Exports rise to multi-year high
Surge in shipments helps to absorb Asia surplus
Surge in shipments plugs supply gaps in Middle East during plant maintenance
Asia’s base oils shipments to the Middle East surged to a multi-year high in October, driven by stronger flows from South Korea, Taiwan and Singapore.
Total exports to the UAE and Saudi Arabia combined exceeded 70,000 tonnes in October, up from more than 51,000 tonnes the previous month, government data showed.
The September volume had already been the highest in more than two years.
The surge in shipments helped to absorb surplus volumes in the Asia-Pacific market, easing the typical year-end supply pressure in that region.
It also helped to plug a supply-gap in the Middle East caused by scheduled maintenance at a key base oils plant in Saudi Arabia during the final weeks of the year.
Market Impact
· Asia refiners: Less pressure to adjust prices to move surplus supplies to distant markets.
· Middle East buyers: Reduced need to seek additional volumes or adjust prices to attract shipments.
· Price impact: More balanced fundamentals raise prospect of base oils prices staying more range-bound in the coming weeks.
Takeaway
The record shipments highlight Asia’s growing surplus supply and the importance of outlets like the Middle East in absorbing these volumes.
The start-up of new production capacity will further increase competition for and reliance on outlets like the Middle East.