US base oils and lube demand fell in May amid a simultaneous slowdown in domestic consumption and exports.High base oils export prices and a seasonal dip in domestic consumption in the third quarter of the year raised the prospect of extending that trend during the summer months.The dynamic increased the importance of a round of stock-building to cushion against that demand weakness.Domestic consumption of 2.32 million barrels (327,000 tonnes) in May fell from 3.33 million barrels in April and by 23% from year-earlier levels, according to the EIA.Base oils and lube exports of 3.53 million barrels in May fell by 14% from year-earlier levels to the lowest since last October.Total demand, or domestic consumption and exports combined, duly fell to 5.85 million barrels in May.The volume slipped from more than 7.10 million barrels in April and by 18% from year-earlier levels, and lagged US supply for the first time in five months.US base oils prices extended their rise throughout the second quarter and at the start of the third quarter of the year even with signs of more muted demand.Supply-demand fundamentals instead got support from a wave of stock-building to cover against any supply disruptions over the coming months.Forecasts of an unusually active Atlantic hurricane season this year, and an unusually early storm that struck the US Gulf coast in early July, added to buyers’ urgency to boost inventory levels.The stock-building lifted current demand by bringing forward future demand.The move was set to cushion the impact of any supply disruptions.It was also likely to magnify the impact of any extended weakness in domestic and overseas demand if the US avoids any major disruptions.The fall in US exports in May already reflected the weaker overseas demand.The slowdown cut US base oils and lube exports as a share of US output to 70% of the total in May.The share fell from more than 77% of total output in April to the lowest in nine months.The dip in exports as a share of output in May partly reflected a drop in surplus supply.It also coincided with increasingly firm US base oils export prices relative to other regions, closing off arbitrage opportunities to those markets.The closed arbitrage could complicate the impact of any slowdown in stock-building in the domestic market.Any such slowdown would boost the need for an alternative demand-driver such as overseas demand to limit a subsequent rise in surplus supplies..US’ May base oils supply falls
US base oils and lube demand fell in May amid a simultaneous slowdown in domestic consumption and exports.High base oils export prices and a seasonal dip in domestic consumption in the third quarter of the year raised the prospect of extending that trend during the summer months.The dynamic increased the importance of a round of stock-building to cushion against that demand weakness.Domestic consumption of 2.32 million barrels (327,000 tonnes) in May fell from 3.33 million barrels in April and by 23% from year-earlier levels, according to the EIA.Base oils and lube exports of 3.53 million barrels in May fell by 14% from year-earlier levels to the lowest since last October.Total demand, or domestic consumption and exports combined, duly fell to 5.85 million barrels in May.The volume slipped from more than 7.10 million barrels in April and by 18% from year-earlier levels, and lagged US supply for the first time in five months.US base oils prices extended their rise throughout the second quarter and at the start of the third quarter of the year even with signs of more muted demand.Supply-demand fundamentals instead got support from a wave of stock-building to cover against any supply disruptions over the coming months.Forecasts of an unusually active Atlantic hurricane season this year, and an unusually early storm that struck the US Gulf coast in early July, added to buyers’ urgency to boost inventory levels.The stock-building lifted current demand by bringing forward future demand.The move was set to cushion the impact of any supply disruptions.It was also likely to magnify the impact of any extended weakness in domestic and overseas demand if the US avoids any major disruptions.The fall in US exports in May already reflected the weaker overseas demand.The slowdown cut US base oils and lube exports as a share of US output to 70% of the total in May.The share fell from more than 77% of total output in April to the lowest in nine months.The dip in exports as a share of output in May partly reflected a drop in surplus supply.It also coincided with increasingly firm US base oils export prices relative to other regions, closing off arbitrage opportunities to those markets.The closed arbitrage could complicate the impact of any slowdown in stock-building in the domestic market.Any such slowdown would boost the need for an alternative demand-driver such as overseas demand to limit a subsequent rise in surplus supplies..US’ May base oils supply falls