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Market Overview

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The global base oil market is experiencing steady growth, with a projected CAGR of over 5%. By 2027, it is expected to reach USD 40.76 billion, up from USD 30 billion in 2021. The market is highly fragmented, driven by factors such as rapid infrastructure and automotive industry growth, as well as increased construction activities. Mergers and acquisitions are becoming more frequent, further propelling the market’s expansion.

Base oil is a crucial raw material used in the production of various products including motor oil, lubricating grease, and metal processing fluids. It finds application in industries such as heavy manufacturing, automotive, oil & gas, power, electrical, and marine. The demand for base oil is particularly increasing in emerging economies like Brazil, Russia, India, and China, where industrialization plays a significant role in driving growth across sectors such as agriculture, construction, mining, and automotive.

Base oils are refined crude oil base stocks that are used in the manufacturing of automotive and industrial lubricants, greases, rubber products, and white and paraffin oil. They possess exceptional cooling and low-temperature properties due to their polar nature compared to paraffinic oils. Lubricants, which consist of 70% lubricant oil and up to 30% additives, are essential in reducing friction and wear between surfaces.

The industry is undergoing digitization through the integration of AI, robotics, virtual and augmented reality programs, among others. Energy transition towards sustainability and investment in green energy solutions, infrastructural changes, and the increased use of natural gas are shaping the future of the market. Furthermore, global consumption of petroleum and liquid fuels is projected to rise, making oil and oil products indispensable commodities for transportation and chemicals industries.

Currently, the US leads in oil production, followed by Saudi Arabia and Russia as major producers and exporters. Base stocks, essential for producing lubricants, are in high demand from the automotive and manufacturing sectors. However, the COVID-19 pandemic had a negative impact on the base oil market due to supply chain disruptions, production facility shutdowns, labor force participation decline, and social distancing measures.

Despite these challenges, the demand for base oil is expected to grow steadily in the coming years. Rapid industrialization, environmental sustainability initiatives, and increasing demand from sectors such as automotive, construction, agriculture, and manufacturing will drive market expansion. Asia, particularly countries like China, India, Thailand, Malaysia, Indonesia, Singapore, and Vietnam, presents significant opportunities for high-quality and sustainable base oils due to urbanization and government policies attracting foreign investments.

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Market Segmentation

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The market is segmented based on various factors, including group, end-user, and geography.

Segmentation by Geography
North America – US, Canada
Europe – Germany, France, UK, Spain, Russia
APAC – China, Japan, India, South Korea, Indonesia
Latin America – Brazil, Mexico
Middle East & Africa -Saudi Arabia, Iran, UAE

Segmentation by Group
Group I
Group II
Group III
Group IV
Group V

Segmentation by End-User
Automotive Oil
Industrial Oil
Process Oil
Metalworking Fluids
Greases
Others

In terms of groups, Group II is projected to be the largest segment in the base oil market. Group II base oils are more refined compared to Group I, exhibiting clear color and superior antioxidant properties due to the saturated nature of their hydrocarbon molecules. However, Group II base oils are more expensive than Group I. These base oils find primary applications in the textile industry, cutting oils, and the formulation of lubricants for turbines, heat pumps, exchangers, and engines, attributed to their impressive characteristics of wear and tear resistance, low friction, and enhanced load-bearing capacity.

In terms of end-users, automotive or engine oil holds the largest share in the base oil market. The primary function of automotive oil is to reduce friction and wear and tear in automotive engines, while also cleansing the engine from sludge and deposits. Previously, Group I base oil was utilized in automotive oil. However, presently, Group II and Group III base oils are highly preferred due to emission regulation standards, increased demand for low viscosity and low volatility lubricants, and the growing need for improved fuel economy, thereby driving the demand for premium base oil. Europe, APAC, and North America are witnessing a rising demand for automotive oil, consequently fueling the demand for base oil. Additionally, APAC is experiencing a significant surge in demand.

