S Korea Aug base oils output stays low

South Korea’s base oils production edged up in August from the previous month even as regional prices for the lubricant feedstock fell.

Output of 2.79mn bl (392,250t) in August rose by 1pc from 2.72mn bl in July to a three-month high, according to Korea Petroleum Association (KPA).

The volume was still the third lowest in the past 15 months. The lowest volumes during that period had been in June and July.

Base oils production as a share of South Korea’s total refined products output also remained low at 2.50pc, up from 2.47pc in July. Those levels were the lowest in more than a year.

South Korea’s base oils output still rose amid signs of higher refinery run rates. The country’s total refined products output rose in August to its highest in more than three years.

Weaker domestic base oils demand in South Korea in August compounded the rise in surplus supply.

Consumption fell by 13pc in August from the previous month, contrasting with the small rise in base oils output. The trend boosted the surplus of production over consumption to a three-month high.

Higher base oils production added to supply at a time when regional demand faced a seasonal slowdown and prices had fallen sharply because of persistent surplus availability.

Refiners faced a strong incentive to increase their run rates to take advantage of diesel and jet fuel prices that remained much higher than usual relative to crude and diesel.

The two products accounted for more than 40pc of total refined products output in August for a second month.

Before July, the last time their share had risen above the 40pc level was in August 2020.

The phenomenon of higher base oils supply amid lower run rates also appeared in other markets this year as refiners maximized output to produce more middle distillates.

Base oils output as a share of their total output fell. Output still rose because of the higher run rates.