US domestic base oils demand hit a three-year high, tightening winter supply and drawing down inventories
Global Group III constraints and refinery run cuts pointed to renewed interest in US exports
Simultaneous domestic and overseas demand growth could further tighten US supply balances
US domestic base oils demand extended its surge to a three-year high in January, keeping supply tighter than usual during winter and adding to pressure on market fundamentals that intensified from end-February.
Domestic base oils and lubricants consumption rose to 3.53 million barrels (498,000 tonnes), climbing from 2.66 million barrels in December and by 68% year on year to the highest since January 2023, EIA data showed.
Strong domestic demand offset the impact of a sharp slowdown in base oils exports since the middle of last year, curbing a build-up of surplus supplies.
The slowdown in overseas demand was now beginning to reverse as global supply disruption prompted buyers to turn to US refiners to cover shortfalls.
The shift signalled simultaneous strength in domestic and export demand, tightening overall market balances.
Key Highlights
· Domestic demand rose by 6.7 million barrels (43%) year on year in the seven months to January, more than offsetting a 5.4 million barrel (20%) fall in exports.
· Exports’ share of total demand fell to 47% in January and 49% in the seven months to January, down from 62% in the first half of 2025.
· Total demand, or domestic consumption and exports combined, rose to 6.73 million barrels in January, a seventeen-month high.
· Demand exceeded supply for the first time in three months, drawing down surplus volumes and leaving inventories at their lowest level for January since 2021.
Market Repercussions
Beyond the seasonal uplift, domestic demand was likely to strengthen further as buyers sought alternative volumes to offset an anticipated tightening in Group III base oils supply.
Global conditions were tightening availability further.
Overseas buyers faced similar constraints in Group III availability, alongside tighter supply pressure as refiners cut run rates and shifted production to motor fuels and jet fuel.
This was likely to drive a recovery in export demand and increase reliance on US supply.
A revival in overseas demand, alongside already elevated domestic consumption growth, would tighten supply further and increasingly test US refiners’ ability to keep pace.