The US Base Oil market has experienced a pressure on prices throughout January 2024 despite the higher freight charges in the overseas markets. This downtrend was attributed to the combination of weak demand and ample supply of Base Oil in the regional as well as international markets. While several suppliers haven't seen significant changes in demand compared to December, others report some improvement, suggesting customers might be restocking after depleting inventories in February 2024. However, as per the reports, the downstream automotive sector remains sluggish, and blenders remain cautious about acquiring raw materials.

While global shipping and logistical turmoil continue to grip market participants, the market for Base Oil has been continuously declining with a drop of 4% to settle at USD 1430/ tonne for Base Oil Group II H 100 FOB Texas, USA during January 2024. Both blenders and finished product manufacturers reported to have lower demand for lubricants, leading them to be cautious about buying Base Oils. Moreover, the sluggish exports have been a major reason for this downtrend. Suppliers were eager to capitalize on export opportunities and manage domestic inventories which tempted them to offer discounts. This has further kept the potential for price dips on the horizon during this timeframe. Secondly, increased Group II production of Base Oil within the US market and a shift in trade patterns towards Europe and Latin America further supported the downtrend as ample supplies within the region were available throughout January. Due to the global shipping issues, several US producers were struggling to find export opportunities as the key markets like India, which imports significant volumes of US Group II grades, were facing challenges due to higher freight rates, and limited vessel space. Additionally, stricter import restrictions imposed by the Mexican government have impacted Base Oil demand in the US market.

As per ChemAnalyst, the Base Oil market in the USA is expected to recover as suppliers are hopeful for improved business in February amidst improved Panama Canal traffic eased the market as several delays kept on affecting shipments from Asia due to low water levels which allowed more vessels to cross per day. This might surge the new orders from the overseas market which could help the Base Oil prices to sustain their profit margins. However, export markets like Mexico and India require resolution of their respective challenges to boost demand. While the improved Panama Canal situation offers some relief, its impact on alternative transportation options remains to be seen.