Brazil's base oils imports jumped in August as buyers sourced from a growing number of markets, reducing their reliance on US supplies.

Base oils imports rose to more than 74,000 tonnes in August from 60,700 tonnes in July, more than doubling from a year earlier, MDIC data showed. Imports increased year on year for the sixth time in seven months and remained above the 63,000-tonne monthly average of the past year.

The August volume was the third-highest in 23 months, after larger imports earlier this year in April and June. But US cargoes accounted for a smaller share of imports than during those two months.

Tight US supply and steep price premiums continued to push buyers toward lower-priced premium-grade cargoes from South Korea and India, as well as shipments from Turkey and Turkmenistan.

The broader range of suppliers suggests Brazil's diversification beyond the US is gaining momentum, giving buyers more alternatives as US supply remains tight.

Key Highlights

·         US suppliers accounted for 70% of August imports, compared with more than 75% when imports were similarly high in April and June.

·         US’ August share of total imports stayed lower than usual for a second straight month, with that pattern last happening at the end of 2024.

·         India supplied close to 5,000 tonnes in August, the second-highest monthly volume in 34 months, after almost 7,000 tonnes in July.

·         A pickup in shipments from South Korea in July continued through August, with the trend showing signs of extending into September.

·         Turkmenistan and Turkey combined sent more than 2,500 tonnes to Brazil in August, extending a recent pickup in flows from the two countries.

·         Domestic output had rebounded to a one-year high in July, after scheduled maintenance at Petrobras' Reduc plant ended; August's higher imports added to that already-elevated base.

Market Repercussions

US supply is likely to remain tighter than usual while Middle East Group III imports remain almost at a standstill, keeping US prices at a premium to cargoes from alternative sources.

Brazil’s dependence on the US for a large portion of its supplies leaves it more exposed when US supply tightens, making higher domestic output and a wider range of overseas suppliers more valuable.

Higher availability in other regions, combined with steep discounts to US prices, should continue to favour supplies from established sources including South Korea while supporting further shipments from newer suppliers including India.

The longer US supply stays tight and prices remain elevated, the more time alternative suppliers have to establish regular flows into Brazil, turning spot purchases into a more consistent source of supply.

A sustained recovery in domestic output would reduce Brazil's need for imports overall, while a wider range of overseas suppliers would make the country less dependent on the US for the imports it still needs.