Europe’s Q2 Base Oils Exports Hold Up Despite Supply Disruptions

Europe's base oils exports fell in June on a UK-led slowdown, but second-quarter exports still rose as the region proved more resilient than Asia and the US amid global supply disruptions.

Total exports to markets outside Europe fell to more than 250,000 tonnes in June, down 3% year on year and the first annual decline in four months, Eurostat and HMRC data showed.

The broader picture was stronger. Europe exported close to 800,000 tonnes in the second quarter, up from less than 785,000 tonnes in the first quarter and climbing 4% from a year earlier.

That contrasted with a 7% year-on-year decline in Asia’s exports in the second quarter and a 6% drop in US exports.

Europe’s relative resilience reflected the different ways the Middle East disruptions have affected the three regions. The US has had to rely more heavily on domestic production as Group III imports from the Middle East collapsed, while Asia has faced feedstock disruptions and redirected more of its remaining exports toward Europe and the US.

Europe had more Group III production available domestically, reducing the size of the gap left by lost Middle East volumes. But it too has had to adjust its trade flows, with shipments to Singapore rising sharply in the second quarter.

Key Highlights

·         Exports to Africa rose to more than 83,000 tonnes in June, the highest in six months and up 14% year on year.

·         Africa accounted for more than 33% of Europe’s exports, the largest share in six months.

·         Higher exports to Africa contrasted with a fall in shipments to Singapore to less than 1,000 tonnes, the lowest since January.

·         Even with the slowdown, Europe's exports to Singapore surged to more than 38,000 tonnes in the second quarter, up from less than 8,500 tonnes in the first three months of the year and the highest since the second quarter of 2021.

Market Repercussions

The disruption has affected each region differently, with Europe covering more of Singapore's shortfall, Asia redirecting Group III to Europe and the US, and the US relying more on domestic supply.

That pattern is likely to continue for as long as the Middle East disruptions persist, with Group I and Group II supplies moving from Europe to Asia and Group III moving from Asia to Europe and the US.

June's slowdown in shipments to Singapore could signal that supply conditions there are starting to stabilise.

An extension of the trend would ease the need for Europe to keep plugging that gap, freeing up more barrels for other markets.