China’s base oils output held steady in January even as lunar new year holidays curbed activity at the end of the month.Total paraffinic base oils output of around 455,000 tonnes in January fell from more than 465,000 tonnes the previous month, OilChem China data showed.But the volume stayed in a 450,000-470,000 tonne/month range for the fourth time in the last five months.Steady output in January coincided with weaker domestic Group II light-grade base oils values versus diesel prices and versus FOB Asia cargo prices.Steady output and weaker prices suggested that supply was sufficient to meet demand, and that domestic buyers were comfortable to maintain low stocks ahead of the lunar new year holidays.The dynamic raised the prospect of a stronger seasonal pick-up in demand following the end of the holidays in early February, and buyers’ expectations of sufficient supply to meet that demand.China’s base oils imports surged in the first quarter of last year, even with domestic output averaging around 450,000-460,000 tonnes/month during that period.China’s domestic prices for products like Group III base oils and Group II light grades were at a steeper premium to FOB Asia cargo prices at that time, facilitating the pick-up in shipments.The base oils premium for those grades was lower so far this year versus year-earlier levels.The dynamic raised the prospect of those base oils premiums widening over the coming weeks, or of supply from domestic refiners covering a larger share of the country’s requirements.There were signs of a combination of the two outcomes.China’s domestic brightstock premium to FOB Asia prices rebounded in late January to the highest since last September.The higher premium facilitated the arbitrage to move more of those supplies to the country.China’s Group III base oils output fell to an eight-month low of less than 27,000 tonnes in January.It was still up from around 18,000 tonnes the same month a year earlier, when China was more reliant on overseas supplies to cover its Group III requirements.Any recovery in Group III base oils output in February to more typical levels of around 40,000 tonnes/month would curb requirements for the grade from overseas markets..China’s Dec base oils imports mixed.Taiwan’s Dec base oils exports hold firm.S Korea December base oils exports fall.China’s December base oils output rises.Base Oil News stories and analysis also available on ICIS platform
