• Europe's base oils exports rose for a third month in April, reaching their third-highest level in more than two years

• Group I exports climbed to a six-month high as Italy increased shipments despite strong domestic demand

• Rising exports reinforced signs that regional supply remained sufficient, with disruption-related tightness driven partly by stock-building and export commitments

Europe's base oils exports extended their recovery in April, reinforcing signs that supply remained more sufficient than expected even as stock-building and export commitments tightened regional availability.

Total exports to markets outside Europe exceeded 260,000 tonnes in April, rising year on year for a third straight month and reaching their third-highest level in 26 months, Eurostat and HMRC data showed.

The elevated exports coincided with European blenders’ moves to accelerate purchases and build stocks to cover against supply disruptions.

The combination tightened availability even amid signs of healthy output. The supply was there, but it left.

Key Highlights

·         Group I exports rose 19% year on year to the highest volume in six months as flows from Italy surged to a 21-month high.

·         Italy's exports climbed even as domestic demand remained elevated, leaving domestic supply lagging consumption for a second straight month.

·         Italy's base oils output recovered to a near-nine-month high in April, with run rates above typical levels.

·         Africa accounted for a smaller-than-usual share of Europe exports as flows shifted toward other destinations.

·         Shipments to India and Singapore increased, while exports to the US remained elevated.

Market Repercussions

The rise in exports added to the strain created by disruption-related stock-building across Europe during the second quarter, leaving supply struggling to keep pace with demand.

That balance could now shift as disruption risks ease and crude oil prices fall.

Rising output and higher run rates in markets such as Italy contrasted with earlier concerns that elevated gasoil margins would prompt refiners to divert feedstock away from base oils production.

Term export commitments accounted for a significant share of the supply that left the region, limiting refiners’ ability to redirect supply quickly as domestic demand accelerated.

Even so, Europe’s elevated prices relative to other markets could give refiners more reason to retain more production within the region.

The improving supply outlook created a dilemma for blenders.

The disruption period underscored the value of holding larger stocks to provide a buffer against unexpected shortages.

But the prospect of improving availability and falling prices increased the risk of carrying more expensive inventories into a weaker market.