Global base oils supply surplus rises to 20-month high
Demand rises strongly from year-earlier but falls from July
Rising surplus boosts importance of open arbitrage
Global base oils supply outpaced demand in August by the largest volume in twenty months, leaving a growing volume of surplus shipments to clear over the following months.
Rising demand in key markets like Asia and especially the Americas in August far outweighed an ongoing slowdown in consumption in Europe.
Strong demand in those markets lifted total consumption by nearly 10% in August from year-earlier levels.
The firm demand almost matched the 10% rise in global base oils supply during the same period to more than 3 million tonnes in August.
But a seasonal slowdown in demand in August from July contrasted with a month-on-month rise in supply to a four-year high.
The month-on-month disconnect between supply and demand magnified the subsequent surge in surplus supply to the highest level since December 2023.
The pick-up in surplus supply in every major market increased the importance of and competition for outlets with firm demand and insufficient base oils production capacity.
Competitive base oils export prices facilitated the opportunity to target such markets.
A surge in Asia’s base oils exports to the Middle East in September already reflected the rise in surplus supply and competitive prices to clear the volumes.
