Italy’s May base oils stocks fall

Italy’s base oils stocks fell in May to their lowest in more than seven years as consumption outpaced the country’s supplies.

Base oils stocks of 49,780t in May fell from 54,720t the previous month to the lowest since before 2015, government data showed.

Italy’s base oils inventories fell for seven straight months to less than half their November 2021 level and from average levels of 95,000 t/month in 2021.

Stocks slumped as the country’s base oils production lagged consumption in six of the last seven months to May.

The persistent shortfall reflected the impact of the prolonged shutdown of a key Group I base oils unit in the country since late last year.

The repercussions have been multifold.

Italy’s base oils exports have slumped this year as domestic supply has tightened.

Overseas buyers in markets like West Africa and East Mediterranean typically rely on base oil cargoes from Italy to cover a portion of their requirements.

These buyers have had to seek supplies from elsewhere.

Italy’s base oils imports have risen to make up the shortfall in supply.

The moves boosted demand for shipments from markets like Spain at a time when supply in Europe was tighter than expected.

European Group I base oil prices surged in the first half of the year in response to tight regional supply.

The tight fundamentals would have been worse if demand had been stronger.

Base oils consumption has instead fallen continually from year-earlier levels throughout the past year.

Consumption extended that slide in May and dropped at a faster pace than the fall in base oils production for only the second time in the last seven months.

Consumption is unlikely to make any significant rebound over the coming months as Italy's economic activity slows.

Base oils production by contrast is likely to continue its recovery following the restart of the Group I base oils plant.