Despite a period typically marked by price inclines, the European Base Oil market exhibited surprising stability during the first half of July 2024. However, this equilibrium opposes a market under considerable strain as the overall market remained surprisingly high for this time of year due to ongoing supply constraints.

Primarily, the surge in crude oil costs, the fundamental feedstock for Base Oil production, has exerted upward pressure on production expenses. Concurrently, logistical challenges stemming from the Hamburg port strike and the ongoing Red Sea disruptions have inflated shipping costs, further exacerbating market tensions. A previous shortage of lighter neutral Group I grades compelled blenders to shift their focus to Group II alternatives. The reluctance of these blenders to revert to Group I, even as availability improves, has tightened overall market conditions. Henceforth, the Group II refineries constructed in the United States have continued to ship Base Oil supplies to Europe to meet the strong demand from the lubricants business. In the meanwhile, arbitrage prospects from the USA to the Middle East and India were unappealing due to the logistical challenges associated with shipping past Africa's Cape of Good Hope. As a result, European Base Oil exports have been suspended, with the market relying exclusively on imported cargo to satisfy domestic consumption. This resonated move has increased the domestic supply which somewhat offset the logistical challenges. ExxonMobil’s refineries in Rotterdam and Fawley, UK, which recently underwent significant maintenance, have resumed regular shipments to West African markets which could alleviate localized supply pressures.

As per ChemAnalyst, the prolonged port strike could cause logistical problems and lengthen delivery delays, which would raise Base Oil costs. As a result, Base Oil prices in Germany are predicted to soar until the end of July 2024. Meanwhile, the acquisition of Tecoil strengthens TotalEnergies' position in the Base Oil market by providing access to advanced re-refining technology which could boost the market sentiments in the upcoming weeks. Tecoil has a production facility in Hamina, eastern Finland, that can produce 50,000 tons of RRBOs a year. The company has collected spent lubricants and provided them to its plant by building a strong circular economy network throughout Europe. The goal of this action is to satisfy the growing consumer demand for high-performing and eco-friendly Base Oils. This allows them to produce more sustainable and high-performance lubricants while contributing to a circular economy for lubricants as Tecoil specializes in producing Re-Refined Base Oils which can reduce the carbon footprint of lubricant production compared to using virgin Base Oils.