Italy’s November base oils output falls

Italy’s base oils output fell to a five-month low in November, slowing a build-up of surplus supplies in the face of weak domestic demand.

A slump in the country’s base oils imports in October and a surge in exports countered further the impact of slowing demand.

European base oils prices fell sharply in the fourth quarter of last year because of weak demand that magnified the impact of lingering surplus base oils supplies.

Falling prices added to blenders’ reluctance to procure more supplies.

They also incentivized refiners to cut base oils output and focus on producing more middle distillates instead.

The fall in Italy’s base oils output in November pointed to such an adjustment in production and suggested the size of the country’s surplus at year-end could be smaller than expected.

Supply then faced the prospect of balancing out or tightening faster than expected following the removal of the surplus.

The surplus likely shrank further following a pick-up in shipments to Turkey from late last year and to west Africa early this year.

Italy’s base oils output of 60,490t in November fell from more than 80,000t the previous month to the lowest since last June, government data showed.

Output had been unusually low in first-half 2022 because of the extended shutdown of a key Group I base oils plant in the country.

Italy’s base oils production typically averages more than 90,000 t/month when its plants are operating normally.

The fall in output in November contrasted with a rise in the country’s gasoil production.

The trend boosted gasoil’s share of Italy’s refined products output to more than 44.5pc of the total. The share rose from less than 39pc in October to the highest in more than nine months.

Strong diesel values relative to crude continued to incentivize refiners to maximise middle distillates production at the beginning of this year.

Increasingly weak base oils values relative to crude and diesel incentivized them to cut or maintain low output of the lubricant feedstock even ahead of a seasonal rise in demand later in the first quarter of the year.