The UK’s base oils output fell in June, contrasting with a rise in output in markets like Italy and Spain that helped to lift Europe’s Group I supply to a five-month high.The rise in supply supported a rebound in Group I base oils exports to markets outside the region.It also contrasted with a drop in supply of Group II and Group III base oils in June.The dynamic suggested that rising supply was a key factor behind Europe’s weaker Group I prices relative to premium-grade base oils in recent months.It also raised the prospect of Europe facing a larger surplus of Group I supplies to clear during the final weeks of the third quarter.The UK’s base oils output of 23,000 tonnes in June fell from close to 30,000 tonnes in May to an eleven-month low, government data showed.The size of the slowdown lagged the jump in Italy’s base oils output in June from May amid a recovery in production following plant-maintenance work.Spain’s base oils output rose less sharply than Italy in June. The volume was still the highest in ten months.Higher output, combined with steady imports, lifted Europe’s Group I base oils supply to more than 190,000 tonnes in June..The volume rose from average levels of around 164,000 tonnes/month during the previous eight months to the highest since January.Supply could extend its rise during the third quarter of the year following the completion of plant-maintenance work and as firm margins incentivize refiners to maintain high output.The rise in supply supported a rebound in Group I base oils exports to markets outside Europe to a five-month in June..Excluding those shipments, Europe’s net supply rose to the highest since last September.The rise in supplies preceded a seasonal slowdown in Europe’s lube demand during the summer holidays, especially in the month of August.Higher supply and weaker demand raised the prospect of a larger volume of surplus supplies to clear at the end of the third quarter of the year.A larger surplus increased the importance of a strong seasonal pick-up in regional demand to absorb more of those supplies.A more muted pick-up in demand would by contrast exacerbate the pressure on supplies..Netherlands’ June base oils output falls.Europe June Group III supply holds firm.Base Oil News stories and analysis also available on ICIS platform
