China’s base oils output stayed unusually high in September for a second month at a time of year when lube consumption typically gets a seasonal boost.Total paraffinic base oils output of more than 485,000 tonnes in September edged down from more than 490,000 tonnes the previous month, OilChem China data showed..The September volume was still the second-highest in eleven months.High base oils output partly reflected the rise in run-rates after a protracted round of plant-maintenance work cut production levels during the first half of the year.High output for a second month also pointed either to a strong pick-up in consumption or to a pick-up in stocks if consumption failed to keep pace with the rise in supply..China’s domestic base oils prices rose strongly in August and first-half September relative to diesel and to FOB Asia cargo prices even with the rise in supply.Higher price-differentials, rising domestic output and a more feasible arbitrage to import additional shipments pointed to firmer demand. Domestic base oils price-differentials then began to ease from second-half September. But the pace of the fall was relatively slow.The weaker prices coincided with a time of year when the seasonal boost from higher lube consumption starts to wane. That slowdown typically then extends through the fourth quarter of the year.An extension of higher domestic base oils output in the fourth quarter, combined with weaker demand, could curb China’s requirements for additional supplies from regional markets.Any such slowdown in requirements would coincide with a recovery in South Korea’s base oils output in recent months, as well as the recent start-up of a new Group II base oils unit in Singapore.Any slowdown in China’s requirements would put pressure on those key regional producers to move more supplies to other markets instead.China’s Group II base oils output held at more than 400,000 tonnes in September for a second month.Before August, the last time the country’s Group II output exceeded that level was at end-2021.The higher output also far outpaced typical levels of around 355,000 tonnes/month in the year to July.Output could slip in October because of some plant-maintenance work.Even so, any signs of output holding at more elevated levels over the coming months would typically put pressure on domestic price-differentials.Any signs of price-differentials staying firmer than usual could point to stronger-than-expected demand..S Korea's August base oils output rises.ExxonMobil ships Group II base stocks from new Singapore units.China’s August base oils demand rises.Base Oil News stories and analysis also available on ICIS platform
