US base oils and lubricants exports extended their fall in June as lower domestic supply left fewer barrels available for overseas buyers.

Total exports fell to just over 3 million barrels (428,000 tonnes) in June, down from more than 3.25 million barrels in May, US Census Bureau data showed. The volume fell 11% year on year and for the twelfth time in the past thirteen months.

The decline followed a drop in US base oils supply in May to its lowest level in 38 months as output fell and imports slumped. That left domestic producers covering a larger share of local demand, with less supply available to export.

The effect was already visible in April, when total exports rose year on year that month, but shipments to spot-dependent markets had already begun slowing. That slowdown extended through May and June, leaving those buyers with fewer US barrels to draw on.

Key Highlights

·         Exports to Nigeria were almost halted for a second month, contrasting with a surge in flows late last year and in the first quarter.

·         Shipments to India remained negligible for a third month, with the arbitrage closed.

·         Shipments to Pakistan fell to their lowest quarterly volume since the fourth quarter of 2023.

·         Exports to Mexico were more mixed, recovering to their highest in eight months but still down 45% year on year.

Market Repercussions

The smaller export pool is likely to persist while Middle East disruptions continue to restrict US imports and domestic production covers more of the country's requirements.

That limited the prospect of a typical build-up of surplus volumes at a time of year when domestic demand sees a seasonal slowdown. It also left the market with less room to absorb any storm-related disruptions during the Atlantic hurricane season.

The impact was greatest for markets that depend heavily on spot cargoes, complicating procurement plans for buyers like Nigeria. The country relies on spot shipments for a large share of its supply and typically starts replenishing stocks ahead of a seasonal increase in demand toward the end of the third quarter.

India was less exposed, as its own rising domestic production reduced the need for US supply, with the price gap between the two markets keeping the arbitrage shut.

US base oils prices rose to a steep premium to Asia in the second quarter, keeping the arbitrage open. That premium widened further in the third quarter, suggesting that available arbitrage flows had so far done little to replenish the shrinking US export pool.