Italy’s January base oils output jumps

Italy’s base oils output rose to an eighteen-month high in January at the same time as regional demand remained weak.

The subsequent rise in surplus supply added to downward pressure on regional base oils prices and triggered a swathe of arbitrage shipments to markets like West Africa and the Mideast Gulf.

The surge in base oils output came just ahead of and helped to cushion the impact of the EU’s ban on base oils imports from Russia.

But weaker-than-usual lube consumption, uncertainty about demand and regional blenders’ moves to push back stock-replenishment plans dampened the impact of the loss of the Russian supplies.

They also magnified the impact of the rise in supplies from markets like Italy.

The subsequent pressure on prices highlighted the difficulty that regional refiners faced as they dealt with the overlapping challenge of changes in trade flows and blenders’ shifting procurement plans.

Italy’s base oils output of more than 90,700t in January rose from less than 60,000t the previous month, government data showed.

The January volume was the highest since July 2021. The December volume had been the lowest since last June.

The lower base oils output during the final months of last year had helped to limit the size of the regional supply surplus in the face of weak lubricants consumption.

The higher base oils output at the start of this year increased the supply surplus.

Italy’s base oils exports already rose to a nineteen-month high in December, reflecting the country’s growing surplus even with output at lower levels.

The surge in January supplies increased further the need to line up overseas outlets for the surplus.

The shipment of several cargoes to the Mideast Gulf reflected the pressure to clear the volumes.

Shipments in that market faced competition from supplies of Iranian origin and offers of cargoes of Russian origin.

Supplies from those markets are typically at steep discounts to prices for supplies of European origin.