Brazil’s Oct base oil output holds steady

Brazil’s base oils output held in a narrow range in October, raising the prospect of avoiding a repeat of a large supply-build the market faced in late 2021.

The steady output coincided with a sustained slowdown in the country’s lube demand throughout most of the year.

The trend contrasted with a surge in base oils production and imports during the second half of last year even as domestic demand had already begun to slow.

Base oils production fell and imports slumped at the start of this year as the surplus overhang cleared.

The more balanced supply this time raised the prospect of steadier output and imports in the fourth quarter and at the beginning of next year.

A steady flow of imports over the coming months would in turn facilitate overseas refiners’ moves to clear surplus cargoes.

Supply in markets like the US typically builds at year-end and the start of the new year because of a seasonal slowdown in domestic demand.  

Brazil’s base oils output of 52,360mᶟ (46,390t) in October compared with 50,930mᶟ the previous month and 52,640mᶟ in August, government data showed.

Production levels were up from around 44,000 mᶟ/month in the first half of the year. They were down from more than 62,000 mᶟ/month during the second half of last year.

Output from Petrobras’s Reduc refinery rose in October to a one-year high of 49,230mᶟ.

Its share of the plant’s refined products output fell back to 0.24pc of the total. The share was down from more than 0.30pc in each of the previous two months.

Refiners globally had less incentive to increase base oils production this year amid persistent surplus supply in Asia-Pacific. Surplus volumes in other markets like Mideast Gulf and Europe also rose since the third quarter of the year.

High diesel prices and tight supply boosted the attraction of producing more middle distillates instead.