Brazil's lubricants demand fell more slowly in July, adding to signs that consumption is stabilising after a round of inventory drawdown that left the import-dependent market more exposed to supply constraints.

Demand fell 3% year on year to 130,500 cubic metres (116,000 tonnes), ANP data showed. The decline was the second straight monthly fall, but smaller than in June, when consumption sank to its weakest level since December 2023.

The slower decline added to signs that buyers in several major markets were moving back toward more typical purchasing patterns after running down inventories built earlier in the year to cover against supply disruptions.

A preference to maintain lower stocks pointed to expectations that supply was sufficient to meet demand.

Argentina, by contrast, saw an even sharper fall in lubricants consumption in July. Weaker demand freed more surplus supply for export, with shipments rebounding after a near-complete pause in May and June.

Key Highlights

·         Brazil’s total lubricants consumption in the first seven months of the year rose to more than 900,000 cubic metres, still up 4% from a year earlier.

·         Argentina’s lubricants demand fell 11% year on year to 16,900 cubic metres in July, the lowest level in five months.

·         Argentina's automobile lubricants demand fell 14% year on year, a third straight monthly decline, while industrial oils consumption rose 0.5% after two consecutive monthly declines.

·         Argentina's base oils exports rose above 7,000 cubic metres in July, the highest since October 2025, with cargoes moving mostly to Brazil and the US.

Market Repercussions

Buyers’ stocks surged across most major markets earlier in the year as concern about supply disruptions prompted them to lock in sufficient volumes.

But for term buyers especially, supply held up even through a disruption of that scale, suggesting the underlying balance for most base oils grades was more sufficient than the earlier stockpiling assumed.

Steadier demand and thinner stocks now leave buyers more exposed to fresh disruption, just as plant maintenance picks up in several regions and the US enters the peak of Atlantic hurricane season.

That risk may be one that buyers in Brazil are willing to take. Holding thinner stocks, on the expectation that supply remains sufficient, avoids the alternative of carrying large volumes bought at high prices and then working them down over months.