Europe’s base oils surplus rose to a six-month high, with Group I, II and III availability all climbing to multi-month highs
Lubricants consumption stagnated while exports declined, keeping overall demand at a six-month low
Early-year surplus cushioned supply disruptions, but stronger March demand likely tightened stocks ahead of Q2
Europe’s base oils supply balance improved in February for a second month, leaving the region with a larger surplus to cushion seasonal demand and the unexpected supply disruptions that followed.
The surplus of supply over demand rose to more than 120,000 tonnes in February, up from over 70,000 tonnes in January and the highest in six months, Eurostat, Census Bureau, Secretary of State for Energy and other government data showed.
The widening surplus reflected rising output and persistently weak demand, putting growing pressure on regional prices at the start of the year.
Higher surplus volumes left the market better positioned to meet a seasonal pick-up in demand toward the end of the first quarter as well as absorb both planned and unexpected supply disruptions.
Key Highlights
· Total supply rebounded to a six-month high, with Group I, Group II and Group III base oils all rising to multi-month highs.
· Imports rose to a four-month high, with shipments from Asia climbing to the highest in at least nine months.
· Total demand, or regional consumption and base oils exports combined, fell year on year for a second month to a six-month low.
· Lubricants demand held in a narrow range for a second month, with little sign of a recovery in consumption.
· Base oils exports fell year on year for a second month, holding at a six-month low.
Market Repercussions
Persistently weak demand incentivized blenders to maintain lean stocks and to procure smaller volumes more frequently.
The strategy curbed their exposure to price volatility at the start of the year but left them more vulnerable to supply disruptions from end-February, magnifying the impact of subsequent restocking.
The surplus built in January and February helped cushion the initial impact of those disruptions and supported the seasonal increase in demand.
Even so, the surge in demand in markets such as Italy in March pointed to a rapid draw on surplus volumes, leaving regional inventories tighter heading into the second quarter.