UK’s July base oils output rises

The UK’s base oils output rose in July to a five-month high, adding to signs of improving supply in Europe.

Base oils output of 39,340t in July rose from less than 25,000t in each of the previous four months and from less than 2,000t in March, government data showed.

Output still fell 6pc from year-earlier levels.

The sustained slump in production cut the UK’s total base oils output to 165,820t in the first seven months of the year. The volume was down more than 20pc from 210,030t during the same period last year.

The sustained fall in base oils output coincided with a similar drop in production in key markets like Netherlands and Italy during the first half of the year.

A slump in base oils shipments from Russia to Europe compounded the tight availability.

Regional base oils prices surged in the first half of the year in response to tight supply fundamentals and rising crude prices.

The supply tightness began to ease from the start of the third quarter as regional base oils production rose and demand fell.

Base oils production in the Netherlands rose in July to a seven-month high.

Base oils output in Italy bottomed out in May and was set to rebound in the third quarter following the restart of a Group I base oils plant. The plant had been offline since late last year.

Turkey’s demand for European base oils supplies ebbed as rising shipments of Russian base oils covered more of its requirements.

Weaker diesel prices relative to crude in the third quarter of the year and firmer base oils prices relative to diesel added to refiners’ incentive to produce more base oils.

Unusually high diesel prices relative to crude had incentivized refiners to boost output of middle distillates in the second quarter of the year.

The moves compounded the base oils supply tightness at the time.

The UK’s diesel and jet fuel output remained unusually high in July, accounting for 35pc of the country’s total refined products output. The share was similar to the previous month and up from around 30pc in 2021.

The share of base oils rose to 0.98pc of total refined products output in July. The share was up from 0.56pc the previous month and the second highest in 17 months.