Europe March base oil supply stays low

Base oils supply from eight countries in Europe stayed unusually low in March, reflecting the impact of lower output in key markets like Italy, UK and Netherlands.

Base oils supply of close to 286,000t in March fell from more than 298,000t the previous month and by 37pc from year-earlier levels, government data showed.

The volume was derived mostly from production from markets in western and southern Europe.

Total supply of close to 868,000t in the first three months of the year was down 30pc from 1.25mn t during the same three-month period a year earlier.

The volume was lower even than during the first two quarters of 2020.

Regional base oil prices surged last year in response to strong demand and tight supplies, even with the higher production level during that period.

Regional supply got a further boost from a rise in shipments of Russian origin.

Regional base oil prices have risen sharply again this year. Prices have risen more because of the surge in crude and diesel prices since the start of the year. But supply fundamentals are even tighter than last year.

Besides the drop in output in markets like Italy, a slump in shipments from Russia to Europe has added to the supply squeeze.

Most of the drop in supply has involved Group I base oils. The shipments from Russia also consisted mostly of Group I base oils.

The tight supply has complicated procurement plans for buyers outside Europe that typically covered requirements with supplies from that region.

Some of them have sought supplies from Asia-Pacific, where prices are at a steep discount to prices in Europe.