Europe’s Nov base oils supply falls

Europe’s base oils supply fell to a five-month low in November amid a dip in output in markets like Italy and Spain.

The drop in supplies matched the fall in regional lube demand, limiting the size of the supply-build in Europe during the final months of last year.

Regional base oils prices extended their fall early this year as weak demand complicated refiners’ moves to place those surplus supplies.

A likely pick-up in demand over the coming weeks would better reflect the size of the surplus.

Prices would likely respond in kind.

A drop in base oils supplies of Russian origin would compound any regional supply tightness.

Base oils supply of less than 360,000t in November fell from more than 387,000t the previous month, government data showed.

The supplies mostly originated from western and southern Europe.  

The drop in volumes for a thirteenth month from year-earlier levels cut total supply to around 3.9mn t in the first eleven months of the year.

The volume was down 19pc from close to 4.9mn t during the same period in 2021.

European refiners still had surplus volumes to clear during the final months of last year and early this year even with the drop in output from outlets like Italy and Spain.

The surplus volumes moved to overseas markets like Nigeria and Mideast Gulf.

Lower base oils output, the removal of surplus supplies to overseas markets and the loss of Russian base oils shipments now faced the prospect of a seasonal rise in lube demand over the coming months.

Europe’s lube demand typically falls sharply in the month of December before rising strongly over at least the following five months.

The size of the rise in demand may be smaller than usual this year because of the region’s weak economic growth and blenders’ caution over inventory levels.

Demand is still likely to be higher than during the fourth quarter of 2022.