London – Global base oil demand growth remains modest in aggregate but hides divergent regional shifts, Michael Connolly of ICIS said at the 30th ICIS World Base Oils Conference last week.
“Demand on a global basis is a boring story. A little bit of evolution with growth in Group II and Group III offsetting decline elsewhere,” he told attendees. “But it’s a very different story depending on where you look! Where it is interesting is regionally.”
While North America, Northeast Asia and the rest of Asia-Pacific currently account for the largest share of demand, growth dynamics increasingly favor emerging markets and higher-quality base oil grades, Connolly explained.
ICIS data presented at the conference show a continued structural shift toward API Group II and Group III through 2035. Global Group II demand is projected to grow at a 1.9% compound annual rate between 2025 and 2035, while Group III rises 0.9% and Group I declines 2.6%, resulting in a net 10-year gain of 700,000 metric tons each for Groups II and III and a 1.7 million ton contraction for Group I.
Regionally, “traditional markets” such as Africa, the Middle East and parts of Asia are driven more by volume expansion, while “contemporary markets” in North America, Europe and Northeast Asia are shaped by evolving quality requirements rather than fleet growth and showing continued displacement of Group I by higher-specification grades.
Lubricant demand growth overall is expected to slow across mature markets with faster electrification and higher starting quality bases, while emerging markets with limited electrification continue to expand. Industrial lubricant demand is projected to grow at a 1.6% compounded rate over the next decade, compared with 0.4% for heavy-duty engine oils and a 1.7% decline for passenger car motor oils.
Supply additions are set to test balances in the near term. ICIS forecasts a dip in global Group II and III utilization in 2026 and 2027 due to a wave of new capacity, followed by recovery as demand catches up.
“Capacity has to come on in chunks, but demand comes in increments,” Connolly said.
Utilization for Group I is expected to remain relatively flat in the medium term because capacity rationalizations have outpaced demand losses, though further demand erosion in the early 2030s may require additional capacity reductions. At the same time, ICIS estimates a 20% reduction in global refinery runs by 2050 as transportation fuel demand declines, creating complex and non-linear effects for base oil production, particularly for Group I complexes dependent on specific feedstocks.
“Beyond 2028 and 2029, the switch in demand catches up with the addition of capacity,” Connolly said, pointing to a longer-term rebalancing once the current investment cycle is absorbed. He noted that the most significant uncertainties stem from electrification, refinery closures and shifting trade flows, which will reshape both regional supply hubs and cross-border movements.