Europe's October Group III supply falls

Europe’s Group III base oils supplies fell in October to the second-lowest level in almost two years amid a drop in shipments everywhere from Asia to Mideast Gulf and Europe itself.

Supplies of less than 110,000t in October fell from more than 160,000t the previous month. The volume was the lowest since May and second lowest since end-2020.

The lower volumes cut supply for a product that faced stronger demand compared with Group I and Group II base oils. At the same time, supplies of those other grades were more plentiful.

The rise in European Group III base oils prices relative to Group I and Group II prices in the fourth quarter of the year reflected their tighter fundamentals.

Group III prices also held at a steep premium to crude and diesel throughout this year, reflecting their structural strength.

The drop in shipments in October highlighted the importance of supplies from Spain for the European market.

A surge in supplies from the country this year coincided with and partly triggered a drop in shipments from other countries to Europe.

Higher prices in the US added to the attraction of moving more shipments to that market.

The lower October supplies in Europe partly reflected a drop in shipments from Spain. The slowdown gathered pace in November and extended into December.

Higher volumes from Spain this year had previously cushioned the impact of the fall in shipments from other markets to Europe.

That support was more muted in October amid plant maintenance work in the Mideast Gulf and a drop in shipments from South Korea.

The slowdown cut total Group III supplies to Europe to around 1.41mn t in the first ten months of the year. The volume was down 5pc from 1.49mn t during the same period last year.

The slowdown gathered pace in the second half of the year, with supplies falling 8pc in the four months to October.