US’ September base oils demand falls

US base oils demand fell to a thirteen-month low in September amid a simultaneous dip in domestic consumption and shipments to overseas markets.

Lower demand contrasted with a surge in supply, triggering a rise in US stocks to the highest this year.

The rise in stocks highlighted the speed of a build-up of surplus supplies and the importance of maintaining high exports to limit that scenario, especially during the final months of the year.

Moves to maintain high exports would extend a trend throughout this year, when firm overseas shipment volumes balanced out the sustained fall in domestic base oils and lube consumption.

The domestic demand weakness extended into September.

Domestic consumption of 2.14 million barrels (301,000 tonnes) in September fell for a fourth month in five from year-earlier levels to the lowest since February, EIA data showed.

US base oils and lube exports by contrast rose in September for the third time in four months from year-earlier levels.

Shipments of 3.52 million barrels in September still fell from close to 4.10 million barrels the previous month.

The slowdown cut US’ total base oils demand, or domestic consumption and exports combined, to 5.65 million barrels in September.

The volume fell from more than 6.40 million barrels in August to the lowest this year.

US base oils and lube exports accounted for more than 60% of the total volume in September for the fourth time in five months.

The large share reflected the importance of US exports in maintaining balanced supply-demand fundamentals.

The need to maintain high export volumes in turn highlighted the importance of export prices that sustained the feasibility of arbitrage shipments to outlets like Africa and India.

The shipment of more supplies to Nigeria in October and November pointed to prices that were competitive enough to attract buying interest in that market.

A drop in US base oils supply would also help to prevent a large supply-build in the final months of the year.

A surge in supply in September instead triggered a jump in US base oils and lube stocks to the highest this year.

Supply likely fell in October because of plant maintenance work and signs of a dip in imports.

Supply likely recovered in November, even with the brief, unplanned shutdown of a Group II unit at the end of the month.

Higher supply and lower domestic demand added to pressure on US exports staying at elevated levels to maintain more balanced fundamentals.