US base oil and lube exports fell in April to a five-year low on a slump in shipments to Mexico and Belgium. A rise in shipments to arbitrage markets like Nigeria and India was insufficient to pick up the slack.
Base oil and lube exports of 1.92mn bl in April were down by half from 3.84mn bl the previous month to their lowest since January 2015, according to the Energy Information Administration. The volume fell below the 2mn bl level for the first time since 2015.
The slump in shipments cut total exports to 11.43mn bl in the first four months of the year. The volume was down by 18pc from 13.9mn bl during the same period last year.
Exports fell as demand slumped in the key outlets of Mexico and Belgium, mostly because of the Covid-19 outbreak. Consumer demand fell in response to lockdown measures to halt the spread of the virus.
Falling global fuel demand exacerbated the slump in crude and diesel prices. Falling crude prices added to overseas buyers' reluctance to secure more supplies. They focused instead on working down inventories built up during the first quarter.
Mexico and Belgium combined accounted for 46pc of US base oil and lube exports in 2019. The share was up from 26pc in 2015.
Exports to Europe have surged since then in response to rising demand for premium-grade base oils and the region's lack of production capacity for these grades until the start of last year.
Exports to Mexico have surged since 2017 because of a tax system that made imported base oils less expensive than imported diesel. The quirk has boosted demand for base oils as a fuel extender.
US base oil and lube exports to Mexico slumped in April to a three-year low of 509,000 bl. Exports fell below the 1mn bl/month level for the first time in seven months.
Exports to Belgium fell in April to a 25-month low of 228,000 bl, down from 446,000 bl the previous month. Total exports of 292,000 bl to Europe in April fell by half from 579,000 bl during the same month last year.
The slowdown in exports to those key markets prompted US producers to target other outlets like India and west Africa. These markets attract more US supplies when the arbitrage is workable. Lower base oil prices in March-April made the arbitrage feasible.
Exports of mostly Group II base oils to India rose in April to a five-month high of 123,000 bl. Shipments of 187,000 bl to the UAE in April were also the highest in five months. Exports of 105,000 bl to Nigeria were the highest since last November.
A rare record-high volume of 15,000 bl was exported to Pakistan in April. The shipment was the first to that country since 2018.
