The UK’s base oils output fell to a one-year low in July at a time of year when Europe’s demand faced a seasonal slowdown.The fall in output was insufficient to counter a rise in Italy’s output to a thirteen-month high and in Spain’s output to a one-year high.Higher output from Poland and a pick-up in imports from Egypt added to Europe’s Group I base oils supply.Higher supply and weaker demand left Europe facing a growing surplus of Group I base oils that extended through the third quarter of the year.The UK’s base oils output of 19,000 tonnes in July fell from 23,000 tonnes the previous month to the lowest in a year, government data showed.But the UK was the outlier.Output in Italy, Spain and Poland extended their recovery following scheduled maintenance work or unplanned production issues during the first half of the year.Higher output, combined with a rise in imports, lifted Europe’s Group I base oils supply to more than 195,000 tonnes in July..The volume was the highest in six months and rose from an already-elevated level of more than 190,000 tonnes in June.The rise in supply preceded a typical seasonal slump in Europe’s lube demand during the summer-holiday period.The diverging supply-demand fundamentals boosted the need for a pick-up in base oils exports to limit the size of a build-up of surplus volumes..Europe’s Group I base oils exports to markets outside the region duly rose in July to the highest level since January, mostly on the back of a surge in shipments from the UK.But regional supply remained elevated even with the rise in exports.The dynamic increased the need for the removal of additional volumes and prices that facilitated such shipments.A drop in Europe’s Group I heavy-neutrals base oils prices relative to prices in outlets like Middle East in August and September duly boosted the feasibility of lining up arbitrage shipments to those markets.The rise in Europe’s surplus Group I supply contrasted with a drop in supply of Europe’s Group II base oils supply in July.The pressure on Europe’s Group I base oils prices also contrasted with increasingly firm Group II prices relative to Group I and relative to prices in source-markets like US and Asia during the third quarter.The lack of any scheduled Group I plant-maintenance work raised the prospect of Group I supply holding at more elevated levels during the fourth quarter of the year..Europe’s July Group III base oils supply rises.Netherlands’ July base oils supply falls.UK’s June base oils output falls
