Europe's base oils exports eased in May as more premium-grade cargoes stayed within the region to cover the gap left by collapsing Middle East imports.

Exports fell to less than 250,000 tonnes in May from more than 290,000 tonnes in both March and April, Eurostat and HMRC data showed. The decline left exports at their lowest since January.

The slowdown reflected diverging trends across grades. Group I exports jumped 40% year on year, easing only slightly from April's six-month high and staying above normal levels. Exports of other grades fell to a nine-month low.

The divergence followed a fall in imports to a 27-month low in May, tightening regional supply of premium grades and increasing the need to retain more material within Europe.

Key Highlights

·         Group I exports continued outperforming other grades, adding to signs that surplus availability remained concentrated more in those base oils.

·         Italy's Group I exports held firm for a second month despite domestic production easing to a five-month low.

·         Europe's imports fell to a 27-month low after the collapse in Middle East premium-grade shipments and slowdown in Asia supplies.

·         The pattern increasingly mirrored the US market, where tighter domestic supply similarly reduced spot export availability.

Market Repercussions

Europe increasingly joined the US in prioritising domestic supply over overseas spot markets as premium-grade availability tightened.

That created additional opportunities for suppliers in China, India and South Korea to expand shipments in overseas markets, filling demand previously covered by the Middle East, Europe or the US.

Europe was likely to retain a greater share of premium-grade production within its domestic market while Middle East supplies remained disrupted.

Buyers in the region were also starting to turn to the same Asian markets for supplies that Europe previously targeted as outlets for its own surplus shipments.