Exports fall to five-year low as plant maintenance slashes supply
India and UAE most affected, with the UAE boosting inflows from Asia, Europe and US in response
Normal shipments resume in H2 January, with Yanbu's expanded capacity this year set to add further to supply
Saudi Arabia’s base oils exports from the Red Sea ports of Yanbu and Jeddah fell to a five-year low in December, as plant-maintenance work slashed supply from one of the Middle East’s key producers.
A sharp pick-up in cargo-loadings in the past week pointed to the completion of the maintenance work and a resumption of normal refinery activity.
Combined shipments from the two ports fell to little more than 10,000 tonnes in December, down from typical monthly volumes of more than 55,000 tonnes in the year to November, provisional shipping data showed.
Key Highlights
· The slump in shipments from the second half of November coincided with the start of maintenance work on the Yanbu base oils plant, with the shutdown scheduled to last until the end of the year.
· The project to expand premium-grade production at the plant was set to accelerate during the shutdown, with completion targeted as early as possible this year.
· As the largest outlets for supplies from Saudi Arabia, India and the UAE were the most affected by the December slump.
· India’s imports from Saudi Arabia fell to a five-year low in December, with a pause in shipments of Group II light and heavy grades alongside a slump in Group I supplies.
· The UAE cushioned the impact of the slowdown through a surge in imports from Asia especially, as well as additional volumes from Europe and the US during the fourth quarter.
· The impact on Europe was more muted, with several cargoes still loading from Yanbu and Jeddah in December before heading to the region.
Market Repercussions
The resumption of normal shipments from Saudi Arabia from the second half of January is likely to curb a repeat of the recent surge in base oils flows to the UAE.
An expected rise in supply following the completion of the Yanbu expansion project could further limit arbitrage opportunities to move base oils from other regions to the Middle East.
The additional capacity instead raises the prospect of intensifying competition for key growth markets such as India and Southeast Asia.