Japan’s June base oils output rises

Japan’s base oils and lube output rose in June to a three-month high, helping to meet signs of firm domestic demand.

The rise in production also added to healthy regional availability of supplies.

Base oils and lube output of 198,010 kilolitres (175,400t) in June rose from 172,210kl the previous month and by 11pc from year-earlier levels, government data showed.

The rise in production boosted total output to 1.10mn kl in the first half of the year. The volume was up 4pc from 1.06mn kl the same time a year earlier and was the highest for that period in three years.

The rise in base oils output partly reflected the impact of a lighter-than-usual round of plant maintenance in Japan so far this year.

Any supplies with prices linked to crude oil prices also faced less pressure on margins than supplies linked to regional base oils prices.

Regional base oils prices struggled to keep pace with the surge in crude and diesel prices in the first half of the year amid healthy supply-demand fundamentals.

The squeeze on margins incentivized Asia-Pacific refiners to cut base oils production and produce more diesel instead. The rise in Japan’s base oils output dampened the impact of those moves.

The higher base oils production in Japan also coincided with a strong recovery in domestic lube demand.

Japan’s base oil production levels are set to fall later in the year because of plant maintenance work and the planned closure of a base oils plant.