US May Base Oils Supply Falls As Output, Imports Slide

US base oils supply slumped in May as domestic output fell just as Middle East import disruptions reached the US market.

Total supply, or domestic production and imports combined, fell to 5.32 million barrels (749,000 tonnes) in May from 6.46 million barrels in April, EIA data showed. It was the lowest level since February 2025.

The fall in imports was expected after Middle East disruptions from end-February halted Group III shipments from that region to the US.

The drop in imports was expected to increase reliance on domestic production to cover part of the shortfall. Instead, imports and output fell together.

Domestic demand absorbed a larger share of available supply, leaving fewer surplus barrels for export and keeping US base oils prices elevated.

Key Highlights

·         Base oils' share of US refinery output fell to 0.77%, the lowest since April 2025.

·         Distillates accounted for 25.6% of refinery production in May, up from 25% in April, amid surging diesel crack spreads.

·         Paraffinic base oils production in the Texas Gulf Coast district dropped to its lowest level since October 2022, pointing to refinery maintenance or operational issues.

·         Imports accounted for just 11% of total supply, down from 23% in April and well below typical levels.

·         Domestic demand accounted for 67% of total supply, up from 55% in April and the highest since August 2022.

·         US inventories fell for a ninth straight month year-on-year to their lowest level since July 2021.

Market Repercussions

The May data pointed to a structural shift in US supply. Lower Middle East imports were already forcing domestic production to supply a larger share of the US market. May accelerated that trend as refinery output also declined.

That share is likely to grow further whenever output comes under renewed pressure, from maintenance or other operational issues, leaving even less supply for export.

That would leave fewer surplus barrels available for markets such as West Africa and India during a period when US spot shipments have often increased over the summer months.

The contrast with Asia has become increasingly pronounced. Softer demand in markets such as Japan released additional supply into export markets, weighing on regional prices.

Tighter US balances by contrast kept domestic prices at elevated levels, widening their premium to Asia. That price gap looks set to keep Asia as the primary source of spot cargoes for overseas buyers.