Output falls to lowest since April, when maintenance work slashed base oils production.
Lower output cuts inventories to lowest since May, easing pressure to clear surplus volumes
Lower output coincides with tighter-than-expected supply in other markets like Hungary and Turkey
Italy’s base oils production fell sharply in October, dropping to a six-month low and adding to tighter-than-expected Group I availability in Europe during the final months of the year.
The steep decline cushioned the impact of a seasonal slowdown in regional demand at year-end, limiting the size of the typical build-up of surplus Group I base oils in the fourth quarter.
A smaller surplus eased pressure on refiners to push excess volumes into export markets or to accept prices in those markets that they deemed to be too low.
Lower-than-expected supply heading into year-end is now set to overlap with early-year restocking by blenders, potentially supporting regional supply-demand balances as 2026 begins.
Key Market Highlights
Italy’s base oils output fell below 14,000 tonnes in October, down from more than 44,000 tonnes in September and the lowest since April.
The scale of the October decline in both base oils and total refinery output pointed to additional maintenance work beyond an earlier shutdown in March–April.
Base oils stocks fell to the lowest level since May, as reduced output contrasted with a typical October rise in consumption from September.
Inventories now sit nearly 50% below year-earlier levels, reducing pressure to clear surplus Group I supplies via exports.
Italy’s output decline coincided with wider regional disruptions, including an unexpected plant shutdown in Hungary and lower Group I availability in Turkey.
Italy’s lower production and stocks limited its flexibility to respond to any near-term pick-up in Group I demand for alternative supplies.
European Group I base oil margins continued to weaken in Q4 2025, though the pace of decline slowed compared with Q4 2024.
Market Implications
Italy’s reduced base oils output removed a key source of incremental Group I supply at a time of year when surplus availability typically rises sharply.
Multiple overlapping European supply disruptions and the completion of year-end destocking could leave the market facing a more balanced-than-expected starting point for 2026.
