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Asia’s base oils surplus nearly halved in June as supply fell faster than lubricants demand
Middle East disruptions cut premium-grade imports while regional output also eased
The smaller surplus limits Asia’s ability to meet additional requirements from more distant markets as regional demand starts to recover
Asia’s lubricants demand edged down in June, but a sharper fall in base oils supply cut the region’s surplus nearly in half, leaving less supply available as seasonal demand slowed.
Total lubricants demand fell 3% year on year to around 840,000 tonnes, after slipping 0.4% in May, according to Ministry of Energy, METI, KPA, PSA and other government data.
But demand, which excludes China, rose from less than 815,000 tonnes in May.
Regional output declined from May, while total supply, including premium-grade imports from the Middle East, dropped to its lowest level in 16 months.
The combination of firmer demand and weaker supply slashed Asia's surplus in June, reversing two months of far more comfortable balances.
The narrowing surplus pointed to a market where tightening supply was outweighing any relief from softer demand — a pattern also emerging in other key markets including the US.
Key Highlights
· Asia’s lubricants demand was mixed, with Thailand’s consumption sliding by more than 25% year on year, as well as lower demand in the Philippines, India and Japan.
· South Korea and Vietnam maintained relatively firm demand.
· Regional output fell to around 925,000 tonnes from close to 950,000 tonnes in May, even as it rose year on year for an eleventh straight month.
· Total supply, including Middle East Group III imports, fell to less than 930,000 tonnes from more than 985,000 tonnes in May, the lowest level since February 2025.
· That cut Asia's surplus over demand to less than 90,000 tonnes in June, down from more than 170,000 tonnes in both April and May.
Market Repercussions
The smaller surplus helped offset the impact of softer demand at the start of the third quarter, curbing pressure on Asian refiners to find outlets for excess barrels or to cut prices to facilitate such moves.
The arbitrage was already wide open, with Asia Group II prices at a steep discount to Europe and the US. But shipment volumes stayed relatively low, pointing to other constraints beyond price, including logistics, as well as supply itself.
The supply balance could tighten further as regional demand begins to revive in the remaining weeks of the third quarter. That could limit the region’s ability to meet additional requirements in more distant markets where supply already remains constrained.
