Pakistan’s June base oils supply falls

Pakistan’s base oils supply held at a five-month low in June even amid signs of healthy domestic lube consumption.

Lower supply and firm demand raised the prospect of squeezing blenders’ stocks and triggering a pick-up in requirements for replenishment volumes.

Total base oils supply, or domestic output and imports combined, came to around 27,700 tonnes in June, customs and industry data showed.

The volume edged down from close to 28,000 tonnes the previous month and cut total supply to 88,000 tonnes in the second quarter of the year.

The volume fell from 102,000 tonnes in the first three months of the year to the lowest since the third quarter of last year.

Supplies fell even amid expectations of an extension of Pakistan’s economic recovery over the coming months against the backdrop of lower inflation and interest rates.

Domestic lube demand already rose in June for a third month from year-earlier levels.

Pakistan’s automobile sales excluding two- and three-wheelers rose in July, also for a third month.

Including two- and three-wheelers, they rose in July for a seventeenth month.

Even with the prospect of steady growth, Pakistan’s lube consumption typically slows in the month of July from June during the monsoon season.

The drop in demand boosted the attraction for blenders to trim their inventories ahead of the seasonal slowdown.

The fall in Pakistan’s base oils supply in June facilitated those moves.

The lower supply then increased the need for blenders to replenish their stocks to cover for a typical recovery in lube consumption later in the third quarter of the year.

The dynamic raised the prospect of a rise in requirements for base oil supplies from overseas markets to cover that pick-up in domestic demand.

The rise in requirements would coincide with similar moves in other markets like India and China as blenders there also prepared for a seasonal rise in demand at the end of the third quarter.

Firmer demand throughout Asia raised the prospect of absorbing more of the region’s base oils supplies, curbing for longer any need for refiners to target more distant markets with any surplus volumes.