Global base oils and lubricants fundamentals tightened in January as demand outpaced supply, leaving a smaller-than-usual surplus at the start of the year and a reduced buffer ahead of supply disruptions from late February.

The surplus of supply over demand came to more than 400,000 tonnes in January, down from more than 520,000 tonnes in December and 30% lower year on year, EIA, ANP, Ministry of Energy and other government data showed.

The surplus shrank for a fifth straight month, as demand outperformed supply every month since May 2025 even with new production capacity coming on stream and a relatively light round of plant maintenance.

The absence of a typical surplus build around the turn of the year left the market more exposed when disruptions emerged from late February.

Key Highlights

·         Americas demand rose year on year for a seventh month as surging US consumption offset a drop in Latin America demand for a third month.

·         Rising demand contrasted with a fall in Americas supply.

·         Europe’s lubricants demand fell for a third month, but at a slower pace than the fall in base oils supply.

·         Asia’s demand rose for a seventh straight month, partially offsetting a similar increase in regional base oils supply.

·         The global base oils surplus in the three months to January came to around 1.30 million tonnes, the lowest for that period in three years.

Market Repercussions

The tighter-than-usual supply-demand balance at end-2025 and into January already cut arbitrage flows to outlets such as India, limiting their opportunity to build inventories ahead of peak demand at the end of the first quarter.

Even before the disruptions emerged, the balance pointed to further tightening during the first quarter as refinery maintenance coincided with a seasonal rise in demand.

The late-February disruptions then compounded pressure on that smaller buffer.