China’s July base oils demand rises

China’s base oils demand rose in July even as signs of slowing economic activity raised the prospect of a slowdown in the country's lube consumption.

The contrasting trends pointed to moves to replenish low stocks after a protracted round of plant-maintenance cut China’s base oils supply in the second quarter of the year.

Any such pick-up in inventories raised the prospect of adding to pressure on demand in the coming months if China’s economic growth continues to struggle.

The country’s base oils demand, or output and net imports combined, rose to more than 525,000 tonnes in July, government and industry data showed.

The volume was up from around 507,000 tonnes in June and rose from year-earlier levels for the first time in three months.

Demand rose after China’s base oils output fell in the second quarter of the year to its lowest level since late-2023.

An ongoing slide in China’s base oils imports compounded the drop in output and subsequent squeeze on supply.

China’s base oils output then rose in July from year-earlier levels for the first time in three months, and imports for the first time in five months.

The rise in supply in July enabled blenders to replenish depleted inventories.

It also coincided with a time of year when consumption typically faced a seasonal slowdown during the summer months.

An improvement in blenders' inventory levels raised the prospect of a more muted round of stock-replenishment later in the third quarter of the year.

Demand typically rises around that time as blenders prepare for a seasonal pick-up in consumption from around the end of the third quarter.

The lack of any sharp recovery in China’s base oils prices in recent weeks suggested such a scenario could now be playing out.

China’s domestic Group II base oils prices remained unusually weak relative to domestic diesel prices in first-half August.

The same time a year earlier, the domestic Group II price-premium to diesel began a strong rebound that extended to the end of the third quarter.