China’s Sept base oils demand edges up

China’s base oils demand edged up in September at a time of year when consumption typically gets a strong seasonal boost.

Notional demand, or output plus net imports, rose to 424,460t in September, up 8pc from a multi-year low of 394,700t the previous month, government and industry data showed.

The volume was still the second lowest in years.

The size of the increase was also smaller than the more than 112,000t or 20pc rise in demand in September 2021 from the previous month.

China’s base oils demand typically rises in the month of September from August as blenders replenish stocks after a slowdown in activity during the summer months.

The move precedes a typical rise in lube demand at the end of the third quarter amid a seasonal pick-up in automobile sales and industrial activity.

China’s car sales rose by 33pc in September to the highest level this year. The country’s industrial production rose in September at its fastest pace in seven months.

Firmer automobile demand and industrial production contrasted with a more muted pick-up in base oils demand.

The smaller-than-usual rise in demand partly reflected low domestic base oils production in September as refiners focused on maximising diesel production.

Domestic blenders also continued to prefer to hold low inventories because of concern about the possibility of lockdowns and their impact on economic activity and lube demand.

China’s domestic Group II base oils prices rose strongly in September and October amid firmer demand and tighter supplies.

The stronger prices slashed their steep discount to fob Asia base oil cargo prices. But prices had yet to rise to the kind of premium to fob Asia prices that would trigger a surge in supplies from the region.

The trend pointed to stronger demand for overseas supplies, combined with the same caution about the size of the volumes required.