Spain directed almost all of its Group III base oils exports to northwest Europe in June as slowing shipments from Indonesia increased reliance on alternative suppliers to support Europe's premium-grade market.

Group III exports from Cartagena held close to 40,000 tonnes in June, similar to May, port data showed.

Unlike May, almost all cargoes headed to northwest Europe, lifting shipments to that region to their highest level in more than two years.

The pick-up in flows and the arrival of a cargo from Indonesia in early July left Europe better supplied at the start of the third quarter.

Availability could then tighten, with a gap in flows from Indonesia over the coming weeks and maintenance at multiple Group III units converging in the months ahead.

Key Highlights

·         Shipments from Spain to northwest Europe reached their highest level in 30 months, contrasting with a slump in flows to other outlets such as Turkey and India.

·         Indonesia's Group III exports fell to an 11-month low in May and showed signs of weakening further during June.

·         No Indonesian cargoes were scheduled to arrive in Europe for more than a month from early July.

·         A slowdown in Indonesian flows would follow the dip in shipments from the Middle East, whose monthly flows to Europe averaged close to 60,000 tonnes in the year to March.

Market Repercussions

The market headed into summer with the Group III supply chain under pressure from multiple directions.

The gap of more than a month before the arrival of another shipment from Indonesia left northwest Europe more dependent on flows from Spain.

The market already entered the period with Group III supply increasingly tight after several months without normal Middle East flows.

The convergence of slower Indonesian shipments and maintenance at several major plants pointed to increasingly squeezed supply capacity, with seasonal demand weakness the only partial offset.