US June Base Oils Supply Falls To 16-Month Low

US base oils supply fell to a 16-month low in June as lower domestic output compounded weak imports, tightening the market just as domestic demand increased.

Total supply, or domestic output and imports combined, fell to 5.16 million barrels (727,000 tonnes) in June from 5.32 million barrels in May, US Energy Information Administration data showed. The volume was down 17% from a year earlier and the lowest since February 2025.

Imports rose from May but remained 36% below a year earlier, leaving domestic production to cover a larger share of US demand.

Output instead fell to a 14-month low, while domestic demand rose, widening the supply deficit and squeezing stocks to a five-year low.

The tighter US balance added to a global market already short of base oils because of the Middle East disruption, leaving less scope for US suppliers to ease that tightness.

Key Highlights

·         Total output fell 12% year on year to 4.33 million barrels in June, the lowest in 14 months.

·         Paraffinic base oils output in the Louisiana Gulf Coast district fell to 1.03 million barrels, the lowest since October 2025 and well below typical monthly volumes of more than 1.60 million barrels.

·         Base oils' share of total US refinery output fell to its lowest level in 14 months even as refinery utilisation reached its highest level since August 2018.

·         Imports covered 16% of total June supply, up from 11% in May but below the 21% typical share in the year to April.

·         Imports covered 30% of domestic demand, up from 24% in May, but down from a 43% share in the year to April.

·         US base oils stocks fell to 9.0 million barrels in June from 9.71 million barrels in May, their lowest level since April 2021, as supply lagged demand for a sixth straight month.

·         June’s total supply was the lowest for the month since 2020, when pandemic lockdowns curbed activity.

Market Repercussions

US supply needs both domestic output and imports to remain higher than usual to offset the loss of Middle East volumes. Imports stayed low in June even with higher shipments from South Korea, showing how difficult it has been to offset the lost volumes with overseas supplies.

That put the onus on a sustained pickup in domestic output at a time of year when refiners faced higher risk of weather-related disruptions during the Atlantic hurricane season.

Strong diesel economics and unusually low distillates stocks also incentivised US refiners to maximise motor fuels output.

US Group II prices remained elevated relative to diesel, but the gap was smaller relative to diesel's unusually strong crack spread, limiting the incentive to shift more production toward base oils.

A tight US balance would leave refiners focused on domestic demand, limiting the volume available for overseas markets while Middle East supplies remained constrained.