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China's output rises to four-year high in 2025 on higher Group II production
Group II accounts for growing share of total base oils output in December, in Q4 and in 2025
Higher output and firm domestic base oils prices suggest demand is sufficiently strong to absorb the volumes
China’s base oils output climbed to a fourteen-month high in December, driven by a surge in Group II production.
Total paraffinic base oils output rose to close to 510,000 tonnes in December, up from around 460,000 tonnes in November, OilChem China data showed.
The volume was the highest since October 2024 and the second-highest monthly level since end-2021.
Production levels jumped as Group II base oils output surged to a four-year high.
Operating rates increased at a time of year when demand faced a seasonal slowdown, raising the prospect of a build-up of surplus supplies and pressure on prices.
China’s Group II base oils prices instead extended their rise versus diesel prices and continued to strengthen versus Fob Asia cargo prices.
Key Highlights
· Group II base oils output rose to close to 430,000 tonnes in December, marking the highest volume and largest share of total production since December 2021.
· Group I and Group III base oils output remained subdued, edging only slightly higher and reinforcing the industry’s growing emphasis on Group II grades.
· China’s total base oils output reached 5.50 million tonnes in 2025, edging up from the previous year to the highest level since 2021.
· Group II production rose by 9% in 2025, contrasting with declines in both Group I and Group III output.
· Group III base oils output fell in 2025 for the first time in at least four years, cutting its share of total production to just 6%.
· The domestic Group III base oils price premium to Group II base oils extended its slide in 2025, incentivizing refiners to prioritise Group II production over Group III.
Market Repercussions
China’s surging Group II base oils output coincided with increasingly firm domestic base oils prices, both relative to competing fuels and other base oils grades, as well as against regional benchmarks.
Firm prices encouraged refiners to maintain or raise base oils output, adding to supply.
Rising output alongside firm prices pointed either to a growing build-up of surplus volumes or to demand strong enough to absorb the additional supplies.
The sustained strength in both prices and production suggested that demand was increasingly instrumental in supporting the firmer fundamentals at end-2025 and into the start of the year.
