Global base oils supply held firm in February, adding to expectations of sufficient availability and incentivizing blenders to maintain lean stocks ahead of end-February supply disruptions that tightened global markets.

Total base oils supply exceeded 2.70 million tonnes in February, down from close to 3.0 million tonnes but up 15% year on year, EIA, METI, Ministry of Energy, ANP and other government data showed.

The year-on-year increase marked the fourth straight monthly rise and coincided with a period when lubricants demand typically slowed, curbing buyers’ urgency to replenish inventories ahead of the spring oil-change season.

The looser supply-demand balance left the market more exposed to the subsequent supply disruptions that emerged from end-February.

Key Highlights

·         Europe supply rose 24% year on year to a six-month high, supported by stronger production in the Netherlands and Italy.

·         Asia supply rose 10% year on year even as it fell from January to a three-month low amid lower South Korean output.

·         China supply rose 26% year on year and held near multi-year highs, boosting domestic stocks ahead of subsequent disruptions.

·         Americas supply rose 8% year on year even as volumes dipped to a ten-month low, with US output staying lower for a second straight month.

Market Repercussions

Plentiful supply and weaker base oils prices in January and February incentivised blenders globally to hold lean stocks.

That strategy then coincided with seasonal demand recovery and unexpected supply disruptions from end-February.

The convergence of all three factors magnified the subsequent surge in base oils prices.