China’s base oils output rose to a ten-month high in August at a time of year when blenders start to replenish stocks ahead of a seasonal rise in consumption at the end of the third quarter.China’s domestic base oils prices held firm even with the rise in supply.Firm prices and higher supply suggested that demand was sufficiently strong to absorb the additional volumes.China’s total paraffinic base oils output rose to more than 490,000 tonnes in August, OilChem China data showed..The volume rose from close to 425,000 tonnes the previous month to the highest since last October.Output rose mostly because of a surge in production of Group II base oils to the highest since end-2021, in the midst of the Covid-19 pandemic.China's Group II base oils output got a boost following the completion of a protracted round of plant-maintenance work..Domestic Group II base oils prices also held unusually firm relative to Group III prices.The Group II price-strength incentivized refiners to produce more of those supplies rather than Group III base oils.But China’s domestic Group II prices were unusually weak relative to diesel prices in June and July, at a time of year when demand typically faces a seasonal slowdown.China’s Group II output rose in August despite the weak margins during the previous two months.Those weak margins then rebounded throughout the month of August even as supply rose.The dynamic raised the prospect of a fall in base oils imports as domestic supply covered more of the country’s requirements.But China’s domestic base oils prices also rose relative to FOB Asia cargo prices throughout August, facilitating arbitrage opportunities.The dynamic pointed to a pick-up in demand that was sufficient to absorb the rise in supplies.An extension of that dynamic would reveal whether stock-replenishment or end-user consumption was the key driver behind the rise in demand..China’s July base oils demand rises.Japan’s July base oils exports fall.South Korea’s July base oils output rises.Base Oil News stories and analysis also available on ICIS platform
