US’ July Base Oils Exports Fall To 41-Month Low

US base oils and lubricants exports fell to a 41-month low in July as tightening domestic supply left refiners with little surplus to send overseas, extending a squeeze on spot shipments.

Exports fell to less than 2.30 million barrels (317,000 tonnes) from 3.04 million barrels a month earlier, US Customs data showed. The volume was down 23% year on year and the lowest since February 2023.

Exports have now fallen in all but one of the past fourteen months, but the driver has shifted in recent months.

Earlier declines reflected an unusual surge in domestic demand rather than a fall in supply. Since May, the constraint has been supply itself, as lower output and scarce imports left refiners with fewer surplus barrels, a squeeze that June's jump in demand only added to.

The shift showed how Middle East disruptions spread through global trade flows and continued to tighten supply beyond the region. Lower imports have tightened the US domestic balance, leaving fewer barrels available for export.

Key Highlights

·         Exports to key spot-market outlets fell 31% year on year, a steeper decline than in total shipments.

·         Exports to Nigeria were negligible for a third straight month, compared with more than 445,000 barrels in the three months to April.

·         India shipments stayed scant for a fourth month at less than 2,000 barrels, versus more than 122,000 barrels in the first quarter.

·         Pakistan received no shipments in July and almost none in June, breaking a pattern since early 2024 of a surge in exports to the country at least every other month.

·         Mexico shipments fell back to less than 560,000 barrels, the second-lowest since December 2022 and down from more than 900,000 barrels in June.

Market Repercussions

Spot-cargo exports typically rise through the summer, as softer domestic demand prompts refiners to clear surplus barrels overseas. That seasonal pattern looks unlikely this year.

With little domestic surplus to spare, markets that have relied on US spot cargoes, especially in West Africa, will need to look elsewhere.

The longer Middle East-driven disruptions keep US imports low and domestic supply constrained, the fewer spot barrels will be available for export.

That creates an opportunity for regions with more supply to spare to replace US barrels in markets where buyers need reliable alternatives.

Asia stands to pick up some of that business. In countries including South Korea, Taiwan and Singapore, relatively small domestic markets had been a disadvantage when supply was plentiful and refiners needed to find outlets for excess barrels. With US supply now constrained, the same production capacity leaves more barrels available for export.