Argentina's lubricants demand fell for a fourth straight month in August, as a slowing economy added to the drag from buyers running down stocks built earlier in the year.

Demand fell 9% year on year to 18,200 cubic metres (16,100 tonnes), Ministry of Economy data showed.

The run of declines left consumption in the first eight months of the year slightly below last year's level. Buyers built stocks early in the year against supply disruptions and higher prices, then ran them down as those concerns eased.

The extended fall in demand suggested weaker underlying consumption as the broader economy turned lower. Argentina's economic activity fell year on year in July for the first time in five months, after GDP contracted in the second quarter for the first time since 2024.

Argentina’s decline added to a diverging demand picture across major markets. Brazil’s consumption rose in August to its highest since March, while Italy’s fell for a fourth straight month.

Weaker consumption reduced Argentina's base oils requirements just as Latin America’s supply balance moved into shortfall, easing its exposure to tighter US supply.

Key Highlights

·         Demand in the first eight months of the year fell to 146,800 cubic metres, down 1% from 148,000 cubic metres in the same period a year earlier.

·         Automotive lubricants demand fell 5% year on year, a fourth straight monthly decline.

·         Industrial oils consumption fell 16%, after rising 2% in July.

·         Base oils exports fell to less than 500 cubic metres, from more than 7,000 cubic metres in July.

·         Total demand, or domestic consumption and base oils exports combined, fell to less than 20,000 cubic metres, the second-lowest in six months.

Market Repercussions

Weaker demand across more of Latin America would reduce the region's supply requirements, curbing its need for imported base oils.

A slump in US exports drove the region's July shortfall, outweighing higher regional output. With US exports likely to stay lower than usual, softer demand is one way that gap could narrow.

Argentina's slowdown is too small to do that on its own. Brazil's increase in demand in August far exceeded Argentina's decline, leaving the region's largest market with a shortfall.

Argentina's spare barrels could still move to regional outlets, including Brazil, as they did in July. But exports showed no sign of recovering in September.

Without weaker demand beyond Argentina, the region's shortfall will have to be covered by imports that are harder to secure from the US.