Brazil/Argentina’s May net supply rises

Brazil and Argentina’s combined net base oils surplus rose in May to a four-month high as higher domestic production and firm import volumes outpaced a pick-up in lube consumption.

Even so, the surplus remained much smaller than year-earlier levels.

Brazil’s net base oils surplus, or production plus imports less demand and exports, rose to 21,730mᶟ (19,250t) in May, government data showed. The surplus rose from 2,970mᶟ the previous month to the highest since last November.

Even with the rise in supply, the country’s net surplus of 49,130mᶟ in the first five months of the year was more than 80pc down from 299,870mᶟ during the same period a year earlier.

The country’s base oils production and imports fell from the fourth quarter of last year to correct that large imbalance in 2021.

The more balanced supply so far this year curbs the need for such a correction this time.

Argentina’s net base oils supply slipped to a 1,620mᶟ deficit in May, from a 1,060mᶟ surplus the previous month. The relatively balanced supply during that two-month period contrasted with a deficit of more than 10,000mᶟ in February and March.

The lack of a significant imbalance similarly suggests there is scant pressure on the country’s base oil production or imports to adjust significantly from current levels.

The relative supply balance, and the ability to procure overseas supplies from other markets in place of the US, also limits the extent of any upward pressure on base oil prices from these two countries.