Insight: Thailand’s Feb base oils output falls

Thailand’s Group I base oils output fell to a three-month low in February at the same time as a seasonal pick-up in domestic and overseas demand.

Base oils output fell after regional Group I prices dipped to a steep discount to diesel prices in January amid a slower-than-expected revival in Chinese demand.

Weak regional demand forced some shipments of Thai origin to move to more distant outlets like the Mideast Gulf.

Thailand’s lower base oils output in February then coincided with a pick-up in Chinese demand and a recovery in regional base oils prices relative to crude and diesel.

Those fundamentals and price trends extended into March, incentivizing refiners to raise base oils output.

Thailand’s total base oils output of 49,310 kilolitres (43,680t) in February fell from 61,530kl the previous month to the lowest since November, government data showed.

The country’s output had slumped in October and November because of scheduled maintenance work at both of Thailand’s Group I plants.

Regional Group I prices strengthened relative to Group II prices during that time, reflecting the tighter supply of Group I base oils.

Group II prices by contrast widened their premium to Group I prices in recent weeks even with the drop in Thailand’s output in February.

The premium widened even as base oils exports rose in February from other key Asia-Pacific Group II producers such as South Korea and Singapore.

The trend reflected stronger demand for Group II base oils partly because of their competitive price compared with Group I earlier in the year.

It also reflected steady, but not surging, demand in China for products like Group I bright stock.

The price and supply dynamics suggested that Group I supply remained sufficient even with the drop in Thailand’s base oils output in February.