• US exports to South America and Europe remained historically firm despite tighter domestic supply, as refineries prioritised core term customers

• Exports to spot-dependent markets including West Africa, Mexico and India fell further from already low levels, even as term shipments stayed firm

• Tighter US availability limited a key source of stock-building supply for West Africa ahead of the seasonal demand recovery later in the third quarter

US base oils exports to South America and Europe remained historically firm in May despite tightening domestic supply as refiners continued to prioritise core term customers.

Exports to South America held above 700,000 barrels (100,000 tonnes) in May for a second straight month, Census Bureau data showed. The volume was the second-highest in 10 months after April's high.

Exports to Europe fell back to 466,000 barrels from a 22-month high of more than 680,000 barrels in April. The May volume still held above the one-year monthly average of 435,000 barrels.

Combined base oils and lubricants exports to South America and Europe fell to 1.45 million barrels from April’s 29-month high of more than 1.80 million barrels. It was still well above the one-year monthly average of 1.25 million barrels.

Export volumes remained well above typical levels even as they eased from April's multi-year highs.

The higher volumes contrasted with a sustained slump in shipments to markets reliant on spot purchases rather than term contracts.

The divergence suggested that US refiners had sufficient production to meet core customer requirements but little surplus beyond those commitments.

That left buyers in those markets reliant on supplies from other sources such as Asia, although supply there was also exposed to its own disruptions and maintenance schedules.

Key Highlights

·         Shipments to Brazil reached their highest level in more than a decade, keeping South American exports near multi-year highs despite tighter domestic supply.

·         South America and Europe accounted for almost half of US exports, in line with refiners’ continued priority for core term customers.

·         Shipments to Africa, Mexico and India stayed near three-year lows, leaving spot buyers to absorb most of the tightening.

Market Repercussions

US refiners entered the Atlantic hurricane season with sufficient supply to support their core overseas customers, but little surplus to expand exports beyond those core requirements.

The tightness continued falling disproportionately on spot markets. India and especially West Africa remained the most exposed as a traditional source of opportunistic summer supply stayed unusually limited.

The pattern contrasted with a typical northern hemisphere summer, when weaker seasonal demand often leaves US refiners with additional supply to clear into export markets before demand recovers later in the third quarter.

The tighter US balance increased the opportunity for Asian suppliers to expand their presence in more distant markets, though those supplies carried their own risks from disruptions, feedstock shortages and plant maintenance.