China’s Nov base oils demand rises

China’s base oils demand remained unusually low in November even as it rose to a six-month high.

The slow pace of the recovery reflected more signs that the slump in demand had bottomed out and remained fragile.

A stronger pick-up in demand is only expected after the lunar new year holidays that begin in late January.

The strength of demand at that time is likely to partly reflect China’s ability to deal with several large waves of Covid-19 infections over the coming weeks.

The lack of any significant base oils stock-building before then raised the prospect of a sharper-than-usual pick-up in demand from February as buyers replenish low inventories ahead of the spring oil-change season.

Even so, base oils production and imports already rose in November, while exports fell.

Fundamentals improved even with the country still facing strict zero-Covid measures that month. These were only relaxed from the beginning of December.  

China’s notional base oils demand, or output plus net imports, rose to more than 450,000t in November, government and industry data showed.

The volume rose from less than 430,000t in each of the previous three months to the highest since May.

Demand slumped from the second quarter of the year following the imposition of strict lockdown measures in various parts of China to thwart the spread of the Covid-19 virus.

The recovery in November remained fragile.

Demand remained far below levels of more than 630,000 t/month in the first quarter of the year, before the widespread lockdowns began.

Any recovery in consumption closer to those levels implied a steep rise in domestic base oils production and imports over the coming months.

China’s total demand of 5.50mn t in the first eleven months of the year were down 29pc from 7.77mn t during the same period last year.

The loss of more than 2mn t of demand weighed on domestic prices in China and on base oils supply in the Asia-Pacific region throughout the year.

A likely improvement in demand in 2023 would help to correct that imbalance and cut this year’s persistent supply surplus in Asia-Pacific.