Thai Oil’s Q1 lube profit margin slides

Oil refiner Thai Oil’s base oils and lube unit saw its profit margin slip to an unusual discount to the profit margin for refined products in the first quarter of the year.

The base oil unit’s net profit margin of 4.8pc in the first three months of the year fell from 16.1pc during the same period a year earlier.

The refinery unit’s net profit margin rose to 5.1pc during the first three months of the year, versus 1.2pc during the same quarter this time last year.

The transformed dynamics reflected the increasingly strong supply-demand fundamentals for middle distillates. Diesel prices have responded by surging to an increasingly steep premium to crude oil.

Base oil supply-demand fundamentals have been more balanced. At the same time, demand from China has been slower than usual for the time of year because of increasingly widespread and prolonged lockdowns in the country.

The trend has slowed the rise in base oil prices in recent months even as diesel and crude has surged.

Still, this profit-margin scenario is unusual. Thai Oil’s refining profit margin has exceeded its base oils margin four times in the last 21 quarters since the beginning of 2017.