Asia's July Base Oils Exports Hold Steady, Shift to Other Markets

Asia's base oils exports held steady in July for a second month, but China and India's lower share freed up more shipments for tighter markets elsewhere.

Total exports held at more than 610,000 tonnes in July for a second straight month, Enterprise Singapore, Korea Customs Service and other government data showed. The level remained below typical monthly exports of more than 650,000 tonnes over the past year.

Shipments to Southeast Asia, the Middle East, India and China accounted for 66% of the total for a second straight month, holding below 70% for the fourth time in five months. That marked an extended break from the year to March, when the same four markets typically took 73% of a larger total.

The shift pointed to sufficient supply within Asia despite disruptions to flows from the Middle East and lower-than-usual exports from sources including Singapore and Taiwan.

Muted flows to China and India pointed to sufficient local availability in those markets, freeing up a larger share of Asian supplies for markets beyond the region where supply was tighter and prices firmer.

Key Highlights

·         Exports to India recovered above 100,000 tonnes for the first time in three months but remained below their average of more than 145,000 tonnes.

·         Shipments to China fell below 80,000 tonnes for the first time in a year and to their lowest level in 22 months.

·         Exports to the Middle East recovered to a four-month high of more than 4,000 tonnes, but remained down from average levels of more than 35,000 tonnes.

·         Exports to Southeast Asia recovered to more than 220,000 tonnes, the highest level in two years, lifting the region’s share of Asia’s total exports to 36%, the highest in more than seven years.

·         Exports over the four months to July fell 5% year on year, to 2.42 million tonnes, leaving Asia with a smaller share of a smaller total.

Market Repercussions

Asia's ample supply contrasted with a tight US market. That let Asian refiners direct more barrels overseas, while US refiners stayed focused on domestic demand and term buyers.

The flows extended to Group III despite the product remaining tight globally. Growing output from China and India freed up more supplies for export even of that grade.

That gave Asian refiners more scope to capture higher prices in Europe and the Americas and expand their presence in those markets.

Growing reliance on Asian supplies also leaves those markets more exposed to any slowdown in flows from the region. That risk could grow in the coming months as plant maintenance cuts supply.