Global base oils supply falls in August

Base oils supply in the Americas, western Europe and Asia-Pacific fell in August to an 18-month low as lower output in Europe and a slump in supplies in the US countered a small rise in volumes in Asia-Pacific.

Base oils prices fell in Europe and Asia-Pacific in the third quarter of the year even with the sharp drop in supply.

Prices fell as even the lower supply levels continued to exceed demand.

Total supply of around 1.91mn t in August fell from 2.07mn t the previous month to the lowest since February 2021.

The volume was derived by combining supplies in the Americas, eight countries in Europe and seven markets in Asia-Pacific.

The volume excluded China.

Including China, supply of 2.25mn t in August fell by 7pc from 2.43mn t the previous month.

Global base oils prices rose strongly in early 2021 in response to the tight supply.

Prices held steady or fell in the third quarter of this year with supply at similarly low levels.

The contrasting price response partly reflected the timing of the drop in supplies.

The lower volumes in early 2021 came ahead of a seasonal rise in demand.

The drop in supplies in August coincided with a lull in lube consumption during the summer holidays and during the monsoon season in southeast Asia.

Chinese demand also remained unusually weak.

But demand in the Americas held firm. The size of the drop in demand in other markets was also smaller than the fall in supply.

The trend suggested that some of the base oils supplies had been used for non-lubricating oil applications. Demand for those other applications had also fallen.

The drop in base oils prices in the third quarter also reflected lower crude oil and diesel prices.

The drop in prices was less steep than the fall in crude and diesel prices. The trend suggested that there was less downward pressure from surplus supply.

The smaller fall in prices helped to boost many refiners’ profit and margins in the third quarter even in the face of more muted demand.