The Netherlands’ base oils output rose to a four-month high in May, while Europe’s imports from markets producing Group II base oils climbed to a seven-month high.The rise in output and imports lifted Europe’s Group II supply to a seven-month high.Europe’s Group II base oils price-strength in the second quarter of the year and at the start of the third quarter instead pointed to tighter supply.The contrasting dynamics pointed either to firmer-than-usual demand or the prospect of an adjustment in prices.The Netherlands’ base oils output came to 96,000 tonnes in May, government data showed.The volume was closer to more typical levels in the eight months to January, before output dipped to average levels of 82,000 tonnes/month in the three months to April.The Netherlands is home to Europe's sole virgin Group II base oils plant.A pick-up in the Netherlands' domestic demand partially balanced out the rise in output.Rather than end-user consumption, demand rose because of a pick-up in consumption for “transformation in oil products” to a six-month high.A pick-up in base oils imports from key overseas Group II sources like the US added to the rise in the Netherlands’ output.Europe’s total Group II supply, or Group II imports and the Netherlands' output combined, duly rose to more than 163,000 tonnes in May..The volume rose from a narrow 134,000-141,000 tonne/month range during the previous four months to the highest since last October.Higher supply coincided with increasingly firm Europe Group II base oils prices, especially for heavy grades.Europe’s Group II heavy-grade price-premium to Group I heavy neutrals began a sharp rise in May that extended into the third quarter of the year.Group II heavy-grade prices also rose strongly versus prices in US and Asia.The increasingly protracted price-strength suggested that market fundamentals were supporting the higher prices, despite the rise in supply.The dynamic pointed to a strong pick-up in demand for Group II base oils during the second quarter of the year.Any such rise in demand coincided with Group I plant-maintenance work during the second quarter that tightened further the availability of Group I supplies.Any such rise in demand for Group II base oils also coincided with maintenance work and production issues that affected Europe’s Group III base oils supply during the second quarter of the year.The rise in demand and drop in availability of those other base oils grades coincided with a seasonal pick-up in Europe’s lube consumption..US’ May base oils exports to Europe rise.Europe’s May Group III base oils supply holds firm.Netherlands’ April base oils output rises.Base Oil News stories and analyses also available on the ICIS platform
