Europe June base oils supply falls from Netherlands, US

European base oils supply from Netherlands production and US exports fell in June close to its lowest in 19 months amid a slump in shipments from the US.

The total volume of the Netherlands’ base oils and lube production combined with US exports to Europe came to 113,230t in June, government data showed.

The volume was down 10pc from the previous month and 38pc lower than year-earlier levels of more than 180,000t.

Total supplies of 812,660t in the first half of the year were down 22pc from 1.05mn t during the same period last year.

The Netherlands and the US are both key sources of Group II base oils for the European market.

European demand for premium-grade base oils rose in first-half 2022 as blenders sought alternative supplies in place of Group I base oils.

High prices and tight availability of Group I supplies incentivized the switch.

But Group II supplies were also lower. The trend compounded the supply-squeeze in Europe during the first half of the year.

Supplies from the Netherlands were lower amid a drop in base oils production, especially in May.

The speed and size of the drop in supplies that month were similar to supply trend patterns during plant maintenance work.

Unusually high base oils shipments from US to Europe cushioned but were insufficient to reverse the drop in supplies that month.

The Netherlands' base oils output recovered in June. But the rise in supplies was insufficient to counter a slump in shipment volumes from the US to a four-month low.

The slowdown coincided with plant maintenance work in the US.

The tight supply fundamentals supported firm prices.

The premium of European Group II base oils prices to Group I prices trended lower during first-half 2022 but remained higher than during the first half of last year.

The premium to Group I then rose strongly from the beginning of the third quarter of the year.

The tighter availability also highlighted the relatively limited Group II supply options for European blenders.

There was a persistent surplus of Group II supplies in the Asia-Pacific market in first-half 2022. But the volume of arbitrage shipments to Europe was relatively low.

Tighter European supply and firm prices relative to Group I boosted the attraction of using more Group III base oils.