US domestic base oils and lubricants demand rose for the first time in three months, tightening the supply available for export
Exports fell to a four-month low as US refiners covered a larger share of domestic demand
US exports have stayed closely tied to swings in domestic demand, giving overseas buyers more reason to diversify their sources of supply
US base oils and lubricants demand rose in June for the first time in three months, tightening the pool of barrels available for export just as buyers elsewhere were more reliant on US supply.
Domestic demand, or base oils and lubricants consumption combined, rose to 2.78 million barrels (391,000 tonnes) in June from 2.52 million barrels in May, US Energy Information Administration data showed. Demand rose 11% from a year earlier, the first year-on-year rise in three months.
With Middle East-linked base oils imports still curtailed, US refiners were already covering a larger share of domestic demand.
Rising demand added to the pressure, leaving even fewer US barrels for export, which fell in June for a second straight month.
That pointed to a tighter global market, with the strength of US domestic demand playing a growing role in determining availability for other markets.
Key Highlights
· Exports fell 12% year on year to a four-month low, extending a stretch in which exports and domestic demand have posted opposite year-on-year changes in 11 of the past 12 months.
· Total demand, or domestic consumption and exports combined, fell 2% year on year to 5.87 million barrels, a second straight annual decline and the lowest total in four months.
· First-half domestic demand of 18.90 million barrels was the highest for the period since 2022.
Market Repercussions
The growing sensitivity of US exports to domestic demand left overseas buyers that rely heavily on US shipments more exposed to shifts in US consumption.
Higher US prices gave buyers another reason to reduce their reliance on the US.
The shift already began showing up in markets like Brazil. Its imports from the US, normally more than 70% of the total, slid to 55% in July as supplies increased from India, China and South Korea.
India also reduced its reliance on US barrels in the first half of the year as higher domestic production covered more of its requirements.
Buyers that continued to rely on US supplies stayed tied to the strength of US domestic demand. US producers raised posted prices in August, suggesting demand remained strong enough to keep the supply balance tight even during the usual seasonal slowdown.
That left overseas buyers facing tighter US exports at a time when they typically rebuilt stocks after the summer slowdown.