US base oils stocks fell in May to the lowest in almost four years even with a rebound in domestic output of the lubricants feedstock.Stocks instead fell because of an unusually strong rebound in domestic demand, combined with a dip in imports because of plant-maintenance work in the Middle East.The rise in demand was likely to have been temporary, while the maintenance-work in the Middle East has now ended.US base oils price margins held in a narrow range throughout most of the second quarter, while the arbitrage remained feasible to outlets like Europe and India.The rangebound price-levels suggested the market deemed short-term factors to be the key drivers behind the drop in inventories.The rangebound prices, even with the stocks at multi-year lows, instead pointed to expectations that supply remained more than sufficient to cover requirements.US base oils stocks of 9.91 million barrels (1.40 million tonnes) in May fell from 10.64 million barrels in April to the lowest since mid-2021, government data showed..Stocks extended their fall even as US base oils and lube output rebounded to a five-month high of 4.90 million barrels in May.Output rose from 3.90 million barrels in April, when several major base oils units were offline for maintenance-work.The lower output and maintenance work in April coincided with a 13% fall in domestic demand from year-earlier levels.The higher output in May, following the completion of most of the maintenance work, coincided with a 23% jump in domestic demand.The dynamic suggested that consumption in May got a boost from pent-up demand from the previous month when maintenance-work curbed availability.Demand likely got further support from stock-building during the final weeks of the second quarter of the year to cover for any weather-related supply-disruptions during the third quarter.Without those temporary factors, the US’ rangebound domestic base oils prices suggested that outright demand remained weak.The dynamic put the onus on US base oils exports staying elevated to keep supplies at manageable levels.The fall in US base oils export prices in July boosted the feasibility of such a scenario..US’ May base oils exports rise.US’ May base oils imports fall.Base Oil News stories and analysis also available on ICIS platform
