China’s February base oils imports rise

China’s base oils imports rose to an eleven-month high in February, adding to signs of a gradual recovery in demand.

The volumes were still unusually low, suggesting the strength of the recovery remained relatively muted.

A strong rise in China’s demand for regional base oils supplies would tighten availability and support firmer prices.

A more muted rise in demand would likely leave regional suppliers needing to target other markets with surplus supplies. The moves would keep pressure on prices.

China’s base oils imports of close to 158,800t in February rose by 9pc from less than 145,150t the previous month to the highest since March 2022.  

The volume was still unusually low for the time of year and fell for the eleventh in twelve months from year-earlier levels.

The slowdown cut total imports to around 303,900t in the first two months of the year. The volume was down more than 30pc from 444,310t during the same period in 2022.

China’s base oils imports typically surge in the first two months of each year as blenders start to build stocks ahead of the spring oil-change season.

The lack of base oils stock-building before the lunar new year holidays in late January added to the likelihood of a pick-up in demand.

The scrapping of the country’s zero-Covid policy at end-2022 raised the prospect of a stronger-than-usual rise in demand.

A drop in China’s base oils output in February added further to domestic blenders’ need to cover requirements with supplies from overseas markets.

The country’s February base oils imports instead stayed relatively low.

China’s domestic base oils prices reflected the muted demand.

Prices firmed relative to fob Asia cargo prices in January and early February as demand improved.

But the wider premium stayed lower than last November and provided limited upward support for fob Asia prices. It then began to edge lower in the month of March.

China’s pick-up in demand showed signs of extending into March, especially from markets like Taiwan and Singapore.

The firmer buying interest could partly reflect the impact of plant maintenance work in China and buyers’ needs to cover requirements with alternative supplies.

The prospect of a slower recovery in demand could prompt domestic refiners to maintain lower base oils output or to raise production more slowly over the coming months.

Such a move would support steadier demand for regional base oils supplies.