Base Oil Market Size, Share & Trends Analysis Report By Type (Group I, Group II, Group III, Group IV, Group V), By Application (Hydraulic Oil, Automotive Fluid, Metalworking Fluids, Industrial Oil, Other), By End-User (Industry, Construction, Automobile, Agriculture, Marine, Other) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global base oil market size was valued at USD 21.24 billion in 2022 and is projected to reach USD 30.49 billion by 2031, with a CAGR of 4.1% during the forecast period 2023–2031.

Base oils are lubrication oil produced by refining crude oil or through chemical synthesis. Base oil has four vital physical properties, namely viscosity limitations and viscosity index, pour point, volatility, and aniline point that determine how they will perform in service. Motor oil contains approximately 75% of base oil. The base oil helps to protect the bearings, piston rings, and other engine parts that require continuous lubrication. Base oils are processed from crude oil. Synthetic ester oil, virgin base oil, PAO oil, and naphthenic base oil are forms of base oil that are commercially accessible. Base oils are used to create engine oils, transmission, industrial gear lubricants, greases, and other lubricating oils. They work in the automotive, engineering, industrial, and manufacturing industries. Lubricants for home appliances such as refrigerators, mixers, dishwashers, washers, dryers, and blenders are produced using base oils.

PAO is a synthetic base oil used to produce industrial and automobile lubricants. Automotive, heating, ventilation, air conditioning (HVAC), and industrial uses use synthetic ester oils. Virgin group I base oils are utilized in the manufacturing of lubricants. Naphthenic base oils offer good thermal stability and compatibility with synthetic elastomers for use in the automotive, industrial, and tire manufacturing industries.

Market Dynamics

What are the Driving Factors for The Global Base Oil Market?

Advanced engine technology drives the demand for premium lubricants compatible with moving parts and high temperatures. The choice of base oil significantly affects the final lubricants' overall performance. 70-90 percent base oil and 10-30 percent additives make up engine oils. Consequently, the rising demand for high-grade engine oils is also anticipated to stimulate the base oil market. High-performance engine oils can enable diesel vehicles, passenger cars, light-duty trucks, and stationary engines to resist harsh and demanding circumstances. Base oil is an essential component of engine oils. Consequently, the expanding need for high-grade oils in the automobile industry is driving the expansion of the global market.

In the formulation of various types of lubricants, base oils are utilized. The automotive sector is a significant end-user of lubricants. It utilizes lubricants like engine oils, transmission oils, and greases. The worldwide automotive sector is expanding rapidly, especially in developing nations. The International Organization of Motor Vehicle Manufacturers (OICA) reports that sales of new vehicles climbed from 87.50 million units in 2013 to 95.05 million units in 2018. Automotive businesses are committed to improving the fuel economy of vehicles. This is anticipated to increase the need for base oils in the automobile industry during the coming years.

What are the Challenges for The Global Base Oil Market?

Group, I have dominated base oil production since the early 20th century. Nevertheless, the demand for Group I base oil will likely decrease significantly, particularly in the European and North American regions. This diminution is largely attributable to the growing preference for cleaner and higher-quality base oil, as Group I base oil contains a significant concentration of contaminants such as sulfur, nitrogen, olefins, and PCNA (Poly-Cyclic Nuclear Aromatics). It is difficult to achieve the mid-SAPS (Sulfated Ash, Phosphorous, and Sulfur) standards or match the high performance of lighter viscosity grade oils due to the high sulfur concentration of Group I base oil.

What are the Future Opportunities for Global Base Oil Market?

During the forecast period, the BRIC nations (Brazil, Russia, India, and China) are anticipated to be attractive markets for lubricants. According to estimates by the World Bank, around 41% of the world's population resides in the BRIC nations, and this proportion is likely to rise. To address the needs of their massive populations, the governments of these nations place a strong emphasis on industrial growth. Foreign and local investments are predicted to expand significantly during the next five years due to the upgrading of financial infrastructure in these nations. This will stimulate all connected industries, including base oil and lubricants, thereby fostering their expansion.

Rapid development in developing countries is heading up demand for lubricants across a wide range of end-use sectors. In areas such as industrial machinery, automotive, and energy, China, India, Brazil, and South Africa are seeing substantial growth. Because of the depletion of crude oil and the increased emphasis on sustainable development, eco-friendly hydraulic oils are gaining momentum around the world. These oils are used in a variety of industries, including aviation, manufacturing, construction, and automotive. Hydraulic fluids protect equipment from corrosion and wear and tear while also acting as a heat transmission medium. They transfer kinetic energy between the pump and the hydrostatic motors, resulting in volume flow. Hydraulic oils are used in automatic transmissions, brakes, and power steering systems in passenger cars as well as industrial machines, including tractors, forklift trucks, and bulldozers.

Regional Analysis

The global base oil market has been segmented based on geography into North America, Europe, Asia Pacific, and LAMEA.

In 2021, North America held a considerable part of the worldwide market. The U.S. is experiencing a moderate demand for high-performance lubricants, driven by the increased emphasis on CO2 emission control. In the near future, a surge in the research and development of new lubricating mixes is anticipated to fuel the market in North America.

