Supply falls for fourth time in five months
Domestic Group III price-differentials weaken despite lower supply
Falling supply contrasts with steady supply at higher levels in Europe
China’s Group III base oils supply fell sharply in October, extending a months-long decline and signalling a deeper slowdown in domestic demand for the supplies.
Total Group III supply, combining domestic output and imports, dropped below 45,000 tonnes in October, government and industry data showed.
The volume was down more than 30% year-on-year and stayed stuck near this lower level for most of the past six months.
China’s domestic Group III base oils prices extended their weakness versus Group II prices in the fourth quarter even with the tighter availability.
The price-weakness speeded up the prospect of even lower supply by incentivizing domestic refiners to prioritise Group II base oils production and overseas suppliers to divert more shipments to other markets.
The price-weakness, combined with lower supply, pointed to increasingly weak demand for the premium-grade supplies.
Lower supply and weaker demand contrasted with Europe, where Group III supply held firm and much higher than in China throughout 2025 despite the region’s anaemic economic growth.
The diverging trends could reflect a repercussion of the rapid electrification of China’s car parc, its growing share of the country’s total vehicle fleet and subsequent drop in requirements for high-performance engine oils.
Europe’s slower transition away from internal combustion engines by contrast helps to sustain firm demand for premium-grade engine oils.