Thai Oil’s Q1 base oil profit falls

Oil refiner Thai Oil’s base oils and lube unit saw its profit fall in the first three months of the year, mirroring a similar trend among other Group I and Group II base oil producers in Asia-Pacific.

The unit’s net profit of 329mn Baht ($9.47mn) in the first three months of the year fell by more than half from Bt797mn during the same period a year earlier.

Its earnings before interest, taxes, depreciation and amortisation fell by 56pc to B455mn.

The last time profit fell to those levels was at the start of the Covid-19 pandemic in the second quarter of 2020.

Profit fell even as sales rose by 37pc to B6.81bn.

The disconnect reflected the impact of feedstock costs that rose much faster than base oil prices, especially for Group I supplies in the Asia-Pacific region.

Sales growth was itself capped as the unit's base oils production of 59,000t in the first three months of the year fell by 6pc from 63,000t during the same period last year.

Thai Oil operates a 260,000 t/yr Group I base oils unit at its 275,000 b/d refinery in Sriracha.

A year ago, base oil values were unusually strong relative to crude and diesel prices. The trend reflected tight supply and strong demand and incentivized refiners to maximise base oils production.

This year, base oil values have been unusually weak relative to crude and diesel.

The price trend has reversed that incentive and instead encouraged refiners to produce more refined products like diesel.