Supply rises on simultaneous pick-up in output and imports
Group I availability improves, mirroring similar trend in Japan
New Singapore unit could compound pressure on regional Group I market
Thailand’s base oils supply climbed to a seven-month high in October on the back of a simultaneous pick-up in output and imports.
Total supply, or output and imports combined, reached 90,000 kilolitres (80,000 tonnes) in October, up from less than 87,000 kilolitres in September, Ministry of Energy data showed.
Domestic base oils output rose to 57,000 kilolitres, its highest in six months and up from less than 54,000 kilolitres in September.
Higher output lifted the country’s supply of Group I base oils.
The pick-up in imports of premium-grade base oils covered more of the country’s lubricant feedstock requirements, freeing up additional Group I volumes.
A similar pattern emerged in Japan, where rising output and higher imports triggered a pick-up in surplus Group I supply from domestic producers.
The parallel trend across two key Asia markets underscored the region’s accelerating transition to premium-grade base oils in lubricants formulations.
The shift to higher-quality base oils left Asia with an overhang of Group I supplies despite several plant-closures across the region in recent years.
The shrinking number of Group I refineries means any planned or unexpected plant shutdowns can have a more outsized impact on supply and prices.
That kind of volatility added to the incentive for blenders to reduce their reliance on Group I base oils and limit their exposure to such supply disruptions.
The recent start-up of a new Group II unit in Singapore could further reduce the region’s demand for Group I supplies.
The unit’s output includes a heavy-grade base oil that can act as an alternative to Group I brightstock in many applications.
Asia’s unusually strong Group I brightstock prices this year helped to offset weaker levels for Group I heavy- and light neutrals.
Any pressure on those prices resulting from increased availability of an alternative to brightstock could intensify the challenges facing Group I refiners.
