December output climbs to a forty-five month high as Group I demand falls to a one-year low
Widening surplus increases reliance on elevated exports to limit inventory-build
Higher exports add to pressure in Asia's Group I market, where margins continue to weaken
Thailand’s Group I base oils market swung deeper into surplus in December as output surged to a forty-five month high, while domestic demand weakened.
Total base oils output rose to 62,700 kilolitres (56,000 tonnes) in December, up from less than 57,000 kilolitres in each of the previous seven months and the highest since March 2022, Ministry of Energy data showed.
Domestic demand for Group I supplies by contrast fell to less than 10,000 kilolitres, its lowest in a year, widening the gap between output and consumption to the largest level since late-2021.
The imbalance put pressure on refiners to either adjust output or to boost exports to limit a build-up of surplus supplies.
Key Highlights
· Thailand’s December net domestic Group I base oils supply, or output less domestic demand, rose to almost 53,000 kilolitres, up from less than 45,000 kilolitres in November and the highest since November 2021.
· Group I base oils exports rose year on year for the third time in four months, climbing to a three-month high and removing a significant portion of the excess volumes.
· Total December net Group I supply, or output less total demand, rose to a four-month high of close to 19,000 kilolitres, a level that remained relatively manageable.
· Thailand’s base oils imports rose year on year for a sixth month, boosting overall supply and intensifying pressure on domestic Group I volumes.
· Fourth-quarter total supply, or output and imports combined, exceeded 261,000 kilolitres, up from less than 245,000 kilolitres in the third quarter and the highest quarterly volume in more than five years.
Market Repercussions
Robust export flows helped to limit a build-up of surplus supplies in December and across the fourth quarter.
That trend would need to persist if Thailand’s output remains at elevated levels and domestic demand stays weak.
Sustained high exports from Thailand would add to a pick-up in Group I base oils shipments from Japan since late last year.
Any slowdown in Thailand’s production or recovery in domestic demand would reduce surplus supplies and ease pressure to clear volumes in overseas markets.
Such a scenario is increasingly feasible as the persistent regional surplus put growing pressure on Asia’s Group I base oils margins, which have fallen steadily since the start of the year.