China’s April base oil imports slide

China’s base oil imports slumped in April to a six-month low, highlighting the impact of lockdown measures on the country’s economic activity and lubricant demand.

Base oil imports of 154,080t in April fell by 29pc from 217,310t the previous month, government data showed. The volume was down 40pc from year-earlier levels of 257,170t.

China’s base oil imports typically rise strongly during the first few months of each year as distributors and blenders replenish stocks ahead of the spring oil-change season.

Imports have typically exceeded 230,000 t/month during that period, including the month of April.

Base oil imports then typically slow down during the third quarter of the year, with volumes falling back below the 200,000 t/month level.

Strict and increasingly widespread lockdowns in key industrial centres of China upended that typical trend as economic activity slumped.

The country’s car sales fell by more than 40pc in April. Industrial production contracted in April for the first time in two years.

The slowdown was reminiscent of the sharp contraction during the first few months of 2020, when China underwent a nationwide lockdown to curb the spread of the Covid-19 virus.

The country’s base oil imports then rebounded in the second and third quarters of 2020 as lockdown measures were eased. Third-quarter imports rose by 29cp from the second quarter of 2020.

A similar trend could repeat itself this year as lockdown measures are eased and pent-up demand revives.

But that time, in 2020, imports rebounded at a time when regional base oil prices were unusually low. Domestic Chinese prices were at a steep premium to those prices, making attractive the arbitrage to move supplies to China.

This time, regional base oil prices are unusually high and at a steep premium to domestic Chinese base oil prices.