Base Oil Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Base Oil Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The base oil market size was estimated at around 35 million metric tons in 2020, and the market is projected to register a CAGR of around 2.5% during the forecast period (2021-2026).

COVID-19 negatively impacted the market in 2020. The declining automotive industry and the temporary shutdown of automotive manufacturing units and various industrial units due to the pandemic scenario have declined the consumption of engine oil, gear oils, greases, and metalworking fluid, thus, creating a negative impact on the demand for base oil.

Key Highlights

• Over the short term, the major factor driving the market's growth is rapid industrialization in developing nations considering the industrial application of base oil such as hydraulic fluid and industrial gear oil.
• On the flipside, automobile manufacturers focusing on engine downsizing and extended oil change intervals are likely to hamper the market's growth.
• The Group I segment dominated the market, but it is likely to decline during the forecast period, owing to its replacement by Group II and Group III base oils.
• The expanding production capabilities of base oils in developing countries are likely to provide opportunities for the market studied during the forecast period.
• The Asia-Pacific region is expected to dominate the market and is also likely to witness the highest CAGR during the forecast period.

Key Market TrendsEngine Oil Segment to Dominate the Market Demand

• The engine oil segment dominates the demand for base oil due to the growing demand for engine oil from industries such as automotive, power, heavy equipment, metalworking, chemicals, and others.
• Engine oils are widely used to lubricate internal combustion engines and are composed of 75-90% base oils and 10-25% additives.
• They are typically used for applications, such as wear reduction, corrosion protection, and smooth operation of the engine internals. They function by creating a thin film between the moving parts for enhancing heat transfer and reducing tension during the contact of parts.
• The automotive industry stands to be the largest consumer of engine oil. Currently, high-mileage engine oils are in demand in the automotive industry, owing to the properties that help in oil leak prevention and reduction in oil-burn offs.
• Up to Q3 of 2019, about 67.47 million vehicles were produced globally and reached about 52 million vehicles up to Q3 of 2020, registering a decline rate of about 23%. Thus, this led to a decrease in the demand for engine oils, which, in turn, negatively impacted the market growth of base oil.
• Most light and heavy vehicle diesel and gasoline engines use 10W40 and 15W40 viscosity grade oils globally. As of Q3 2019, about 15.37 million light commercial vehicles were produced globally and has reached about 11.79 million till Q3 2020, registering a decline rate of about 23.2%, thus led to a decrease in the demand for engine oils, which in turn negatively impacted the market growth of base oil.
• Therefore, the aforementioned factors are expected to impact the base oil market in the coming years significantly.

Asia-Pacific Region to Dominate the Market

• The Asia-Pacific region dominated the global market share. The rising investments in the region by multinational companies, the growing industrial sector, and high demand for gear oil, grease, etc., from industries, such as heavy equipment, power, and metalworking, are some of the key drivers for the base oil market in the region.
• China, the world’s largest automotive producer, is majorly focusing on increasing the production and sale of electric vehicles in the country. As of Q3 2019, China had produced 18.17 million vehicles and reached 16.96 million vehicles by Q3 2020, registering a decline rate of about 6.66%, which, in turn, negatively impacted the demand for the regional base oil market.
• Besides, countries such as India, Indonesia, Malaysia, and Thailand have also been witnessing a decline in the production of vehicles in the region as of the third quarter of 2020. Hence, all such trends in the automotive industry in the region are expected to show a significant impact on the base oil market in the coming years.
• As of Q3 2019, India had produced 3.5 million vehicles and reached 2.16 million vehicles by Q3 2020, registering a decline rate of about 38%, which, in turn, negatively impacted the demand for the regional base oil market.
• In addition, growing investments in the construction sector are anticipated to boost the demand for lubricants used in construction activities and in heavy equipment.
• Countries like India, China, the Philippines, Vietnam, and Indonesia have been witnessing growth in the construction industry considering the post-COVID scenario. Investments in residential and commercial construction in these countries have been increasing at a robust rate. This is further expected to increase the demand for base oil in construction applications in the coming years.
• Therefore, the aforementioned factors are expected to impact the base oil market in the coming years significantly.

Competitive Landscape

The base oil market is a highly fragmented market, where numerous players hold insignificant shares to affect the market dynamics individually. Some of the noticeable players in the market include Exxon Mobil Corporation, Royal Dutch Shell PLC, China Petroleum & Chemical Corporation, Evonik Industries AG, and Chevron Corporation, among others.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

Abu Dhabi National Oil Company
Chevron Corporation
China Petroleum & Chemical Corporation
CNOOC Limited
Eni SpA
Evonik Industries AG
Exxon Mobil Corporation
Formosa Petrochemical Corporation
Gazprom Neft PJSC
GP Global
GS Caltex Corporation
Indian Oil Corporation Ltd
LUKOIL
NESTE
Nynas AB
Petrobras
PETRONAS Lubricants International
Philips 66 Company
Repsol
Royal Dutch Shell PLC
Saudi Arabian Oil Co.
Sepahan Oil
SK Lubricants Co. Ltd
S
OIL CORPORATION
Total

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