Europe’s Group I base oils supply fell in October to its lowest level in almost two years, helping to offset the usual year-end seasonal slowdown in regional demand.

Total Group I supply, or output and imports combined, came to less than 135,000 tonnes in October, down from more than 170,000 tonnes in September, government data showed.

The volume was the lowest since late-2023.

A rise in Europe’s Group I base oils exports to markets outside the region amplified the squeeze on supply.

Tighter availability at the start of the fourth quarter cushioned the impact of a seasonal slowdown in regional demand, curbing pressure on refiners to discount prices to clear excess volumes.

Key Highlights

·         Supply fell amid reduced output in Italy, the UK, and Poland, alongside a production pause in Turkey.

·         Unexpected production issues in Hungary in the second half of October are set to keep the country’s output lower until at least early 2026.

·         Europe’s Group I base oils imports fell to a twenty-two-month low.

·         Net supply, or output and imports less exports, fell to less than 55,000 tonnes, down from more than 110,000 tonnes in each of the previous five months, marking the lowest in more than six years.

Market Repercussions

Europe’s Group I base oils market typically faces pressure from rising surplus supply late in the year, prompting refiners to cut prices to clear the overhang.

October’s tighter-than-usual supply showed signs of limiting that overhang and curbing the volume carried into the start of this year.

Europe’s Group I base oils prices rebounded relative to gasoil prices from early-November, at a time of year when they usually weaken.

The firmer price-differentials added to signs of a more balanced-than-usual market at the end of last year.