Supply falls on dip in Italy, Spain, UK output
Lower Group I exports keep more supply in Europe
Large surplus heading into Q4 increases pressure to open arbitrage
Europe’s Group I base oils supply fell to a four-month low in September as output from major producers slipped and import volumes eased.
The region still faced pressure from surplus volumes heading into the fourth quarter as a drop in Group I exports kept more supply in local markets.
Total supply, or domestic production plus imports from outside Europe, fell to under 180,000 tonnes, down from more than 195,000 tonnes in both July and August, government data showed.
The decline followed a drop in output in Spain and Italy to a four-month low alongside a pull-back in Egyptian imports from August’s multi-year high.
Lower Group I exports dulled the impact of the drop in supply.
Base oils shipments from key Group I producers fell to a four-month low in September, leaving more of the supplies in Europe.
Net regional supply, or supply less exports, dipped to under 125,000 tonnes in September, down from almost 140,000 tonnes in August.
The September volume was still the second-highest in twelve months, raising the prospect of refiners carrying larger-than-usual stocks heading into the fourth quarter.
Demand typically weakens during that period as blenders trim inventories before year-end, complicating moves to clear any surplus.
The elevated September supply likely helped cushion the impact of October’s unexpected production issues in Hungary and reduced shipments from Russia to Turkey.
Even so, the recent shipment of a cargo from Greece to India underscored the ongoing surplus and the pressure to adjust prices to clear excess volumes from the region.
