China’s base oils output rose in September close to its highest level in more than two years amid a rebound in production of Group II base oils.The jump in output coincided with increasingly firm Group I and Group II base oils prices relative to diesel prices and relative to Asia-Pacific cargo prices.The price dynamics incentivized the production or import of additional base oils supplies.Higher production and a more feasible arbitrage pointed to either a growing build-up of surplus supplies or to demand that was sufficiently strong to absorb the additional volumes.China’s paraffinic base oils output rose to close to 470,000 tonnes in September, OilChem China data showed.The volume rose from less than 430,000 tonnes in each of the previous three months to levels that were almost the same as in January.The September and January volumes were the highest since end-2021, before a wave of lockdowns in China slashed the country’s economic activity and lube consumption in 2022.Output rose because of a jump in Group II base oils production to more than 350,000 tonnes. The volume was the highest since early 2022.Group II output rose following the restart of several base oils units in late August and early September.The shutdown of the plants had coincided with and cushioned the impact of a seasonal slowdown in China’s lube demand in July and August.The lower supply during those months supported a widening premium of domestic base oils prices over FOB Asia cargo prices.The more feasible arbitrage coincided with a pick-up in China’s base oils imports in August from year-earlier levels for the first time in seven months.The rise in China’s domestic base oils supply in September curbed the need for supplementary shipments from regional markets.At the same time, China's domestic base oils price premium to FOB Asia prices extended its rise through the month even with the rebound in domestic supplies.The increasingly feasible arbitrage coincided with a seasonal pick-up in demand in China at the end of the third quarter.Any extension of that price trend, along with higher domestic supply, would point to a more sustained pick-up in demand..China’s August base oils imports rise
China’s base oils output rose in September close to its highest level in more than two years amid a rebound in production of Group II base oils.The jump in output coincided with increasingly firm Group I and Group II base oils prices relative to diesel prices and relative to Asia-Pacific cargo prices.The price dynamics incentivized the production or import of additional base oils supplies.Higher production and a more feasible arbitrage pointed to either a growing build-up of surplus supplies or to demand that was sufficiently strong to absorb the additional volumes.China’s paraffinic base oils output rose to close to 470,000 tonnes in September, OilChem China data showed.The volume rose from less than 430,000 tonnes in each of the previous three months to levels that were almost the same as in January.The September and January volumes were the highest since end-2021, before a wave of lockdowns in China slashed the country’s economic activity and lube consumption in 2022.Output rose because of a jump in Group II base oils production to more than 350,000 tonnes. The volume was the highest since early 2022.Group II output rose following the restart of several base oils units in late August and early September.The shutdown of the plants had coincided with and cushioned the impact of a seasonal slowdown in China’s lube demand in July and August.The lower supply during those months supported a widening premium of domestic base oils prices over FOB Asia cargo prices.The more feasible arbitrage coincided with a pick-up in China’s base oils imports in August from year-earlier levels for the first time in seven months.The rise in China’s domestic base oils supply in September curbed the need for supplementary shipments from regional markets.At the same time, China's domestic base oils price premium to FOB Asia prices extended its rise through the month even with the rebound in domestic supplies.The increasingly feasible arbitrage coincided with a seasonal pick-up in demand in China at the end of the third quarter.Any extension of that price trend, along with higher domestic supply, would point to a more sustained pick-up in demand..China’s August base oils imports rise