China’s base oils output fell to a twenty-one-month low in June amid ongoing plant-maintenance work and run-cuts.The drop in output coincided with weaker domestic base oils margins and a seasonal slowdown in demand that added to the attraction of maintaining output at lower levels.A recent jump in domestic price-differentials for imported Group II base oils suggested that the drop in supply could have left availability tighter than expected for some products.China’s total paraffinic base oils output fell to less than 400,000 tonnes in June, OilChem China data showed..The volume fell by 7% and for a second month from year-earlier levels to the lowest since September 2023.Production levels fell mostly because of a sharp drop in output of Group II base oils to around 320,000 tonnes.The volume fell from typical levels of more than 360,000 tonnes/month in the first five months of the year to the lowest since last August.The lower output coincided with additional plant-maintenance work in China.It also followed the completion of maintenance work on other base oils units.The steepness of the fall in output in June pointed to other factors such as run-cuts adding to the drop in supply.Lower margins incentivized such moves.China’s domestic Group II N150 price-premium to Shandong diesel prices peaked around mid-May before sliding sharply over the following month.Without any significant recovery in recent weeks, the price-premium remained well below more typical levels over most of the past two years.Any such moves to cut domestic output magnified the impact of tighter supplies from key regional sources like Taiwan.China’s base oils imports from Taiwan fell in May to the lowest this year.The dip in shipments showed signs of extending into June, shipping data showed.Lower supply from domestic and key overseas sources preceded a jump in China’s Group II base oils prices for imported supplies versus FOB Asia cargo prices from end-June.The wider premium raised the prospect of a pick-up in arbitrage shipments to China.The country’s still-low margins for base oils from domestic refiners by contrast sustained the incentive to maintain lower run-rates.The price-dynamics could extend any revival in demand for overseas supplies..China’s May base oils demand falls
