US’ Oct base oils exports to Africa mixed

US base oils exports to Africa rose to a three-month high in October amid a recovery in shipments to South Africa.

There were no exports to Nigeria for a second month. The last major shipment to that market was in July.

Improving Group I base oils availability in Europe and in Mideast Gulf raised the prospect of limiting subsequent arbitrage opportunities to West Africa.

US base oils exports of 107,400bl (15,130t) to Africa in October rose from less than 38,000bl the previous month, government data showed.

More than 90pc of the volume consisted of supplies bound for South Africa.

The exports to South Africa likely mostly included term volumes. These are less impacted by changes in prices.

The supplies that moved to Nigeria earlier in the year had mostly consisted of spot volumes. These are strongly impacted by changes in prices that create or close arbitrage opportunities.

High prices and tight Group I base oils supplies in Europe made the arbitrage from the US more feasible in the first seven months of the year.

The dynamic reversed in the second half of the year amid a sustained drop in European prices and increase in surplus supply.

The more competitive prices incentivized buyers in West Africa to lock in more of those supplies instead.

The pause in US shipments to Nigeria ended in November, when a large shipment of Group I base oils moved to the country.

The shipment was lined up at a time of year when domestic demand in the US faced a seasonal slowdown and producers often cut prices to clear surplus volumes through the export market.

Shipments from US to India remained low in October for a sixth month. The low volumes reflected the closed arbitrage to India in the intervening months.

The arbitrate stayed shut partly because of lower Indian demand for very-light grade base oils and partly because of healthy availability of supplies from Asia-Pacific at more competitive prices.

Any shipments from the US would need to match those competitive prices.