Mexico’s lubricating oil demand rose to a six-month high in December, adding to signs of strong consumption in the Latin American region at the end of last year.
Firm lube demand contrasted with weaker consumption in the US at year-end and a slump in demand in Europe.
Firm consumption in Latin America sustained steady demand for base oils from domestic producers and from overseas suppliers.
The US is Latin America’s largest overseas supplier and the source of almost all of Mexico’s base oils supplies.
A slowdown in arbitrage base oils shipments from other regions forced markets like Argentina to cover more of their requirements with domestic supplies.
Mexico had less flexibility to do that, leaving it more exposed to a slowdown in shipments from the US.
A slump in US base oils exports at year-end duly left Mexico with increasingly tight supplies to cover its requirements.
Rising lube consumption compounded the tightness.
Mexico’s lube demand of more than 63,700 kilolitres (56,460t) in December rose from 57,100kl in November to the highest since last June.
The rise in lube consumption every month of the year boosted total sales to almost 706,000kl in 2022, according to Mexican chemical industry association ANIQ.
The volume rose from less than 620,000kl the previous year to the highest in more than a decade.
Lube demand rose on the back of still-firm economic activity at the end of last year.
Mexico’s economy is forecast to grow more slowly this year in the face of rising interest rates, high inflation and slower growth in the US.
Lube demand in other Latin American markets held firm early this year even as their economies faced similar headwinds.
Strong demand at year-end contrasted with a fall in US base oils exports to Mexico in December to the lowest since first-half 2020.
The contrasting trends left US base oils supplies lagging Mexican lube demand in December for just the second time in more than two years.