China’s base oils demand climbed to an eight-month high in November, signalling either a growing build-up of inventories or firmer-than-expected underlying economic activity.

Increasingly firm domestic Group II base oils prices relative to diesel, alongside firm price-differentials over regional cargo prices, encouraged refiners to maximise base oils output and importers to channel more supplies to China.

Healthy supply and rising prices could leave surplus volumes outpacing demand.

Even so, the combination of firm fundamentals and price-strength suggested that underlying demand was unusually resilient, especially for the time of year.

Total demand, or domestic output plus net imports, exceeded 600,000 tonnes for the first time since March, government and industry data showed.

Demand also rose year on year for the fourth time in five months, adding to signs of a shift in market momentum.

A 2% rise in domestic base oils output in November cut the need for additional volumes from overseas markets at a time when demand typically softens towards year-end.

China’s base oils imports instead surged by 60% to more than 160,000 tonnes.

The volume was the highest since March, when imports typically climb ahead of the spring oil-change season.

Slower year-end demand by contrasts typically curbs requirements for overseas supplies.

The counter-seasonal rise in imports included a rebound in Group III shipments from key supply sources to an eight-month high.

The rise in imports lifted their share of China’s Group III supply to more than 60%.

The dynamic extended a trend of imports of the premium-grade base oils covering a growing share of China’s Group III base oils requirements.

The import-share rose amid unusually weak domestic Group III base oils prices relative to Group II prices, which incentivized refiners to focus on producing more Group II base oils instead.