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Market Overview

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The global Group II & III base oil market was valued at USD 20.2 billion in 2021, and it is projected to reach USD 29.8 billion by 2027, showing a Compound Annual Growth Rate (CAGR) of 6.70% during the forecast period from 2022 to 2027.

Group II & III base oils are premium base oils that are produced through the hydrocracking process of crude oil. These base oils have a saturates content of more than 90% and a sulfur content of less than 0.03%. Group III base oils, with their higher viscosity index, are mainly used in industrial lubricant applications and high-performance engine oils to meet stringent engine oil standards without the need for blending poly alpha olefins (PAO). Group II & III base oils are essential feedstocks for the manufacturing of motor oil, industrial oil, process oil, and metal processing fluids. They find applications in various industries such as heavy manufacturing, automotive, oil & gas, power, electrical, and even consumer products like cosmetics and pharmaceuticals.

Compared to Group I base oils, which have inferior properties and are inefficient, Group II and III base oils offer better performance. Group I base oils are gradually being phased out in automotive applications due to their negative impact on engine lifespan and performance. Group II base oils are more efficient, with improved oxidation control, enhanced viscosity control, better base number retention, and improved NOACK stability. Moreover, their price is comparable to Group I base oils, making them more affordable. Group III base oils are even purer and undergo severe hydrocracking to achieve higher purity grades. These improved base oils are essential for the production of high-quality lubricants used in automotive, chemical, manufacturing, power, oil & gas industries, and others.

The demand and production of Group II & III base oils are primarily concentrated in developed regions such as Europe and North America. However, emerging economies like China and India are witnessing an increased adoption of these oils due to their beneficial properties. The Asia Pacific region is expected to experience significant growth in demand for Group II & III base oils, with a projected CAGR of 7.47% by 2027. The increasing demand for environmentally sustainable and efficient lubricants from the automotive, manufacturing, heavy machinery, and other industrial sectors is driving the Group II & III base oil market. Furthermore, the inability of Group I base oils to meet efficiency requirements in high-performance engines and provide longer lifespans also contributes to the consumption of Group II & III base oils.

The lubricants industry is gradually transitioning towards environmental sustainability and the preservation of natural resources. Group II base oils, with a saturates content of more than 90%, sulfur content of less than 0.03%, and a viscosity index (VI) ranging from 80 to 120, are manufactured through hydrocracking. On the other hand, Group III base oils possess a similar chemical nature to Group II but have a higher viscosity index exceeding 120. These base oils undergo severe hydrocracking, hydro-isomerization, and hydrotreating processes. The Group II & III base oil market is growing in Europe, North America, and the Asia-Pacific region. There is a high growth opportunity in North America and Europe due to the increasing demand for premium base oil to curb automotive emissions. In the Asia-Pacific region, the growing automotive requirements and increasing industrial expansion are driving the need for high-quality base oils.

The high antioxidant properties, low sulfur content, enhanced viscosity control, and low volatility of Group II and Group III base oils are key factors contributing to the growing demand for these base stocks. Additionally, the evolving automotive regulations focused on reduced emissions and longer drain intervals are driving the high growth of Group II and Group III base stocks. The increasing focus on better fuel economy, longer engine oil durability, stricter vehicle emission standards, and lower pollution levels are all factors that drive the demand for high-quality base oils, specifically Group II and Group III base oils.

In developed countries like the US, Germany, and France, the industry has existing refined Group II & III base oil capacity, and more capacity is being added to meet the growing demand. On the other hand, the Asia-Pacific region is witnessing steady growth in Group II & III base stock capacity as the region rapidly adopts the increased use of highly re-refined base oil stocks.

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Market Segmentation

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The market is segmented based on various factors, including technology, application, and geography.

Segmentation by Technology
Hydrocracking
Hydrotreating
Catalytic Dewaxing
Others

Segmentation by Application
Automotive Oil
Industrial Oil
Process Oil
Others

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

The production of group II & III base oil utilizes various technologies, including hydrotreating, hydrocracking, catalytic dewaxing, and others. Among these, the hydrocracking segment generated the highest revenue of $7,621 million in 2021, followed by hydrotreating, catalytic dewaxing, and others. Looking ahead, the hydrocracking segment is anticipated to maintain its dominance in the market, exhibiting a compound annual growth rate (CAGR) of 8.13% during the forecast period. This technology involves refining base oils under high pressure and heat, enabling original equipment manufacturers (OEMs) to meet engine emission standards while providing durability and longevity to engines.

In terms of applications, the global group II & III base oil market can be broadly categorized into automotive oil, processing oil, industrial oil, and others (including metalworking fluid and hydraulic oil). Automotive oil held the largest market share in 2021 and is projected to maintain its leading position across all regions throughout the forecast period. The market growth is primarily driven by consumer preference for low-viscosity and high-mileage vehicles. Automotive oil, also known as engine oil, lubricates vehicle engines, reduces friction, prevents engine corrosion, cleans sludge, and acts as a detergent. It accounts for approximately 50.07% of the total group II & III base oil market.

The rapid industrialization and automation in various industries are contributing to the demand for group II & III base oil products. A significant portion of premium base oil is utilized in the automotive industry, which is experiencing rapid growth in the Asia Pacific region. Currently, the region is transitioning from Group I base oil to group II & III base oil, and this trend is expected to continue at an accelerated pace. China and India are key markets for premium base oil due to urbanization, government policies attracting foreign manufacturers, and increased purchasing power, leading to higher demand for vehicles, consumer goods, and real estate.

The use of high-quality lubricants made from group II & III base oils is essential for cooling, power transmission, friction reduction, effective functioning of moving parts, anti-tack properties, heat transferability, and protection against wear and corrosion. Advancements in end-use industries such as automotive and manufacturing, coupled with global economic growth, are expected to drive the demand for lubricants worldwide.

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Competitive Landscape

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Key companies profiled in this report include Chevron Corporation, Exxon Mobil Corporation, Hyundai and Shell Base Oil Co., Petro-Canada Lubricant, Saudi Arabian Oil Co., Asian Oil Company, Abu Dhabi National Oil Company, Chandri Wax Specialties Private Limited, Dodge, GS Caltex, Hindustan Petroleum Corporation Limited (HPCL), HollyFrontier Corporation, Mehta Petro Refineries Ltd, Petroyag, Resolute Oil, Repsol, SBZ Corporation, Sinopec, Shandong Qingyuan Group Co., Vertex Energy Inc.

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Key Questions Answered

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WHAT IS THE MARKET SIZE OF THE GLOBAL GROUP II & III BASE OIL?

The global Group II & III base oil market was valued at USD 20.2 billion in 2021 and is projected to reach USD 29.8 billion by 2027.

WHAT ARE THE PRIMARY TRENDS OBSERVED IN THE GROUP II & III BASE OIL MARKET?

The key trends in the market include the increasing demand for IMO-compliant marine fuel and the expansion of group II & III refining capacity.

WHO ARE THE LEADING PLAYERS IN THE GROUP II & III BASE OIL MARKET?

The key players in the Group II & III base oil market include Chevron Corporation, Exxon Mobil Corporation, Hyundai and Shell Base Oil Co., Petro-Canada Lubricant, and Saudi Arabian Oil Co.

WHICH REGIONS HAVE A DOMINANT PRESENCE IN THE GROUP II & III BASE OIL MARKET?

North America has a dominant presence in the Group II & III base oil market.

WHICH SEGMENT HOLDS THE LARGEST SHARE IN THE GROUP II & III BASE OIL MARKET?

The hydrocracking segment in the technology category is expected to hold the largest share in the Group II & III base oil market.