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Global base oils supply surplus fell to its lowest December level in three years, leaving fundamentals tighter than usual at the start of 2026
Strong demand countered rising supply, keeping the surplus well below typical year-end levels
A smaller supply buffer increased the market's exposure to disruptions now spreading from the Middle East conflict
The surplus of global base oils supply over demand held at its lowest December level in three years, leaving the market with less buffer than usual to absorb supply disruptions now spreading from the Middle East conflict.
The surplus reached more than 550,000 tonnes in December, up from more than 350,000 tonnes in November but still well below typical year-end levels, EIA, Korea Customs Service, METI and other government data showed.
The balance stayed tight as unusually strong demand, especially in the US, countered a sustained rise in supply.
The smaller overhang carried into the start of 2026 curbed pressure on refiners to make steep price adjustments to move excess volumes and limited the opportunity for importers such as India to replenish inventories ahead of peak seasonal demand.
The Middle East conflict raised the prospect of magnifying the impact of that smaller supply buffer.
Key Highlights
· Global base oils supply rose by 9% year on year in December, climbing to the second-highest level since end-2021.
· Global demand rose by 13% year on year in December, climbing for a sixth straight month and cushioning the size of the typical year-end dip in consumption.
· Demand in the Americas rose by 30% year on year, led by rebounding US consumption, while Asian demand rose by more than 10%.
· The fourth-quarter supply surplus fell more than 30% year on year to a three-year low for that period, reflecting the sustained strength of demand.
Market Repercussions
Global base oils margins faced downward pressure early this year as seasonal demand slowed and blenders remained comfortable operating with lean inventories.
But the smaller overhang reduced competition among suppliers to move excess cargoes.
The market now faces a seasonal pick-up in demand alongside scheduled refinery maintenance that was already expected to tighten availability before the Middle East conflict began.
Those firmer fundamentals, combined with the smaller surplus carried into 2026, now face an additional wave of supply disruptions at a time when the market has less capacity to absorb them.
