Insight: Thailand’s Feb base oil supply lags demand

Thailand’s base oils supply lagged demand in February for a second month, raising the prospect of a slowdown in exports over the following months.

A seasonal rise in domestic demand and expectations of steady-to-higher base oils prices in Asia-Pacific curbed further any urgency to boost overseas shipments that rose in February to a seventeen-month high.

Falling base oils prices typically incentivize producers to maximise sales in a bid to lock in prices before they dip any further. Steady or rising prices reverse that incentive.

Easing concern about refinery stock-levels would slow the shipment of base oils cargoes from Thailand to markets like the Mideast Gulf.

It would also incentivize refiners to maintain rather than cut price offers that they were targeting for any export supplies.

A slowdown in shipments would also ease the impact of signs of a slowdown in Chinese demand for Group I bright stock.

A wave of shipments moved from Thailand to China in the first two months of the year. A wide gap between fob Asia and domestic Chinese prices made the arbitrage feasible.

That price gap narrowed in recent weeks in response to higher fob Asia prices and steady-to-lower domestic Chinese prices.