According to China Chemical News, the base oil market in 2026 will enter a complex phase marked by shifting demand patterns, regulatory reforms, and supply chain adjustments. Globally, it will exhibit divergent trends with capacity expansion in Asia and Europe contrasted by a cautious stance in the United States. Mismatched supply and demand alongside regional profitability disparities will become the core market contradictions. Industry consensus anticipates that the 2026 global base oil market will present both opportunities and challenges, with prices unlikely to surpass 2025 levels. The base oil sector will continue facing pressure in the coming years.
In 2025, despite geopolitical and tariff disruptions, fundamentals will drive the Asia-Pacific and Middle East base oil markets. ExxonMobil's Singapore refinery expansion project remains an industry focal point, with its 2026 additional capacity already secured through long-term contracts with key clients, leaving limited incremental supply in the spot market. Industry analysts note that if surplus supplies enter the spot market, Group I naphthenic base oils will face the most significant impact.
Regional market divergence is pronounced across Asia: China's lubricant demand growth is slowing due to electric vehicle adoption and industry consolidation, though new Group II and III base oil facilities remain under construction. India is also advancing Group II/III base oil capacity at the Koyali and Hordia refineries, with its import demand expected to decline slightly.
Asian demand will remain stable through 2026, with Group II and Group III base oils as core categories. On the supply side, Group I base oil faces no major maintenance schedules and will maintain stable supply. Group II oil production will be impacted by key facility maintenance, such as the shutdown of a 1.3 million metric tons/year refinery in South Korea in early April. A Group III and Group III+ refinery in Malaysia plans mid-year maintenance shutdowns. Overall, supply growth relies on capacity expansions coming online, while demand growth remains sluggish. Market fundamentals are expected to balance, with moderate price fluctuations.
In Europe, the base oil market faced sustained pressure in Q4 2025. Supply surpluses combined with lucrative distillate margins forced producers to adjust strategies. All base oil categories faced oversupply, while distillate cracking spreads widened, significantly boosting refiners' incentives to switch production.
European traders report that refineries are broadly reducing base oil output while increasing diesel production, with some light base oils even being diverted into diesel to boost profits. Polish Oil Company's capacity expansion plan emerged as a key variable in the European market. Its 400,000-ton-per-year Group II base oil unit at the Gdansk refinery is scheduled to commence operations in Q1 2026. Analysts pointed out that declining overall lubricant demand in Europe, coupled with new capacity additions, will drive the region toward near self-sufficiency in Group II oils, substantially reducing import dependency.
U.S. market participants, however, maintain a relatively cautious outlook. In 2025, U.S. base oil production provided robust support for global Group II base oil supply, a trend expected to persist into 2026. A former refinery executive stated that refineries will maintain production until excess capacity cannot be absorbed, but the release of new global capacity will impact U.S. exports. Following the commissioning of new facilities in Poland and Singapore, competition intensifies in traditional U.S. export markets like Europe and India. U.S. blenders adopt a cautious stance toward the 2026 base oil market.
Industry consensus suggests January base oil trading will be subdued, with demand potentially recovering only by March. Market participants widely anticipate that 2026 base oil prices will struggle to surpass 2025 levels, with the sector facing continued pressure in the coming years.
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