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Japan's base oils output rose to an 18-month high in April, reversing a March shortfall as elevated margins drew production toward lubricant feedstock
Higher base oils supply and run-rates mirrored a similar trend in other markets in Asia, pointing to improving regional availability
Imports fell to a 27-month low, with Qatar shipments at an 11-month low, pointing to a growing Group III supply gap
Japan's base oils output rose to an 18-month high in April, pointing to refiners prioritising lubricant feedstocks despite falling refinery runs and strong incentives to maximise motor fuels production.
Base oils and lubricants output rose to 181,100 kilolitres (160,000 tonnes) in April, up from 178,000 kilolitres in March to the highest level since October 2024, Ministry of Economy, Trade and Industry data showed.
Output rose even as total refinery production fell close to a 21-month low, while diesel output dropped to a nine-month low.
Concerns had grown that refiners would divert feedstocks toward transport fuels as diesel margins surged following the disruption to Middle East supply flows.
Japan's output increased instead, pointing to improving economics for base oils production.
Key Highlights
· Asphalt production fell to an 11-month low, lifting the surplus of base oils versus asphalt to the highest since June 2023.
· Base oils and lubricants supply, or output and imports combined, outpaced demand by the largest volume in four months.
· Base oils imports fell to a 27-month low, with shipments from Qatar dropping to an 11-month low.
Market Repercussions
Surging Asia base oils prices during March and April improved the competitiveness of lubricant feedstocks relative to other refinery products.
The price strength over diesel values extended through May, sustaining the incentive for refiners to maintain elevated base oils output through June.
Similar patterns emerged in India and South Korea, where base oils run rates also rose in April despite strong transport fuel economics and a prioritisation to maximise output of those products.
Higher output helped keep Japan's base oils balance manageable even as demand surged in March and April. Supply moved from a shortfall in March to a surplus in April.
Concerns about tighter supply had been a major factor supporting the surge in regional demand from March.
Group III base oils remained the outlier. Japan’s imports consist largely of premium Group III grades, and the decline in inflows pointed to tightening availability as Middle East disruptions began to feed through.
The slowdown pointed to the growing importance of additional Group III capacity outside the Strait of Hormuz, a shift that was already under way before the current disruption.
