Europe’s May base oils supply falls

Base oils supply from eight countries in Europe fell in May to its lowest in more than three years, just as the region’s lube demand was rising.

Total base oils supply of less than 260,000t in May fell from more than 330,000t the previous month, government data showed. The volume was the lowest since early 2019.

The supplies mostly originated from sources in western and southern Europe.

The lower volumes cut the region’s total base oils supply to less than 1.50mn t in the first five months of the year.

The volume was down by more than 500,000t from more than 2.0mn t during the same period last year.

It was lower even than during the same period in 2020, when refiners slashed run rates as pandemic lockdowns triggered a slump in fuel demand.

Regional base oils supply fell in May because of a sharp drop in output in the Netherlands and still lower-than-usual production in key sources like UK and Italy.

The drop in supplies partly reflected the impact of plant maintenance work. Unusually high middle distillates prices also incentivized refiners to boost output of those products instead.

A drop in base oils shipments of Russian origin compounded the fall in regional supplies.

The lower supply coincided with a pick-up in European lube demand in May. A seasonal rise in demand got additional support from a post-lockdown recovery in services and tourism activity.

The tight supply-demand fundamentals supported a surge in European base oils prices in the second quarter of the year.

The higher prices made more workable the arbitrage from other markets like US and Asia-Pacific.