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Base oils exports to South America extended their rise in February, boosting regional inventories ahead of global supply disruptions
Combined South America and Mexico shipments reached their highest share of total US exports in thirteen months, curbing flows to other regions
Global supply disruptions from end-February increased South America's reliance on US flows as arbitrage shipments from Asia paused
US base oils exports to South America rose in February even as total shipments fell, boosting regional inventories ahead of the global supply disruptions that deepened the region's reliance on US flows.
Total base oils exports to South America rose to 528,000 barrels (74,000 tonnes) in February, up from less than 483,000 barrels in January and climbing year on year for the seventh time in eight months, Census Bureau data showed.
The sustained increase contrasted with a drop in total US exports that included a slump in flows to Europe.
Stronger flows to South America bolstered regional inventories ahead of tightening global supply conditions from late February. The region's reliance on those flows for most of its supply also left it more exposed to any subsequent tightening.
Key Highlights
· Rising exports to South America helped offset an ongoing slide in base oils and lubricants flows to Mexico, with February shipments falling by 51% year on year and for an eighth straight month.
· Total exports to Mexico edged up to a four-month high, remaining in a relatively narrow range for an eighth month and suggesting that the slump in shipments had bottomed out.
· Total base oils and lubricants shipments to South America and Mexico combined accounted for 68% of total US exports, up from 64% in January and the highest share in thirteen months.
Market Repercussions
Rising domestic and overseas demand for US base oils from March contrasted with the prospect of tighter supply as refiners prioritised motor fuels output.
The tighter fundamentals raised the prospect of US suppliers prioritising core markets such as South America, magnifying the impact of any drop in availability for other outlets such as Africa and India.
Even so, buyers in South America faced the dual risk of tighter US supply and greater dependence on those flows amid a pause in arbitrage shipments from Asia.
A regional focus on maximising domestic base oils output to reduce import dependence faced its own constraints, with recent production issues in Brazil and a focus on motor fuels output adding to the region’s reliance on imports.
