US domestic demand and exports both declined in May, breaking the pattern where weaker buying released additional barrels into overseas markets
Unlike Asia, softer demand did not increase export availability, pointing to a tighter US supply balance
Firm US prices despite weaker demand kept Asia as the main source of additional spot supply
US base oils and lubricants demand and exports both fell in May, breaking a pattern where weaker domestic buying typically freed additional supply for overseas markets.
Domestic demand fell 11% year on year to 2.52 million barrels (355,000 tonnes), Energy Information Administration data showed, extending April's decline.
Exports also fell 11% from a year earlier, marking the first month since June 2025 that both domestic demand and exports weakened simultaneously.
The slowdown followed a surge in first-quarter demand as blenders built inventories ahead of higher base oils prices and worsening supply disruptions.
For most of the past two years, softer US demand had meant more supply flowing to export markets. Not this time.
Key Highlights
· Total demand, or domestic consumption and exports combined, fell 11% year on year to 5.93 million barrels in May, the first year-on-year decline in seven months.
· Exports accounted for 57% of total demand, down slightly from 58% in April but still the second-highest share in 11 months.
· May's slowdown followed a surge in domestic demand in the nine months to March, including an 83% year-on-year rise in the first quarter.
· US prices held at a steep premium to Asia even with the arbitrage window open.
Market Repercussions
The simultaneous fall in domestic demand and exports marked a break from the recent US pattern and widened the contrast with Asia.
Softer domestic demand in markets such as Japan and India freed up additional supply for export markets, weighing on regional prices.
Weaker US demand did the opposite. It failed to lift export availability or ease the wide premium of US prices over Asia.
The pattern suggested tighter supply continued to outweigh softer demand.
Hurricane season and the need to hold precautionary inventories could further limit surplus export availability in the coming weeks.
With the US no longer releasing additional barrels as domestic demand eased, buyers elsewhere increasingly had to look to Asia instead.