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US base oils exports eased in May but remained well above historical levels despite firm domestic demand
Shipments to spot-dependent markets such as Mexico and West Africa continued to shrink as refiners prioritised domestic requirements and term customers
Reduced US spot availability left buyers increasingly dependent on alternative suppliers, particularly in Asia
US base oils and lubricants exports eased in May but remained historically firm as refiners continued prioritising domestic requirements and long-term export customers, leaving less spot supply available for overseas buyers.
Exports slipped to less than 3.30 million barrels (459,000 tonnes) in May from almost 3.70 million barrels in April, US Census Bureau data showed.
The volume remained well above average monthly exports during the previous year and marked a third straight month of above-average overseas shipments despite firmer domestic requirements.
While total exports stayed firm, the destinations that fell away were the regular outlets for spot shipments such as Mexico, West Africa and India.
The slowdown pointed to a sharper line between buyers with term supply and those relying on spot availability, leaving buyers without term contracts to seek alternatives, primarily in Asia.
Key Highlights
· Exports to Mexico fell for an eleventh straight month year on year, hitting a 41-month low.
· Shipments to West Africa fell to their lowest level in almost three years.
· Combined exports to Mexico, Africa and India dropped to their lowest level in more than three years.
· Those three markets accounted for their second-smallest share of total US exports in almost four years.
Market Repercussions
US exports remained adequate but revealed a deepening split between markets receiving term supply and those relying on spot volumes, with the second group increasingly cut off from US shipments.
Domestic requirements remained elevated following the loss of Middle East Group III imports, reducing the volume of spot shipments available for export.
West Africa was most exposed, given its reliance on imports to meet domestic demand and limited alternative suppliers of spot volumes.
India was better positioned. Rising domestic production and term contracts with Asian suppliers reduced its reliance on spot flows from the US.
Mexico remained dependent on the US as its primary supplier. Previous export volumes had comfortably exceeded domestic requirements, but that surplus had narrowed sharply.
Tighter US supply strengthened Asia's role as the principal source of spot export volumes for import-dependent markets.
