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Group I base oils supply fell in December for the third time in four months, pushing fourth-quarter volumes to the lowest level in more than seven years
Full-year 2025 supply dropped to a multi-year low, underscoring the structural contraction of Europe’s Group I capacity
A smaller year-end surplus strengthens European refiners’ leverage heading into a period of seasonal demand recovery and rising crude oil prices
Europe’s Group I base oils supply fell in December for the third time in four months, cutting fourth-quarter volumes to the lowest in more than seven years and tightening the regional balance heading into 2026.
Total Group I supply fell to less than 160,000 tonnes in December, down from closer to 170,000 tonnes in November and 8% below year-earlier levels, various government data showed.
Lower supply helped offset a typical seasonal slowdown in demand at year-end, reducing the surplus carried into the new year and limiting pressure on refiners to clear lingering volumes in overseas markets.
A smaller overhang also strengthened refiners’ pricing leverage, a position that took on added significance in the face of rising feedstock costs from early January.
Key Highlights
· December Group I supply fell month on month as lower output in UK, Poland and Turkey countered a recovery in Italy’s base oils production.
· Fourth-quarter supply dropped to less than 460,000 tonnes, down from more than 560,000 tonnes in the third quarter and the lowest quarterly total in more than seven years.
· Full-year 2025 supply fell to little more than 2.0 million tonnes, slipping 8% year on year to a multi-year low and highlighting the structural contraction of Europe’s Group I capacity.
· Fourth-quarter net supply, or output less exports to markets outside Europe, fell to around 260,000 tonnes, down from more than 370,000 tonnes in the third quarter and the lowest in more than six years.
Market Repercussions
Lower supply and a smaller year-end surplus curbed the need for refiners to push volumes into export markets to balance inventories.
In previous years, the removal of such supplies often triggered sharp price adjustments around year-end or the start of the new year to make arbitrage shipments viable.
The smaller surplus at the start of 2026 limited that dynamic.
The market now faced a typical pick-up in demand ahead of the spring oil-change season at the same time as a surge in crude oil prices that had already risen steadily since the start of the year.
Firmer supply-demand fundamentals, combined with already-squeezed base oils margins, gave refiners greater scope to pass through the higher feedstock costs more quickly.
