Base oils supply flipped to a shortfall for the first time in five months, removing a key buffer against supply disruptions
Group I supply-balance almost disappeared, contrasting with larger-than-usual surplus volumes in December and January
Tighter Group I availability and Middle East Group III disruptions accelerate substitution into Group II, increasing pressure on those supply chains
Thailand’s base oils market flipped to a supply shortfall in February for the first time in five months, removing a buffer that could have softened the impact of the regional disruptions that emerged soon after.
Total supply, or output and imports combined, fell to less than 83,000 kilolitres (73,000 tonnes) in February, dropping from close to 93,000 kilolitres in January to a seven-month low, Ministry of Energy data showed.
The decline contrasted with a rise in total demand, with combined domestic consumption and exports climbing to a 47-month high of more than 92,300 kilolitres.
The tightening balance pointed to moves to clear a persistent surplus and trim output in response to weak base oils margins at the start of the year, with little indication at the time of the supply disruptions that emerged from end-February.
Key Highlights
· Base oils output fell to less than 54,000 kilolitres, slipping from more than 60,000 kilolitres/month in December and January to a five-month low.
· Lubricants demand fell for a fifth straight month year on year, led by a 21% drop in engine oils consumption.
· IRPC’s base oils exports rose for a third month year on year to a three-year high.
· Thailand’s Group I supply surplus fell to less than 100 tonnes, down from more than 23,000 tonnes in January to a 40-month low.
· The market shifted to a shortfall of close to 10,000 kilolitres, the largest deficit in 13 months, reversing a surplus of more than 13,000 kilolitres/month in December and January.
Market Repercussions
Thailand’s lower output and inventory levels mirrored a similar trend in Japan at a time when market focus had been on managing excess regional supply and weak margins.
The tightening balance instead accelerated the impact of supply disruptions that emerged from end-February, alongside refiners’ prioritisation of motor fuels over base oils production.
The structural decline in Group I refining capacity across Asia further amplified the effect of reduced output in markets such as Thailand and Japan.
Tighter Group I availability, alongside Group III disruptions in the Middle East, increased pressure on blenders to turn to Group II base oils, adding to demand on those suppliers at a time when they also faced rising feedstock costs and constrained availability.