Asia’s May base oils supply falls

Asia-Pacific base oils supply fell in May to a nine-month low amid lower output everywhere from Japan to Pakistan.

Availability remained sufficient even with the drop in supply, partly because of the sustained slowdown in Chinese demand for regional base oil shipments.

Base oils supply of less than 910,000t in May fell by 4pc from around 949,000t the previous month to the lowest since last September.

It was still up 14pc from year-earlier levels and boosted total supply to 4.69mn t in the first five months of the year.

The volume was up 17pc from little more than 4mn t during the same period last year.

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

The rise in supplies from year-earlier levels left sufficient availability to cover demand within the Asia-Pacific market and persistent surplus volumes to move to more distant outlets.

The healthy supply availability kept pressure on regional base oils prices.

These lagged sharply the rise in prices in Europe, Mideast Gulf, and the Americas. The price-disconnect made feasible the arbitrage to move supplies to those markets.

The lower Asia-Pacific volumes in May had some impact. There was a slowdown in shipments to markets like Indonesia and Vietnam, where demand was strong.

There was a slowdown in shipments to China, where demand was weak.

The weak demand reflected the impact of lockdowns in the country that slashed economic activity. The drop in demand compounded the healthy supply availability in the Asia-Pacific region and pressure on prices.

Regional base oil prices rose faster than crude and diesel prices in the month of May. Their premium to diesel rose to its highest this year. But it remained lower than during all of 2021.