Asia’s January Base Oils Supply High; Surplus At Five-Year Low

Asia’s base oils supply stayed high for a second straight month in January, but a smaller-than-usual seasonal surplus left the region more exposed to supply disruption.

Total base oils supply exceeded 1 million tonnes in January for a second month, holding close to December levels and rising 12% year on year, Korea Customs Service, Ministry of Energy and other government data showed.

Supply typically rises relative to demand at year-end and the start of the new year, with a seasonal slowdown in lubricants consumption triggering a build-up of surplus volumes.

Unusually strong demand instead absorbed most of the additional output, capping the surplus and leaving the market more balanced than usual heading into the spring oil-change season.

Key Highlights

·         January’s base oils supply was the second-highest in nearly three years, with December volumes the highest during that time amid a surge in South Korea’s output.

·         Supply rose year on year for a sixth straight month, contrasting with a 2% dip in the first half of 2025 and lifting December-January volumes to the highest in at least five years.

·         The combined December-January surplus fell to a five-year low of around 190,000 tonnes as consumption rose faster than supply.

·         The two-month surplus fell from more than 200,000 tonnes during the same period a year earlier and close to 300,000 tonnes in the two months to January 2024.

Market Repercussions

Until a few weeks ago, the smaller surplus left regional refiners better positioned to benefit from a seasonal pick-up in demand from the end of the first quarter and to cushion the impact of new production capacity coming online.

The tighter balance now left the region more exposed to a larger-than-expected drop in base oils supply caused by surging crude oil prices and feedstock disruption.

Any such drop, combined with an extension of the region’s strong demand growth, pointed to the prospect of a repeat of last year’s tighter-than-expected supply balance in the first half of the year.

Last year’s drop in supply reflected plant-maintenance that had been announced well in advance.

Any drop this year from run cuts would be unplanned, leaving refiners and blenders less time to prepare.