Europe June exports to Russia stay low

Europe’s base oils exports to Russia stayed unusually low in June even as they edged up to a three-month high.

Base oils exports of 5,400t in June rose from 3,910t the previous month, EU government data showed. It was still the third lowest in more than six years and down 75pc from year-earlier levels.

Exports of 11,610t to Russia in the three months to end-June fell from more than 45,000t during the first quarter of the year and by 82pc from almost 64,000t during the same period a year earlier.

A large share of Europe’s exports to Russia had previously originated from countries that produce other base oils grades rather than Group I supplies.

The trend reflected Russia’s structural oversupply of Group I base oils and tighter availability of other supplies such as premium grades and naphthenic base oils.

The fall in shipments to Russia in the second quarter included a slump in exports from those countries that produced those other grades.

Exports from Finland to Russia fell to less than 2,700t in the second quarter of the year. The volume was down from almost 22,000t during the first three months of the year.

Finland is home to a Group III base oils plant.

The drop in Europe shipments to Russia freed up more volumes for other markets at a time when regional supply was unexpectedly tight.

The tightness partly reflected a drop in Group I base oil shipments of Russian origin.

The tight availability and rising prices for Group I supplies incentivized regional blenders to procure more premium-grade base oils instead.

The change in trade flows is likely to be prolonged.

The dynamic incentivizes blenders to adjust their base oils requirements accordingly or to line up alternative supply sources.