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Global base oils supply fell to a 13-month low in May as Middle East disruptions began to cut into production and trade flows
Demand growth slowed as buyers moved from disruption-driven stock-building to inventory management, but supply fell faster, shrinking the global surplus
The smaller surplus leaves less room to absorb further disruptions, keeping pressure on Group III supply and base oils prices
Global base oils supply fell to a 13-month low in May as Middle East disruptions began to cut into the market, shrinking the surplus even as demand growth slowed.
Supply fell to less than 2.70 million tonnes from close to 2.90 million tonnes in April and more than 3.15 million tonnes in March, when production reached its highest level in more than five years.
The May volume was down 1% year on year and the first annual decline in seven months, according to EIA, Ministry of Energy, ANP, METI, KPA and other government data.
The decline was broad-based, with supply falling in Asia, China, the Americas and the Middle East, where volumes slumped to their lowest level in more than six years.
The drop came as Middle East disruptions coincided with plant maintenance and other production issues, reversing expectations at the start of the year that new capacity would push global supply higher.
Demand continued to grow, but at a slower pace as buyers moved away from disruption-driven stock-building and focused more on managing inventories. Supply fell faster, keeping the surplus under growing pressure.
Key Highlights
· Asia and China accounted for 55% of global supply, maintaining a share above 50% for the ninth straight month despite lower regional output.
· Global demand rose by more than 4% in May, but growth slowed to its weakest pace in 11 months as stock-building eased.
· The global surplus held below year-earlier levels for the eighth time in nine months, with the January-May surplus down by about 35% from the same period in 2025.
· The three-month average surplus held close to its lowest level since the first half of 2022.
Market Repercussions
The smaller surplus left refiners and blenders with less room to absorb any more supply disruption, even as seasonal demand typically slows during the summer months.
Those disruptions showed little sign of ending soon, keeping pressure on Group III supply and on feedstock availability for other grades.
The market now faced additional pressure from unusually high diesel crack spreads, as well as a seasonal pick-up in demand later in the third quarter and the peak Atlantic hurricane period from end-August.
