US base oils imports recovered to a three-month high in July as high prices drew more Asian barrels into a market still short of Group III following the loss of Middle East supply.

Shipments from the Middle East had previously been the largest single source of US Group III imports, leaving those volumes difficult to replace and squeezing availability of a key base stock for high-performance engine oils.

A pick-up in flows from established suppliers including South Korea filled part of the shortfall.

Surging US Group III prices also attracted barrels from new sources, with India responding to the opportunity.

Total imports rose to 900,000 barrels (127,000 tonnes) in July from less than 700,000 barrels in each of the previous two months, US Census Bureau data showed. July imports were still the third-lowest in 17 months and well below the typical monthly volumes of more than 1.40 million barrels in the year to April.

Imports account for most of the US Group III supply, while Group III makes up most of the country's base oils imports.

The recovery in July was concentrated in Asian supply, with shipments from India reaching a record of more than 150,000 barrels. The last time the country moved more than 1,000 barrels to the US was in August 2023.

The surge followed the start-up of new Group III capacity in India late last year, just months before the Middle East conflict brought Group III flows from the region to a halt.

Key Highlights

·         Imports from the Middle East stayed negligible for a third straight month, after previously accounting for more than 40% of US imports.

·         Imports from South Korea rose to more than 460,000 barrels in July, the second-highest in 16 months.

·         South Korea's share of US imports rose above 50% for a second straight month, and to 32% in the first seven months of the year, up from 26% in 2025.

·         More shipments were lined up from India to the US during the third quarter of the year.

Market Repercussions

Imports staying well below typical levels will keep US Group III supply tight, pressuring refiners to cover more domestic demand and leaving less available for export.

But high prices were curbing demand, encouraging a switch to alternative grades where possible, and drawing in more supply from other sources.

That pull softened in the third quarter, with the premium of US prices over FOB Asia narrowing sharply in July and August after peaking in May and early June.

Shipments from India continued past July, showing the arbitrage remained wide enough to keep drawing in supply.

Whether that continues may depend on how much further the premium narrows before Middle East flows recover, as Group III plant maintenance around the world further restricts supply.