Mexico base oil demand flat in Q2 – buyers

23 April 2014 21:00 Source:ICIS News

HOUSTON (ICIS)--Mexico’s base oil demand is staying flat at this point in the second quarter, buyers in the region said on Wednesday.

“Demand here in Mexico is flat, not growing,” one buyer said.

“We believe that this is going to be this way for the rest of the second quarter,” the source added.

Market participants in Mexico are expecting the second half of 2014 to experience a demand uptick, but there is uncertainty because by the end of the first quarter of the year the reasons for lagging demand remained unclear.

Faded Mexican base oil demand was blamed on high US prices for a time and then on shifts between truck and rail logistics and then on the Easter holiday season. 

But the pervading reason for slow base oil demand in the region appears to be more nearly lodged in weak overall economics dampening blender/compounder requirements for finished lubricants and motor oils.

High US prices were for a time said to be keeping buyers sidelined at the key Brownsville, Texas, US/Mexican buying region and looking toward the single local producer, Petroleos Mexicanos, or Pemex, for material. 

US base oil suppliers reduced prices in January, trying to bolster sales amid ample domestic supply.

These reductions failed to spark typical spot buying activity from Mexico, leaving many sources to begin to question the overall strength Mexican demand might show in 2014.

US base oil producers raised prices in late March and early April, as low margins and tightening supply of heavy neutral grades supported recouping the earlier reductions where possible.

By late April, Mexican buyers seeking heavy neutral grades, particularly brightstock, are faced with prices up about 10-20 cents/gal from the first quarter.

US brightstock spot prices were most recently assessed at $3.95-4.10/gal, about 20 cents/gal higher than the price in January on FOB Brownsville basis.

One market source commented about Mexico, “If the price is not right, they know how to do without it.”

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By Judith Taylor