Europe’s Feb base oil supply stays low

Base oils supply from seven countries in Europe edged higher in February but was still the second-lowest in the past 20 months.

Base oil supply rose to more than 280,000t in February, up from less than 260,000t the previous month, government data showed.

The volume, derived mostly from production from markets in western and southern Europe, held close to the lowest since June 2020.

That period, in the second quarter of 2020, was when European refiners were operating at much lower production levels.

They had slashed run-rates in response to the slump in motor fuel demand from April 2020 because of widespread countrywide lockdowns.

Base oil supply was lower this time even as refiners operated at much higher run-rates amid unusually high diesel values and tight availability of the motor fuel.

Those high diesel values were one factor that was keeping pressure on base oil supply, with refiners incentivized to produce more of the motor fuel instead.

The prolonged shutdown of a key Group I base oil unit in Italy was another factor behind lower output levels. The shutdown began in November and is expected to extend at least until June.

The lower production in Europe is coinciding with a slump in base oil supplies from Russia. That country is usually a key supplier of Group I base oils both for Europe and for markets that Europe also moves shipments to, such as West Africa.

European Group I base oil prices have surged in recent months partly because of higher crude and diesel prices. Increasingly tight availability of regional base oil supply has added to the upward price pressure.