US’ April Base Oils Demand Falls For First Time In 10 Months

• US base oils and lubricants demand fell for the first time in 10 months in April as March's demand surge unwound and the usual seasonal pattern reversed

• Softer domestic demand freed more supply for exports, which climbed to an 11-month high as overseas markets continued to seek additional volumes

• The reversal suggested disruption-driven stock-building peaked earlier in the US than in other major markets

US base oils and lubricants demand fell in April for the first time in 10 months as disruption-driven stock-building unwound, freeing supply for exports at a time when overseas markets remained tight.

Domestic demand fell to 2.73 million barrels (385,000 tonnes) in April, down from 4.03 million barrels in March, EIA data showed. March had been the highest in 41 months.

Consumption declined 7% from a year earlier after surging 108% in February and 81% in March.

The pullback also broke the normal seasonal pattern.

US demand has risen from March to April in six of the past seven years amid firming spring consumption. Not this year.

April's slowdown pointed to buyers bringing forward more of their spring requirements into February and March ahead of anticipated supply disruptions and producer price increases.

The earlier reversal left refiners with more volumes available for export while buying in other regions was still accelerating.

Key Highlights

·         Total demand, comprising domestic consumption and exports, eased to 6.50 million barrels from 7.46 million barrels in March, but still rose 1% year on year and for a sixth straight month.

·         Exports climbed to their highest level in 11 months and rose year on year for the first time in 11 months as domestic demand weakened.

·         Exports accounted for 58% of total demand, up from 46% in March and the highest share in 10 months.

·         During the previous five months, stronger domestic demand offset falling exports. April was the first reversal of that pattern.

Market Repercussions

April showed the US adjustment occurring earlier than elsewhere. While Europe and Asia were still seeking additional supplies to cover disruption risks, weaker US domestic demand left more volumes available for export markets.

The adjustment helped cover overseas shortages without tightening the domestic market, pointing to sufficient supply for both markets and the opposite of buyers’ expectations when demand surged in February and March.

Near-term US demand pointed to a greater dependence on underlying consumption and hurricane season needs than on the disruption-driven procurement that had driven February and March's surge.