US domestic base oils demand rose for a third straight month in September, keeping stocks tighter and easing pressure on refiners to offload surplus volumes in overseas markets.

Tighter inventories heading into the fourth quarter could cushion the impact of a seasonal year-end demand slowdown.

Domestic consumption rose to 3.16 million barrels (445,000 tonnes) in September, up from 3.09 million barrels in August and 29% year-on-year, EIA data showed.

The last time demand rose for three straight months was in late-2022.

The sustained increase lifted total third-quarter consumption to over 9.60 million barrels, marking the highest third-quarter volume in six years and the strongest demand since end-2022. 

The uptick in domestic demand provides a valuable cushion for US refiners ahead of an expected surge in overseas base oils production, which could limit export opportunities to key markets like India.

Higher domestic demand could also amplify the impact of several refiners’ pivot to producing more Group III base oils instead of Group II.

The move would likely cut their overall output yield while targeting a market segment that is still largely reliant on imports.

The strong demand in September already cushioned the impact of signs of lower-than-usual exports during the third quarter of the year.

The move reversed the recent trend where exports balanced out weak domestic demand.

Any slowdown of this rebound in domestic demand could by contrast intensify pressure on US refiners as global supply rises in the coming months.