Germany’s August lube supply falls

Germany’s lubricating oil supply fell in August as production slumped in the face of slowing domestic and overseas demand.

Lube production of 136,190t in August fell by 20pc from year-earlier levels to the lowest since June 2020, government data showed.

Lubricating oil imports fell less steeply, by 3pc to 23,800t.

Production and imports combined fell in August to a 26-month low of 159,980t.

The slowdown cut total supply to 1.44mn t in the first eight months of the year. The volume was down 164,000t from 1.60mn t during the same period last year.

Lubricating oil production fell in response to sliding domestic and overseas lube demand, even at a time when Germany’s industrial production was still rising.

But industrial activity was forecast to slow over the coming months in the face of rising costs and slowing orders.

The earlier slowdown in lube production reflected one of its functions as a bellwether for the state of upcoming economic activity.

Lower lube production in Europe’s largest economy cut blenders’ requirements for base oils to produce engine oils and industrial oils.

The slowdown in requirements prolonged blenders’ existing base oils inventories.

It also incentivized them to manage their subsequent replenishment requirements carefully in view of expectations of a further slide in demand.

Weaker demand for base oils coincided with Europe’s increasingly tight diesel supplies.

Weak base oils fundamentals sustained downward pressure on prices in the third and fourth quarters of the year.

Strong diesel fundamentals supported unusually high prices for the motor fuel relative to crude and to products like base oils.

The contrasting supply-demand fundamentals incentivized refiners to focus on maximizing diesel production and cutting back on base oils output.

The fall in Germany’s lube production was concentrated on turbine oils, process oils and metalworking fluids. Output of the lubricants all fell by more than 30pc in August.

Transformer oils remained an outlier. Output of the lubricant rose by 29pc in August and for a third straight month.