US domestic and overseas base oils and lube demand slumped to a two-year low in December, magnifying the impact of a rise in supplies.
US refiners typically respond to a seasonal slowdown in domestic consumption at year-end by moving surplus supplies to overseas markets.
US exports usually rise in response to those moves.
US base oils and lube exports instead fell in December to their lowest since first-half 2020, when global demand slumped in response to Covid-19 lockdowns.
US base oils and lube output rose in December but remained lower than usual.
The volume still far outweighed the synchronised fall in domestic demand and exports.
The supply-demand imbalance left US base oils prices under sustained downward pressure at the beginning of this year.
Domestic base oils and lube demand of 3.16mn bl (445,000t) in December edged down from 3.29mn bl the previous month and from 3.58mn bl in October, government data showed.
Demand still rose from year-earlier levels for a fifth straight month.
The trend lifted total consumption to 40.80mn bl in 2022, up 6pc from 38.34mn bl the previous year.
Strong US demand contrasted with weaker lube consumption in other markets like Europe and helped to support firmer domestic base oils prices compared with those other markets.
Those dynamics, of higher US prices and weaker overseas demand, then complicated moves to clear surplus supplies at the end of the year.
Lower US base oils exports in 2022 typically coincided with a drop in domestic base oils output.
The fall in exports in December instead coincided with a rise in domestic output and weak overseas demand.
High US prices relative to other regions added to overseas buyers’ preference to hold back and secure supplies from other sources instead.
The mismatch between supply and demand triggered a surge in US base oils and lube stocks in December to the highest since first-half 2020.