Geographically, APAC emerged as the largest market for base oil during the forecast period. The rapid urbanization, increasing disposable income, and growing industrialization in sectors such as automotive, food processing, cosmetics, textiles, and other manufacturing industries are driving the demand for base oil in APAC. China leads in the APAC region, driven by the escalating demand from the automotive and transportation sector, increasing mining activities, and strong growth in the manufacturing and machinery sectors. The availability of low-cost labor and raw materials further enhances the industry’s growth prospects.

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Competitive Landscape

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The demand for base oil products is closely tied to the consumption of industrial lubricants, which encompass a range of applications including hydraulic oils, metalworking fluids, industrial gear oils, turbine oils, and compressor lubricants. These lubricants find extensive use across diverse industries such as construction, power generation, railways, metals and mining, iron and steel production, chemicals, cement manufacturing, oil and gas, and general manufacturing. However, the outbreak of the COVID-19 pandemic had a severe impact on these industries, leading to temporary production suspensions, logistical slowdowns, reduced labor force participation, and decreased demand.

The base oil market is characterized by intense competition, with both global and regional manufacturers offering a wide array of products. Industry participants consistently employ various operational strategies in order to gain a competitive edge within the global market.

Key players in the base oil industry have pursued several growth strategies. These strategies include engaging in joint ventures, mergers and acquisitions, and other initiatives aimed at expanding their customer base and meeting their evolving requirements. Notable industry participants include Exxon Mobil Corporation (US), Chevron Corporation (US), Petro-Canada Lubricants (Canada), Saudi Aramco (Saudi Arabia), Phillips 66 (US), Asian Oil Company (India), Avista Oil Deutschland GmbH (Germany), HollyFrontier Corporation (US), and GS Caltex Corporation (South Korea). These market players have embraced strategies such as innovation, mergers and acquisitions, joint ventures, and others to drive revenue growth in the base oil market.

Key companies profiled in this report include Exxon Mobil Corporation, Chevron Corporation, Petro-Canada Lubricants, Saudi Arabian Oil Co., Philips 666, Asian Oil Company, Hindustan Petroleum Corporation (HPCL, Neste, Avista Oil Deutschland Gmbh, Sepahan Oil Company, GS Caltex Corporation, PBF Energy, HollyFrontier Corporation, Abu Dhabi National Oil Company, Ergon, SBZ Corporation, Petroyag, Ishtar Company, Yunitco, San Joaquin Corporation, Co. Ltd, Grupa Lotos S.A, Mol Group, Vertex Energy Inc.

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Recent Industry Developments

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In September 2019, Repsol entered into a joint venture with United Global Limited by acquiring a 40% stake in United Oil Company, a lubricant manufacturer based in Singapore. This strategic move enabled Repsol to enhance its market presence in Southeast Asia.

In October 2021, Lehvoss Group, a leading producer and distributor of raw materials for lubricant additives and base oils, disclosed the acquisition of GP2C, a lubricant additive distributor headquartered in France. This acquisition further strengthens Lehvoss Group’s position in the market.

In October 2021, Chevron Global Energy Inc., a wholly-owned subsidiary of Chevron Corporation based in the United States, announced the acquisition of Neste’s global base oil business. This acquisition expands Chevron’s base oil portfolio and reinforces its commitment to the lubricant industry on a global scale.

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Key Questions Answered

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What is the market size of the base oil market and what is its growth rate during the forecast period?

The global base oil market was valued at USD 30.21 billion in 2021 and is projected to reach USD 40.76 billion by 2027, with a compound annual growth rate (CAGR) of 5.12%.

Which region exhibits the highest growth rate in the base oil market?

The Asia Pacific region demonstrates the highest growth rate of 5.8% during the forecast period.

Who are the key players in the base oil market?

Exxon Mobil Corporation, Chevron Corporation, and Petro Canada Lubricants are among the key players in the base oil market.

Which region is more attractive for vendors in the base oil industry?

The Asia Pacific region is considered more attractive for vendors in the base oil industry.

What are the latest trends in the global base oil market?

The latest trends in the base oil market include high demand from the automotive oil segment, the growing importance of re-refining base oils, and the rising demand for Group II and Group III base oils.