has increased its imports of Group II base stocks with another cargo of some 4,000 tons planned for second half April arrival. This Korean parcel follows other imports into the region. Prices for Group II grades have been marginally increased by Far Eastern suppliers to around $1090-$1100/t following source increases, particularly for the lighter vis 100N and 150N. Heavier material such as 500N or 600N is longer and hence, held back in price at $1150-$1225/t CIF, similar to last weeks reported levels.

Once again, rumors regarding base oil production restarting in Iraq are circulating. Unverified reports are that a number of small blenders in the south of the country around Basra have been supplied with truckloads of Iraqi-produced base oils. With no exports of any of this production and limited information from within the country, it has been difficult to establish just exactly is happening.

Africa

East African receivers have issued a number of enquiries for Group I, including SN 150, SN 500 and bright stock. These supplies are all to be made in flexies, with most of the material coming out of U.A.E. Some suppliers in India have made competitive offers for these enquiries, but results are to be determined.

Prices are around $1125/t in respect of the SN 150 and SN 500, with bright stock being offered at $1345/t. Recycled grades are also being included in the mix, and are levied some $150/t lower than virgin material.

South African markets report Group II requirements growing. Most are being met by U.S suppliers, although some Far East imports have been made on a limited basis into Durban. Prices are attractive, albeit in a limited market, with light vis material 100N landing at around $1200/t, and the heaver grade 600N at around $1285/t, all basis delivered CIF in flexies.

West African trade appears to be split into two factions: the contracted supplies which go into markets such as Ghana, which are largely protected in supply terms despite slowly rising indexed prices, and the spot markets of Nigeria, where receivers are becoming concerned regarding suitable material to import. With Baltic supplies being all but missing over the last few weeks, and with replenishment barrels flowing at reduced rates, many are turning to mainstream European suppliers who are inundated with enquiries for large parcels of Group I base oils for prompt supply.

These enquiries are being turned away by many due to lack of product, with most only entertaining regular buyers. Alternative sources such as U.S. and Brazil are coming up with few supply options, and horizons are widening to India, Far East and Middle East Gulf sources.

Prices have been pushed due to freight levels, and FOB prices for grades such as SN 900 are inflated since Russian blends are not available.

One offer quoted this week for a parcel of some 7,000 tons in total gave SN 150 and SN 500 prices at $1175/t, with bright stock at $1375/t, and an SN 900 equivalent grade at $1295/t. These levels pertain to one parcel being delivered CFR Apapa, loading second half April.

European supplies are now estimated at $1190-$1200/t for Group I solvent neutrals, with bright stock between $1325-$1355/t. These latest prices are based on notional European FOB levels where available, adding freight at cost.

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