Europe’s Dec base oils supply falls

Europe’s base oils supply fell to a six-month low in December amid a drop in output in markets like Italy and UK.

Supply still exceeded lube demand in the region, triggering a sustained fall in base oils prices.

The weak fundamentals extended into the first few months of this year as blenders delayed plans to replenish low stocks or sought to procure smaller volumes more regularly.

The moves kept downward pressure on base oils prices.

Prices stayed under pressure even as the speed of the fall in last year's regional supply consistently outpaced the drop in demand.

The trend pointed to shrinking surplus supply and raised the prospect of tighter-than-expected availability of base oils this year when demand revives.

The EU’s ban on imports of Russian base oils from the beginning of February is set to tighten supply further.

Europe's base oils supply of less than 354,000t in December fell from close to 359,000t the previous month, government data showed.

The volume was the lowest since last June.

The drop in volumes for a fourteenth month cut the region’s total supply to around 4.30mn t in 2022.

The volume fell by almost 20pc from just over 5.30mn t in 2022 to the lowest in more than four years.  

The speed of the drop in regional supply far outpaced the 4pc fall in lube demand in Europe’s four largest economies in 2022.

A 13pc fall in Europe’s base oils imports from Russia in 2022 added to the drop in supply.

US’ base oils exports to Europe fell by 6pc in 2022, compounding the fall in availability.

Europe’s base oils prices fell through second-half 2022 and early this year as demand weakness outweighed lower supply.

The trend suggested that blenders were keeping base oils stocks unusually low and limiting any replenishment plans.