Europe’s Dec Group III supply falls

Europe’s supplies of Group III base oils stayed low in December amid a dip in shipments from the Mideast Gulf and Asia-Pacific.

Supplies from Mideast Gulf were likely to rise in January. Supplies from Asia-Pacific were likely to fall even more.

The mixed flows raised the prospect of Group III base oils supply remaining tight early this year even after the completion of plant maintenance work in Europe and the Mideast Gulf late last year.

Supply had already been sufficiently tight to cushion the impact of a seasonal slowdown in lube demand in Europe during the winter months.

Blenders’ wariness about the impact of a slowdown in economic activity in the region added to the drop in demand.

Any ongoing supply tightness would now coincide with a seasonal pick-up in demand ahead of the spring oil-change season.

Europe’s Group III base oils supply of around 115,000t in December fell from a revised volume of more than 150,000t the previous month, government and port data showed.

Group III supply fell for the fifth time in six months, cutting the total volume to 1.67mn t in 2022. The volume fell by 7pc from 1.80mn t the previous year.

Supply fell in the final months of the year partly because of Group III plant maintenance work in Europe and the Mideast Gulf.

Shipments from the Mideast Gulf to Europe had already fallen steadily throughout the year even before the maintenance work.

Rising base oils supply from Spain and high prices and firm demand in the US attracted more Mideast Gulf shipments to that market instead.

A drop in supplies from Asia-Pacific in December compounded the slowdown.

An unusual pause in shipments from Indonesia to Europe in December suggested factors like plant maintenance work or run-cuts.

Shipments from South Korea also slowed.

The slowdown turned to a halt in shipments from South Korea in January.

The drop in supplies from the northeast Asian country was likely to counter the impact of a pick-up in shipments from the Mideast Gulf to Europe since late last year.

Limited surplus supply coincided with signs of steady demand.

Europe’s Group III base oils prices reflected those firm fundamentals.

Prices extended their premium to Group I and Group II prices and to crude and diesel in recent weeks.