US’ April base oil exports to Mexico slide

US base oil exports to Mexico fell in April to a six-month low, extending for a second month a dip in shipments to the Latin American country.

Total exports of 426,680bl (60,100t) to Mexico in April slid by 10pc from 476,050bl in March and by 13pc from year-earlier levels, government data showed.

The volume was down from typical levels of more than 510,000 bl/month over the past year.

The slowdown in shipments coincided with a surge in global crude and diesel prices from late February. The higher prices, combined with unusually low US middle distillates stocks, incentivized refiners to produce more diesel.

Base oil prices have risen strongly since then. But they have mostly kept pace with rather than outpaced the rise in diesel prices. The trend has provided little incentive for US refiners to boost base oils production.

Conversely, high diesel prices have incentivized producers to pour any surplus light-grade base oils back into the diesel pool. They had previously been selling those surplus supplies at discounted price levels to markets like Mexico and India.

The more limited spot supplies have given producers the leverage to cover higher-priced term commitments and to curb the sale of spot supplies unless buyers accepted the prices that the refiners were targeting.

Buyers in Mexico have shown little such willingness.