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US base oils supply rebounded to a seven-month high in March, but the surge in demand left stocks at the lowest level for the month since 2021
The supply shortfall widened to a ten-month high as output and import gains failed to keep pace with surging consumption
Lower stocks reduced the buffer against maintenance-related disruptions, weaker Middle East imports and the approach of the Atlantic hurricane season
US base oils and lubriants supply rebounded to a seven-month high in March, but failed to keep pace with surging demand, leaving inventories at a multi-year low as buyers moved to secure supplies against global disruptions.
Total supply, or output and imports combined, rose to more than 6.80 million barrels in March, rebounding from a 35-month low of 5.41 million barrels in February, Energy Information Administration data showed.
Output recovered to a three-month high of 5.24 million barrels from a 10-month low in February, while imports climbed to a 14-month high.
The rebound came in time to meet a surge in spring demand. Supply still fell short of requirements, leaving the market with its largest shortfall in 10 months.
Key Highlights
· Paraffinic base oils output in the Texas Gulf Coast district rose to its highest level since August 2021, while Louisiana output reached a six-month high.
· Imports climbed to a 14-month high, adding to the recovery in domestic supply.
· The supply shortfall widened to more than 630,000 barrels, the third consecutive monthly deficit and the largest in 10 months.
· Stocks fell to 10.37 million barrels, the lowest March level since 2021.
Market Repercussions
Refiners entered the spring oil-change season with lower-than-usual stocks. That left suppliers with greater pricing leverage even in a normal market.
They instead faced a simultaneous surge in domestic demand, global supply disruptions, and buyers competing to lock in Group III volumes. US base oils prices surged, far outpacing gains in diesel.
The lower stock position reduced the buffer available to absorb other supply pressures through the second quarter, such as maintenance work and a deepening slump in Middle East imports.
Tight supply also raised the prospect of a drop in availability of spot cargoes during the summer months, when weaker domestic demand often triggers a pick-up in shipments to markets such as West Africa and India.
Domestic blenders' higher stocks could buffer the immediate impact of disruptions during the Atlantic hurricane season, but lower refinery inventories would leave the market exposed to any prolonged plant outages.
