Americas’ October lube demand mixed

Lubricating oil demand in the Americas rose in October as a pick-up in US consumption countered more widespread weakness in Latin America.

Firm demand in Latin America throughout most of last year had attracted a steady flow of arbitrage shipments from Asia-Pacific and Mideast Gulf.

Signs of slowing demand in the region was likely to complicate such shipments over the coming months.

US lube demand growth was also likely to face pressure from an expected slowdown in economic growth this year.

Total lube consumption of more than 640,000t in October in the US, Mexico, Brazil and Argentina combined rose from around 550,000t the previous month, government and industry data showed.

The rise in consumption for a fourth month in five lifted total demand to 6.33mn t in the first ten months of the year. The volume was up 7pc from 5.91mn t during the same period in 2021.

Strong demand in the region contrasted with a slump in China’s lube consumption in 2022. The weak demand left a persistent overhang of surplus base oils supplies in Asia-Pacific.

The rise in the Americas' lube consumption also coincided with unexpectedly low base oils production in the US during the second half of last year.

Strong demand and tighter supply in the Americas supported firm prices in the region.

Weak demand and plentiful supply in Asia-Pacific kept prices there under pressure.

The supply-demand and price disparity triggered a wave of arbitrage shipments from Asia-Pacific to the Americas.

Those various dynamics now faced the prospect of change.

Lube demand in Latin America fell in October for a second month and at its fastest pace in eight months.

An extension of the trend would curb the impact of any further US supply tightness.

Lube demand in China is likely to revive over the coming months following the country’s removal of most of its Covid-related restrictions.

Rising demand is likely to absorb more supplies from Asia-Pacific producers.

The result is likely to be a drop in arbitrage opportunities to move shipments from Asia to the Americas.