Asia's October base oils supply falls

Base oils supply in the Asia-Pacific region fell to a 17-month low in October amid a wave of plant maintenance and run-cuts.

The slump in supply followed a surge in Asia-Pacific base oils exports in September to a ten-month high. The shipments cleared a large volume of surplus supplies from the region.

The drop in supply in October curbed any subsequent build-up of surplus volumes at a time of year when global demand typically faces a seasonal slowdown.

The more balanced supply curbed refiners’ need to cut prices sharply to clear volumes.

Firmer Asia-Pacific base oils prices reflected that improved leverage.

Prices firmed strongly in recent weeks relative to crude and diesel and relative to prices in other regions like Europe.

Base oils supply of around 847,000t in October fell from more than 950,000t the previous month, government and industry data showed.

The volume fell by 7pc from year-earlier levels to the lowest since May 2021.

The volume was derived from seven key suppliers in the Asia-Pacific region, excluding China and Indonesia.

Including China, supply fell even more steeply by 18pc from year-earlier levels to 1.17mn t.

Even with the slowdown in October, supply of around 9.4mn t in the first 10 months of the year was up 10pc from 8.6mn t during the same period last year.

Most of the growth was in the first half of the year, when supply rose 17pc from year-earlier levels.

The surge in supplies coincided with weak Chinese demand, leaving growing surplus volumes.

Asia-Pacific base oils prices dipped to steep discounts to prices in other regions to make the arbitrage workable to clear the surplus.

The growth in supply slowed to just 0.2pc so far in the second half of the year.

The more balanced supply, combined with the clear-out of surplus volumes in September, left Asia-Pacific producers better positioned at year-end and heading into the new year.

They also faced the prospect of a rise in Chinese demand from early next year.

A seasonal pick-up in consumption in the country is likely to get a further boost from a revival in economic activity following the end of China’s zero-Covid policy in early December.