Thailand July base oils output stays low

Thailand’s base oils output stayed lower than usual in July amid slack overseas and domestic demand and healthy availability of supply.

Base oils output of 52,950 kilolitres (46,900t) in July rose from 46,920kl the previous month, government data showed. Output fell in June because of plant maintenance work.

The July volume was still 14pc lower than year-earlier levels and down from typical volumes of more than 57,000 kl/month over the past year.

The lower production cut output to 391,770kl in the first seven months of the year.

The volume was down 7pc from 422,910kl during the same period last year and the lowest for that seven-month period in five years. The 2021 volume had been the highest in at least a decade.

The country’s base oils producers had little incentive to raise output in view of weak supply-demand fundamentals and margins that were lower than refined products margins in the second quarter of the year.

The weak fundamentals and prices contrasted with unusually tight supply and high margins during the first seven months of last year.

The weak fundamentals this year reflected healthy availability from regional sources like Singapore and Japan.

Demand in July faced pressure from a seasonal slowdown in domestic consumption. There was also scant recovery in Chinese demand after the relaxation of lockdown measures in the country in early June.

China is a key outlet for Thailand’s Group I bright stock supplies.

Many buyers also preferred to hold back in July amid expectations of a fall in base oils prices, which duly materialized.

Thai Lube’s base oils production edged up in July from the previous month to more than 22,500kl.

Domestic rival IRPC’s base oils output also rose. But it held well below typical levels of more than 30,000 kl/month.