Argentina’s base oils supply rose to a four-month high in January as a recovery in domestic output increased the country’s self-sufficiency, leaving it better insulated than other markets from price and supply disruption spreading from the Middle East conflict.

Total supply, or output and imports combined, rose to 21,400 cubic meters (19,000 tonnes), up from less than 13,000 cubic meters in December and more than double year-earlier levels, Ministry of Economy data showed.

Supply recovered as domestic Group I output rebounded after a refinery fire curbed production in the fourth quarter.

The improved supply helped cover a recovery in domestic lubricants consumption and left Argentina with enough surplus volumes to resume export cargo shipments at the end of February.

Key Highlights

·         Domestic Group I base oils output rose to a five-month high in January, rebounding from a fourth-quarter slump when a refinery fire curbed output.

·         Domestic output covered more than 67% of Argentina’s January supply, up from a near-two-year low of 56% in the fourth quarter of last year — reducing the country's reliance on overseas sources.

·         The US accounted for almost all of Argentina’s base oils imports in January, up from less than 80% in the fourth quarter, cushioning the impact of the slowdown in total import volumes.

·         Domestic lubricants consumption rose 3% year on year in January, climbing for the first time in three months amid a rebound in industrial oils demand.

·         Export cargoes resumed at the end of February after a three-month pause, with a cargo of Group I light grades and brightstock loading for Brazil.

·         Total demand, or domestic consumption and exports combined, held steady for a third month and lagged supply by the largest volume in four months.

Market Repercussions

A recovery in Argentina’s base oils output reduced the country’s reliance on overseas supplies, extending a trend towards greater self-sufficiency that began more than three years ago.

Its reliance on the US for most of the overseas supplies cut exposure to disruptions from other regions such as Asia and the Middle East.

The country’s greater self-sufficiency left it better positioned to cover any extension of the recovery in domestic lubricants demand.

It also contrasted with markets such as Europe and Asia where feedstock supply disruptions and surging diesel crack spreads raised the prospect of lower base oils output at the same time as seasonal demand rises.

The divergence points to the uneven repercussions of the Middle East conflict in global base oils markets, with Latin America better insulated by a recovery in domestic supply and reliance on the US for most imports.