Higher March output failed to keep pace with stronger-than-usual seasonal demand
Imports and total supply rose, but the deficit widened to a near-two-year high
Refiners favoured asphalt over base oils, reflecting weaker margins earlier in the quarter
Japan’s base oils output rose to a one-year high in March to meet a seasonal rise in consumption that proved stronger than expected, leaving supply struggling to keep pace.
Total output rose to 178,000 kilolitres (158,000 tonnes) in March, up from 157,000 kilolitres in February and typical monthly volumes of 163,000 kilolitres in 2025, Ministry of Economy, Trade and Industry data showed.
March is typically the peak month for base oils production in Japan, as refiners raise run rates to meet a seasonal rise in demand.
This year’s increase in output from February was in line with that pattern, but demand rose faster than expected.
The stronger-than-expected rise in consumption left output lagging domestic demand in the month of March for the first time in more than a decade.
Key Highlights
· Domestic demand exceeded output for the second time in three months and just the third time in more than 18 years.
· Imports rose to a five-month high, supported by increased inflows from South Korea.
· Total supply, or output and imports combined, rose to a five-month high but still lagged demand by the widest margin in 22 months.
· Asphalt output exceeded base oils output for a third straight month, reversing a typical pattern of higher base oils production in recent years.
Market Repercussions
Higher asphalt output pointed to moves to limit the rise in base oils production after margins for the lubricant feedstock slid in the first two months of the year.
The strategy would likely have been sufficient to cover typical consumption rather than the surge in demand that followed.
The shortfall instead pointed to a timing mismatch between March demand, which responded quickly to concerns over supply disruptions and rising prices, and output still shaped by earlier margin signals and seasonal trends.
A repeat of that dynamic elsewhere across Asia would leave buyers with larger stocks and refiners with tighter inventories heading into the second quarter.
Refiners could then face greater difficulty rebuilding base oils stocks amid feedstock supply concerns and a focus on maximising motor fuel output.