Latin America’s lube demand fell in November for the first time in four months as consumption dipped across the region’s largest markets.

Total lube demand of more than 190,000 tonnes in November dipped from more than 210,000 tonnes in October and fell by 3% year on year, government data showed.

Weaker demand eased pressure on blenders’ base oils inventories, curbing the urgency for replenishment supplies.

The slowdown could in turn force US refiners with surplus base oils supplies at year-end to target other markets instead.

Key Highlights

·         Latin America’s demand fell on a simultaneous dip in consumption in Brazil, Mexico and Argentina.

·         The weaker demand contrasted with an ongoing rise in lube consumption in Asia and signs of steadier demand in Europe.

·         Slower demand cut the need for additional overseas base oils supplies, with South Korea’s exports to Latin America almost halting in December.

·         Mexico’s lube demand fell at a slower pace in November, amid easing pressure on industrial oils consumption.

·         Mexico’s lube demand accounted for its largest share of the country’s base oils imports in six months, raising the prospect of firmer replenishment requirements.

·         Mexico’s base oils imports accounted for more than 80% of US base oils and lube exports to the country in October, the highest share since the first half of 2023.

·         The more balanced demand and trade-flows pointed to limited room for US exports to fall any further following their recent slump.

·         US exports could instead face upward pressure if Mexico’s demand revived for uses beyond lubricants consumption.

Market Repercussions

Extended weakness in Latin America could complicate US refiners’ moves to clear surplus base oils supplies during the winter months.

The weaker demand already coincided with a slump in arbitrage shipments from more distant markets like Asia, curbing competition for US suppliers.

Signs of more balanced fundamentals in Mexico could also support steadier demand for US shipments.

Even so, the absence of a more diversified recovery in Mexico’s demand would keep pressure on US suppliers to divert larger-than-usual volumes to other markets, which are typically less able to absorb such supplies.