With the turnaround season starting soon for European, Russian and North African refineries, and with demand rising after the winter season, European base stock availability could enter a critical phase. Limited supply options to regions such as West Africa mean the market could be looking at severe shortages, particularly for Group l grades.

Although refiners are complaining that only three or four products are carrying positive realisations from the crude refining process, most mainstream producers appear to be content to increase prices by small amounts of $10 to $25 per metric ton. Whether this is a demonstration of not wanting to lose market share, or whether there is a lack of upstream pressure on base oil prices remains unclear.

Crude has stabilised, if that term can be applied, around $113 to $116 per barrel for Dated Brent. With petroleum product prices being hoisted by refiners throughout Europe, prices for base oils could rise in line with feedstock costs. WTI, the U.S. marker crude, is still languishing some way off Dated Brent at $104.30/bbl, but with ICE gas oil breaking ground around $987/t for front month trading earlier this week, and low sulphur vacuum gas oil trading around $825/t, base oil prices may not be sustainable at current levels.

In Europe, Group I light solvent neutrals SN 100/150 are now being offered out and selling at $1175 to $1195/t, with heavier neutrals SN 500/600 in the region of $1210 to $1240/t. Bright stock in cargo-size lots is now offered at $1480 to $1525/t from mainland European production, on an FOB basis.

These levels are not far above last weeks numbers, but with very few offers or availabilities being disclosed due to lack of material in the market, sellers have been content to nibble a few dollars more where possible in light trading activity.

A number of buyers have been advised that prices will rise from April 1, some by substantial amounts of $30 to $50/t, generally for small quantities delivered throughout Europe by truck.

Group II/II+ grades are increasing from April 1, likely more than Group l material. There are rumours of increases of $50/t or more, but these levels are almost always subject to discounting in one form or another.

Group II prices are therefore expected to land between $1240 and $1265/t for the lighter vis material, with heavier vis grades at $1265 to $1320/t, after April 1.

Group III European levels remain as last week, with the differential between Group l and Group III slightly diminished. The target difference of around $500/t has declined to around $450, but suppliers expect that to change over the next few weeks. 4 cSt Group III material is selling around 1210 to 1225/t, with 6 cSt grades at 1230 to 1245/t, on an ex tank basis. Delivered prices are escalating along with the prices of road fuels.

Russian barrels have been cannily retained by sellers in the Baltic, perhaps waiting for prices to rise further. Levels have moved substantially forward and are now $1125 to $1140/t for SN 150 and $1165 to $1190/t for SN 500. These grades are actively sought by buyers looking to supply receivers in West Africa. The absence of mainstream availability for combination cargoes of Group l SN 150, SN 500 and bright stock leaves many desperate receivers in areas such as West Africa.

Around the Black Sea some Turkish buyers realised that prices are not coming down, and two small cargoes of some 2,000 tons and 2,500 tons have been sold into Gebze from Russian supply for around $1190/t, basis CFR delivery. These may represent good value, since earlier this week there were reports from one seller that prices would rise by another $30-$40/t over those seen already in the market.

U.A.E. sellers continue to offer SN 500 either in bulk or in flexibags on an ex-tank and FOB basis. The numbers have leapt upwards for these avails, and this week prices were around $1245-$1260/t for bulk supplies of relatively small quantities of 1,500 to 2,000 ton lots. No SN 150 was on offer; this area is still very short of this grade. There were reports of Indonesian material imported into U.A.E., and through to Iran. It was thought that this might be quantities of bright stock, but Indonesia and Singapore sources could not confirm that Pertamina had released any large quantities of this grade for sale.

Small quantities of bright stock have been imported into Iran with dollar equivalent prices around $1670/t. Iranian exports of Group l SN 150, SN 500, and SN 650 have not been reported for some time, although with exports from U.A.E. continuing, these grades are finding their way to market.

West Africa abounds with enquiries, but two realisations have hit this area. One is that prices have advanced substantially since a receivers last purchase, the other is the hard truth regarding lack of availability.

Some buyers are looking at Group II as a substitute for Group l light and heavy neutrals. Some claim a saving on additive costs, but it is hard to see how this material can be used without formulation alterations. But of course there are ways of achieving this in West Africa.

West African prices for European mainstream material, where available, are between $1300 and $1365/t for Group l neutrals, with bright stock around $1600 to $1640/t, all basis CFR. Russian and Uzbek grades can be discounted by some $40 to $50/t for the solvent neutral range, but with increasing freight costs, transportation from the Baltic is eating away at this differential and moving Russian supplies towards parity.

The South African base oil scene reports few major movements of base oils. Prices are higher than European numbers, with SN 150 and SN 500 sold locally around $1400 to $1435/t.

The whole EMEA market is tight from a supply viewpoint, and turnarounds in many of the production centres will lead to further supply restriction in the base oil market. Product prices are likely to rise. Will base oils maintain the timing gap after crude and products rise?

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.