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US base oils exports to Europe fell to a five-month low in July, part of a broader slump that took total US exports to a 41-month low
The slowdown, previously confined to spot markets including West Africa and India, spread in July to term-supply markets including Europe and South America
The US and Netherlands account for more than 90% of Europe's Group II supply, leaving few alternatives if US shipments fall further
US base oils exports to Europe fell in July as the export slowdown spread from spot markets to term buyers, reducing a key source of Group II supply with few alternatives.
Exports to Europe fell to 271,000 barrels (38,000 tonnes) in July from 549,000 barrels in June, the lowest since February, US Census Bureau data showed. The volume was well below the roughly 450,000-barrel monthly average of the past year.
The drop came against a broader slump in total US base oils exports, which fell to a 41-month low in July.
Declines over the previous two months had been concentrated in regular spot-market outlets, including West Africa and India. In July, the slowdown extended for the first time to major term-supply markets, including Europe and South America.
The pattern suggested the slowdown reflected tighter domestic supply rather than a seasonal pullback in European demand alone.
The slowdown matters most for Europe's Group II market, which relies on the US and the Netherlands for almost all of its supply, with no equivalent source to replace either one quickly.
Key Highlights
· US shipments to Europe and South America fell to a five-month low, but their share of total US exports rose to 49%, the highest in three months.
· US and Netherlands supplies typically account for more than 90% of Europe's Group II availability.
· Europe's Group II supply fell in June to its third-lowest level in 25 months as US imports slumped.
· US shipments to Europe showed signs of extending the slowdown through August, shipping data showed.
Market Repercussions
June showed how quickly Europe's Group II supply can fall when US shipments decline, even when the Netherlands was supplying close to its normal level.
The previous Netherlands Group II shutdown in early 2024 likewise showed the other side of the combination: strong US exports to Europe helped limit the impact of the plant outage, even as regional Group II supply still fell.
The July drop in US shipments to Europe came during the summer slowdown, limiting its immediate impact on the regional supply balance but increasing the importance of steady Netherlands supply.
A further pullback in supply from either source, on top of an already-tight Group III market, would leave European blenders with fewer options for both Group II and Group III base oils.