In 2021, Asia Pacific dominated the market and accounted for 50.6% of the total revenue. This is a result of the region's existence of expanding economies and the rising disposable incomes of its residents, which make it an appealing market for lubricant manufacturers. The Asia-Pacific area is one of the world's largest markets for base oil, with China dominating the region. The Asia-Pacific base oil market is anticipated to be led by China over the forecast period. The dominance is attributable to the rising usage of automobiles and the rapid expansion of the country's manufacturing sector. Additionally, the market in China is supported by the availability of raw materials, an increase in foreign investments, fast industrialization, and a rising population.

Similarly, the market in India is anticipated to see a high growth rate due to the existence of numerous base oil producers and the government of India's quick infrastructure development initiatives.

In 2021, Europe will account for the second-largest revenue share worldwide. As lubricants are predominantly constituted of base oil, their high consumption is viewed as a key growth driver for the European market. The rising consumption of base oil is closely related to the expansion of the industrial and transportation sectors. From 2005 to 2015, the overall number of passenger vehicles and commercial vehicles also increased by 3.8% and 3.7%, respectively.

Segmental Analysis

The global base oil market is categorized on the basis of type, application, and end users.

The global base oil market is categorized by grade as follows: group I, group II, group III, group IV (PAO), group V (without naphthenic), naphthenic, and re-refined. In 2021, the group I product segment dominated the market and accounted for 42.0% of total sales. This is due to their cost, ease of processing, low volatility, high viscosity index, and lubricating qualities, which have increased their use in automotive, marine, and rail lubricants. Group I goods have a sulfur content of greater than 0.03%, less than 90% saturates, and a viscosity between 80 and 120. This category is distinguished by its low amount of aromatic compounds and paraffinic composition. The temperature range is 32 to 150 degrees Fahrenheit. In comparison to all other groups, group I is less refined and consists of a variety of hydrocarbon chains that are not homogeneous. In 2021, the Group II product segment represented the second-largest revenue share. This is due to its convenient availability and new capacity expansions near countries in the Asia-Pacific and Middle East regions, as well as its affordable pricing. Globally, more than 90 percent of lubricant volume can be formulated from group II types. Since Group II's pricing are comparable to those of Group I, they have become prevalent on the market.

The global base oil market is segmented by application into automotive fluids, process oils, industrial oils, metalworking fluids, and hydraulic oils, among others. In 2021, the automotive fluids segment held roughly 48.0% of the worldwide base oil market. In the automotive sector, base oils are commonly used to produce lubricants. Lubricants serve an important function in automobile engines, transmissions, and steering mechanisms by minimizing friction and heat production. In some instances, these lubricants simultaneously cool multiple automotive components. In 2021, the automotive oils application category led the market and held the biggest revenue share at 42.9%. Its significant market share can be attributed to the rising demand for automotive lubricants such as greases, gear oil, engine oil, and others. Globally, truck engines and autos utilize about 20 million tonnes of lubricants annually, accounting for over half of global lubricant consumption. The automobile sector is projected to motivate oil companies to create base oils due to the efforts of vehicle makers to meet environmental requirements. Based on End-user, the market is segmented as Industry, Construction, Automobile, Agriculture, Marine, and Other.

Impact of covid-19

As the COVID-19 pandemic is spreading like wildfire with no signs of slowing down, it has adversely impacted many industries around the world, including the mining and energy industries. The operations and supply chains of leading players in the global market have been drastically affected. For instance, the nationwide lockdown announced by governments of multiple countries, such as Canada, Chad, Colombia, and many others, has led to disruptions in international mobility, transportation, and supply chains.

Glencore's, a leading player in the market, and a wholly owned subsidiary, PetroChad (Mangara) Limited, had to cease production at their Badila and Mangara oil fields. Apart from this, the demand from key importers of cobalt, i.e. China, has witnessed a sharp fall due to the halt in operations, which is affecting the overall supply and demand.

Recent Developments

• In January 2020, Nynas AB introduced the highly refined process oils NYFLEX 201B and NYFLEX 2005 for sealant compositions.
• Saudi Aramco, in Dec 2019, acquired 17% of Hyundai Oilbank for approx. USD 1,200 million from Hyundai Heavy Industries Holdings. This allowed Saudi Aramco to establish its global presence.
• In October 2019, Texol Lubritech FZC, a Gandhar Oil Refinery India Ltd. subsidiary, opened a production facility in the Hamriyah Free Zone in Sharjah, United Arab Emirates. White oils, LLP, HLP, transformer oils, rubber-processing oils, and industrial and automotive lubricants are produced at this facility.
• On 7th June 2019, Nynas AB launched a new base oil NYNAS® S 3B. This base oil is compliant with FDA regulations. Also, the new base oil is highly refined, meets FDA B requirements, and can be utilized in the food packaging industry.
• On 20th November 2014, Royal Dutch Shell PLC, a leading global oil and gas manufacturer, launched its new range of (EAL) environmentally friendly lubricants, including Shell Naturelle S4 Stern Tube Fluid 100. Shell Naturelle S4 Stern Tube Fluid 100 is made from fully saturated ester base oil, as it offers the best resistance to hydrolysis and oxidation.