Group II output hits third-highest level in more than a year
Group II share of output rises to highest in almost four years
High output could sustain firm exports in coming weeks
China’s base oils output edged higher in November, driven by a strong rebound in Group II production that offset lower volumes of Group I and Group III grades.
Total paraffinic base oils output rose to close to 460,000 tonnes in November, OilChem China data showed.
Production was up from around 450,000 tonnes in October and broadly in line with the typical 455,000-tonne monthly average over the past year.
Rangebound output masked a sharp recovery in Group II production, which climbed to the third-highest level in more than a year following the completion of plant-maintenance work.
The trend lifted Group II’s share of domestic output to the highest level in almost four years and contrasted with a drop in Group III production to a four-month low.
China’s domestic Group II base oils price continued to outperform Group III during the fourth quarter despite the widening supply-gap between the two grades.
The output and price trends pointed to firmer supply-demand fundamentals for Group II base oils even as refiners expand domestic Group III production capacity.
Strong Group II prices relative to other grades and relative to diesel could encourage refiners to maintain or increase production in December.
Any such moves would coincide with a seasonal winter slowdown in domestic demand.
Higher output would also follow a recent rise in China’s base oils exports and the frequent availability of spot cargoes in the Asia-Pacific market.
A further rise in output, combined with weak demand, risks exacerbating that trend and adding further supply to regional markets.