US base oils and lubricants demand extended its surge in December, cushioning the impact of weaker exports and lifting full-year consumption to a three-year high.

Domestic base oils and lubricants demand reached 2.66 million barrels (374,000 tonnes) in December, rising 72% year on year and for a sixth straight month, Energy Information Administration (EIA) data showed.

The timing of the rebound, starting in July, began in the same month as a marked slump in US base oils exports, especially to Mexico, slowing the pace of a build-up of surplus supply.

Domestic demand growth would need to continue to keep inventories manageable unless exports reverse their six-month slump.

Key Highlights

·         Fourth-quarter demand surged 62% year on year, following a 24% rise in the third quarter and contrasting with falling consumption in each of the three quarters to June 2025.

·         Second-half consumption outpaced first-half demand, reversing the typical seasonal pattern.

·         Before 2025, the only similar occurrence in the past decade was in 2020, when pandemic-related restrictions distorted seasonal trends.  

·         Full-year 2025 demand rose to 32.8 million barrels, up 14% year on year and the highest since 2022.

·         Domestic consumption’s share of total US base oils demand climbed to 45% in 2025, up from 38% in 2024 and the highest since 2022, reflecting the impact of weaker exports.

·         The rebound tracked an acceleration in US industrial production growth from July 2025, with output in January rising at its fastest pace in more than three years.

Market Repercussions

The domestic rebound began in July, the same month US base oils exports to Mexico started to fall, and grew large enough to absorb much of the supply that previously moved to that market.

Mexico’s scale made it difficult to replace. Its consistent, large-volume inflows from the US until mid-2025 meant redirecting those supplies elsewhere risked triggering a supply-build in those other markets.

Domestic demand filled much of that gap. Its recovery at a time of year when consumption typically slows reduced the surplus volumes that refiners needed to place in overseas markets.

The spring oil-change season could extend that support.

A seasonal lift in consumption would further narrow the surplus, easing pressure on refiners to secure export outlets at a time when rising Asian supply is intensifying competition in global markets.

A tighter surplus, combined with firm domestic demand, could also limit US refiners’ ability to respond if Middle East supply disruptions triggered a sudden rise in overseas demand.