China’s November base oils output falls

China’s base oils output fell to a three-month low in November amid a dip in production of premium-grade base oils.

The country’s domestic Group II domestic prices held steady versus Asia-Pacific cargo prices in recent weeks, suggesting there was scant need for additional supplies from the region.

The lack of requirement for additional supplies pointed to demand that was sufficiently weak to get by with the lower volumes.

China’s total paraffinic base oils output fell to close to 450,000 tonnes in November, OilChem China data showed.

The volume fell from more than 510,000 tonnes the previous month but still rose by 6% and for a sixteenth month from year-earlier levels.

Output of Group II base oils fell to less than 345,000 tonnes in November, from more than 390,000 tonnes the previous month.

The drop in output coincided with the shutdown of a Group II base oils unit in southern China from second-half November. The unit is expected to stay offline until early January.

The lower supply showed signs of balancing out the impact of a seasonal slowdown in demand during the final months of the year.

China’s domestic Group II light-grade price premium to diesel prices trended lower during the month of November.

But the still-rangebound premium to diesel contrasted with a sharp drop in the premium during the same period last year.

China’s Group II prices also held relatively steady versus FOB NE Asia cargo prices in November, complicating the feasibility of lining up additional arbitrage shipments from the region.

The limited arbitrage opportunities curbed the prospect of a pick-up in demand for supplies from Asia-Pacific refiners.

Even so, the steady price levels also raised the prospect of sustaining ongoing requirements for existing supplies.

A more significant challenge for Asia’s refiners would be a larger rise in base oils exports from China.

The country’s base oils exports surged in 2021 from previous years and held at higher levels since then. But the total volume remained relatively low.

The drop in China’s base oils output in November raised the prospect of extending that trend.