Saudi Arabia's Red Sea base oils exports eased in May after April's surge, but steady flows continued to provide global markets with an additional source of supply during the recent disruption.

Combined shipments from Yanbu and Jeddah slipped to less than 50,000 tonnes in May from more than 75,000 tonnes in April, provisional shipping data showed.

April shipments were the highest monthly volume in eight months, while May returned close to the longer-term monthly average.

The slowdown was uneven as Saudi Arabia redirected cargoes toward the strongest-priced markets.

Exports to Europe remained unusually high for a third straight month, while shipments to Singapore stayed elevated following the recovery from maintenance-related outages late last year and early this year. Flows slowed to India, whose prices lagged Europe and other destinations.

The trade flows reinforced Saudi Arabia's role as one of the market's key balancing suppliers during the disruption period.

While maintenance and logistical issues reduced availability from producers in many key markets, Saudi Arabia’s firm exports helped offset tighter availability and allowed refiners to capture stronger margins in the highest-priced markets.

Key Highlights

·         Combined exports from Yanbu and Jeddah averaged more than 60,000 tonnes across April and May despite May's pullback from April's eight-month high.

·         Shipments to Europe remained among the highest in more than four years for a third straight month, helping offset stronger demand and refinery maintenance in that market.

·         June exports were set to hold close to May levels, with higher shipments to India alongside continuing flows to Southeast Asia and Egypt.

Market Repercussions

Saudi Arabia's Red Sea ports sit outside Hormuz. While other Middle East producers saw export routes disrupted from late February, Saudi Arabia’s exports held firm.

Its ability to redirect exports toward the strongest-priced markets helped limit the impact of supply disruptions in those markets while strengthening its own competitive position.

The steady flows now coincided with recovering production in South Korea, firm supply from other Asian producers and easing disruption risks.

Improving supply contrasted with a seasonal slowdown in demand and weaker crude oil prices that raised the prospect of growing pressure on still-elevated base oils margins.

Saudi Arabia's steady exports are increasingly shifting from supporting a tight market to adding to a broader recovery in global supply.