South Korea’s May base oil exports rise

South Korea’s base oil exports rose in May to the second-highest level this year as scheduled plant maintenance drew to a close during the month.

But the volume remained below typical export levels during second-half 2021 at a time when base oil margins and Chinese demand remained weak.

Base oil exports of 379,180t in May recovered from an eight-month low of 344,880t in April, government data showed.

But the volume remained below average levels of more than 410,000 t/month during second-half 2021.

Exports have also still failed to exceed the 400,000 t/month level so far this year. They exceeded that level seven times last year.

The rise in exports from April coincided with the completion of scheduled plant maintenance work.

The lower volumes compared with more typical levels partly reflected the impact of maintenance work that ended during rather than at the beginning of May.

Refiners have also had more incentive to maximise production of middle distillates rather than base oils. The kind of prices that buyers in markets like India were targeting for very light-grade base oils were similar to or lower than regional diesel prices.

Refiners have been able to tap strong demand in more distant markets like Europe and the Americas.

But the price discount of fob Asia prices to prices in those destination markets has had to remain much wider than usual to make the arbitrage feasible. The resulting price levels were also less competitive than usual versus diesel prices.

The sustained slowdown in South Korea’s base oil exports cut total shipments to 1.82mn t in the first five months of the year. The volume was down 3pc from 1.88mn t during the same period last year, when Asia-Pacific supply was unusually tight.