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Base oils/lube exports rise on higher shipments to Europe, Brazil and Nigeria
Exports to Mexico fall more than 50% year on year, keeping pressure on total shipments
Limited capacity for other markets to absorb surplus supply increases importance of recovery in Mexican demand
US base oils and lubricants exports rose to a four-month high in October as a rise in shipments to South America and Europe partially offset a prolonged slump in flows to Mexico and India.
Total US exports of more than 3.32 million barrels (469,000 tonnes) in October rose from less than 2.70 million barrels in September, US Census Bureau data showed.
The recovery masked ongoing weakness in key destinations.
Total exports still fell by 17% year on year and for a fifth straight month amid a sustained slump in shipments to Mexico.
That weakness extended into October, keeping pressure on refiners to redirect shipments to alternative markets.
Key Highlights
· US base oils/lubricants exports to Mexico fell by more than 50% year on year in October, even as volumes rose to a four-month high.
· Exports to India stayed subdued for a second month, amplifying the impact of weaker Mexican demand.
· Excluding Mexico and India, total exports rose 20% year on year but still remained weak.
· The trend highlighted the critical role of Mexico and India in absorbing surplus US supply, and the difficulty for other markets to replicate that role.
· Exports to Europe climbed to a thirteen-month high, adding supply ahead of a seasonal slowdown in demand.
· Exports to Brazil rose to a twenty-two-month high, contributing to a large supply-build in November.
· Exports to Nigeria rose to a seven-month high, with the stronger flows extending through the rest of the fourth quarter.
Market Repercussions
The rise in shipments to Europe, Brazil and Nigeria, combined with a sharp increase in US domestic consumption, helped keep stocks lower than usual at the start of the fourth quarter.
Sustaining that dynamic to offset the slowdown in flows to Mexico and India could be challenging.
Alternative markets like Europe offer limited capacity to absorb additional volumes in the same way that Mexico has done. The winter seasonal slowdown in consumption is likely to further constrain demand.
The scenario increased the importance of a recovery in exports to Mexico especially to avoid a more rapid build-up of surplus supplies in the US during the winter months.
