Global base oils supply rose in November for the third time in four months, climbing at a time of year when demand typically faced a seasonal slowdown.

Total global base oils supply rose to more than 2.80 million tonnes in November, up from around 2.70 million tonnes in November and 1% higher year on year, various government data showed.

Even with the increase, the volume remained only slightly above typical monthly levels of around 2.75 million tonnes over the past year.

The rise in supply increased the need for a corresponding pick-up in consumption to avoid a build-up of surplus volumes at year-end.

Key Highlights

·         November supply rose month on month in every major market except the Middle East, where refinery-maintenance curtailed output.

·         Output posted the largest increase in the Americas, driven largely by the completion of plant-maintenance in the US.

·         Asia’s base oils output rose year on year for a fourth straight month, with gains extending into December.

·         Europe’s base oils output by contrast fell year on year for a seventh straight month, reflecting operational issues, maintenance work and lower run rates.

Market Repercussions

Global base oils price margins trended lower during the final months of last year, reflecting healthy supply levels and softer seasonal consumption.

But the dip in margins and outright prices was less volatile compared with recent years.

The more muted price pressure suggested that any supply-demand imbalance remained relatively manageable for the time of year.

Overall global supply levels also remained largely rangebound, indicating that recent additions to production capacity had yet to materially alter the global supply balance.

That dynamic could change in the coming year as additional base oils production capacity starts to come online.