The European Commission has decided to cut the Group II base oil import quota by 50pc to 75,000t for the first half of 2022 and to abolish it from the second half of the same year.
Member states will have the opportunity to reopen discussions on the removal of the quota if the 75,000t allowance proves to be insufficient during the first half of 2022.
The quota was already reduced by 50,000t to 150,000t for the second half of 2021. The quota applies to Group II base oil grades N150, N220 and N600. Imports from countries that have a free trade agreement (FTA) with the EU are not included in the quota.
The reduction of the quota will predominantly affect imports of Group II base oils from the US. Canada, Singapore, Japan and South Korea have FTAs with the European Union.
Group II prices in Europe have been trending upwards for the past year. Initial price pressure came from a shortage of supply in the Group I market. The tight availability added to demand for premium-grade Group II base oils as an alternative.
Group I supply is now recovering. But scant surplus availability of Group II base oils in the US market has kept imports tight for some European distributors. The tightness has provided sustained support for Group II prices.
