Saudi Arabia's Red Sea base oils exports stayed unusually low in August, reversing the supply increase seen during the second quarter
Lower Saudi shipments reduced an important source of replacement supply for India, where flows from other suppliers remained below usual levels
October maintenance at Yanbu will coincide with Taiwan plant work, following Asia-to-Americas shipments that diverted additional supply from the region during the third quarter
Saudi Arabia’s Red Sea base oils exports remained unusually low in August, reversing a role that had helped ease global supply disruptions and tightening availability for Asian buyers.
Combined shipments from Yanbu and Jeddah held below 20,000 tonnes in August for a second month, shipping data showed, down sharply from average monthly volumes of more than 60,000 tonnes in the second-quarter.
Saudi Arabia was one of the few major suppliers that added supply to disrupted markets in the second quarter, partially offsetting weaker shipments from Singapore and Taiwan and a slowdown in exports from the US.
That role reversed in the third quarter as Houthi threats prompted cargoes to avoid the Bab el-Mandeb Strait, making Red Sea shipments less attractive.
The lower exports also reduced the benefit of Luberef’s decision to delay planned maintenance at its Yanbu plant from August to October.
The delay enabled the refiner to capture strong base oils margins, but lower shipments during the third quarter curtailed that benefit and the opportunity for buyers to build stocks ahead of the shutdown.
Key Highlights
· Flows to India stayed unusually low in August for a second month, following a surge in shipments to the market in the second quarter.
· Saudi Arabia became an increasingly important source for India as shipments fell from other key suppliers, including Qatar, Singapore and Taiwan.
· Saudi shipments to Europe held firm, extending a rise in flows to the region since the end of the first quarter.
· Saudi exports remained low so far in September, extending the slowdown into a third month ahead of planned October maintenance at Yanbu.
Market Repercussions
Europe would be the most exposed market when the October shutdown begins, given the surge in Saudi cargoes to the region this year, including during the third quarter.
India would also see the loss of an important source of replacement supply extend into the fourth quarter.
The maintenance would also coincide with scheduled plant work in Taiwan, following Asia-to-Americas shipments that diverted additional supply from the region during the third quarter.
A typical pickup in surplus shipments from the US during the fourth quarter would help offset the tightness. But those shipments are also likely to be smaller than usual, with domestic supply there already unusually tight.