US November Base Oils Supply Balance Stays Manageable

US base oils stocks stayed at manageable levels in November even as supply flipped back to surplus for the first time in three months, with stronger domestic demand and lower imports offsetting higher refinery output and a slump in exports.

The supply balance moved to a surplus of 739,000 barrels (104,000 tonnes), recovering from shortfalls in September and October, EIA data showed.

The shift largely reflected a recovery in production following the completion of major plant maintenance work in early November.

The prospect of output remaining at more elevated levels raised the importance of domestic consumption extending its sharp rebound in lieu of any recovery in exports.

Key Highlights

·         Domestic base oils output rose to 5.30 million barrels, recovering from a six-month low of 4.55 million barrels in October when scheduled plant-maintenance curtailed production.

·         Base oils imports fell to a nine-month low of 854,000 barrels, reflecting a pause in shipments from the UAE and slowdown in arrivals from South Korea.

·         Combined output and imports lifted total supply to 6.16 million barrels, only slightly higher than typical levels over the past year.

·         Domestic consumption surged to 3.06 million barrels, more than doubling from year-earlier levels and extending a sharp recovery that began in July.

·         The strength of domestic demand helped offset the 38% slump in exports, which fell to their lowest since end-2022.

·         Exports accounted for 43% of total demand, the lowest share since February 2023, reversing a multi-year trend to mid-June whereby stronger exports offset sliding domestic consumption.

·         Total demand, or domestic consumption and exports combined, fell to an eleven-month low of 5.42 million barrels but still rose year on year for the second time in three months.

Market Repercussions  

The sustained rebound in domestic consumption could reflect a normalisation of activity following an unusually prolonged slump in demand in recent years.

An extension of that recovery would ease pressure on domestic refiners to move a growing share of their supplies into increasingly competitive export markets, at a time when global supply is set to rise sharply.

US light-grade base oils margins especially remained in a narrow range early this year, extending a trend that began in early 2025.

The stability of margins, even during the winter months, suggests that supply-demand fundamentals remain manageable, pointing to domestic or overseas consumption firm enough to prevent a rapid build-up of surplus supplies.