Global premium-grade imports from the Middle East remained near a six-year low in July, with alternative suppliers unable to replace the lost volumes
Higher Group III prices have encouraged South Korea, China and India to increase exports, but additional supply has been insufficient to close the gap
The prolonged shortfall could keep Group III supply tight into next year, with maintenance elsewhere and limited substitution adding to price pressure
Global premium-grade base oils imports from the Middle East stayed unusually low in July, leaving buyers reliant on alternative supply that was insufficient to replace the lost volumes.
The shortage has reduced availability of the base stocks used in high-end engine oils and sent Group III prices sharply higher. The effect is now reaching end-users, with tighter availability of synthetic motor oil emerging in markets including the US.
The US, Europe and Asia took delivery of less than 25,000 tonnes from Qatar, Bahrain and the UAE in July, Census Bureau, Eurostat, Enterprise Singapore and other government data showed.
That was up from less than 6,000 tonnes in June, but still the second-lowest monthly total in more than six years and far below average volumes of more than 210,000 tonnes a month in the year to March, before supply disruptions in the Middle East curtailed flows from the region.
The three Middle East countries typically supplied more than 40% of US Group III supply, more than 35% of Europe's and more than 40% of China's Group III supply.
Exports from South Korea and China have risen to help fill the gap, with surging Group III prices in destination markets encouraging refiners elsewhere to maximise output and shipments.
But the additional supply has been insufficient to replace the lost Middle East volumes, squeezing supply of a key feedstock for high-end engine oils.
Key Highlights
US imports fell to a record low of less than 50 tonnes in July, from typical monthly volumes of more than 83,000 tonnes in the year to March.
European imports held in a narrow range between 3,400 tonnes and 5,700 tonnes for a third straight month, versus typical monthly volumes of more than 58,000 tonnes in the year to March.
Imports to Asia rose to 15,000 tonnes in July from less than 1,500 tonnes in June, but remained far below typical volumes of more than 74,000 tonnes a month in 2025.
The Asian cargoes arrived in Singapore from Qatar and the UAE, suggesting they left the Middle East during a brief hiatus in the conflict in June.
Market Repercussions
A slowdown in Bahrain and UAE shipments last summer, tied to scheduled maintenance, gave buyers and sellers time to plan around it. This year’s disruption was unexpected and has lasted much longer.
With no resumption of shipments imminent, the first cargoes reaching more distant markets including the US would not be expected to arrive before next year, with longer voyages around southern Africa adding to transit times.
Group III supply is likely to remain tight through that period. Maintenance now under way at plants in Europe and Asia will further reduce available supply.
High-end lubricant formulations are difficult to switch to other base stocks, limiting the scope for buyers to reduce Group III requirements quickly. That leaves supply struggling to catch up with demand and keeps upward pressure on base oils prices.