US June base oil exports to S America fall

US base oils exports to South America fell in June to the lowest this year and second-lowest level in more than three years amid a slump in shipments to Brazil and Argentina.

Total exports to the region came to 272,000 barrels (38,000 tonnes) in June, government data showed.

The volume fell from more than 530,000 barrels in each of the previous three months and dipped below the 300,000 barrels/month level for just the fourth time in the last four years.

The drop in exports to a key market for term shipments from the US forced more supplies to move to outlets that are usually the destination for spot cargoes, such as India.

The rise in spot supplies for shipment to overseas markets put more pressure on US export prices to hold at levels that opened or kept open the arbitrage to facilitate such flows.

The fall in shipments to South America followed an increasingly sustained slowdown in lube consumption in markets like Brazil and Argentina.

Weaker lube consumption incentivized blenders in those markets to hold lower inventories.

It also boosted the attraction of procuring smaller volumes for more prompt delivery.

Supplies from domestic sources or from neighbouring markets better met those requirements compared with shipments from the US.

A pick-up in Argentina’s base oils exports to Brazil in June reflected that dynamic.

Any extension of the trend could prolong a slowdown in demand for supplies from the US, forcing more of its shipments to target other markets instead.

An extension of the trend would also leave blenders in South America with increasingly tight stocks.

Even with weaker lube consumption in recent months, Brazil’s supply-demand fundamentals remained relatively balanced.

The balanced fundamentals, and the country’s lack of new base oils production capacity in recent years, left the country reliant on imports to cover well over half of its base oils requirements.

The dynamic raised the prospect of a pick-up in US shipments to markets like Brazil even if the slowdown in their lube consumption continues over the coming months.