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Global imports from the Middle East collapsed again in June, extending a months-long slide to an almost complete halt in shipments from the region
Alternative suppliers including South Korea, India, and China are filling part of the gap, but not enough to replace the lost Middle East volumes
Even once shipments resume, the long transit lag and buyers' growing preference for diversified supply could make it hard for Middle East refiners to win back the market share they have conceded
Global imports of premium-grade base oils from the Middle East collapsed further in June, extending a months-long slide that is forcing buyers worldwide to lean more heavily on alternative sources of Group III supply.
Combined imports of premium-grade base oils from the UAE, Bahrain and Qatar fell to less than 6,000 tonnes in June, from more than 44,000 tonnes in May, Eurostat, US Census Bureau and other government data showed.
The slump reflects the disruption at its source, with the loss of Middle East supply driving everything from soaring margins to the emergence of new suppliers in Asia.
Middle East refiners typically shipped close to 180,000 tonnes of premium-grade base oils a month before the disruption began, a volume that other suppliers have been unable to replace.
The consequences are already visible well beyond the Middle East, with Group III producers elsewhere earning record profits, and India, China and South Korea increasing shipments to markets that previously relied on the region for a large share of their supplies.
Key Highlights
· The collapse has been sequential, from typical volumes above 180,000 tonnes a month in the eight months to March, to little more than 100,000 tonnes in April, to less than 6,000 tonnes in June.
· Imports from Qatar fell below 2,000 tonnes in June, from more than 35,000 tonnes in May and more than 65,000 tonnes in April.
· Imports from Bahrain fell below 1,000 tonnes in June, from close to 5,000 tonnes in May and typical monthy volumes of close to 30,000 tonnes in the year to April.
· UAE shipments accounted for more than 3,000 tonnes of June's imports, broadly unchanged from May.
· US, European and Asian imports each fell to below 4,000 tonnes, with Europe accounting for most of the volume.
· Asia's imports slumped to less than 2,000 tonnes in June from more than 35,000 tonnes in May, when a large shipment to Hong Kong had temporarily lifted the region's total.
Market Repercussions
Even a resumption of Middle East shipments would not bring quick relief. The same weeks-long transit lag that delayed the disruption's full impact on destination markets would apply in reverse, meaning cargoes would take more than a month to reach buyers once loadings actually restart.
That delay means the market could remain tight even after the disruption itself begins to ease, particularly with buyers having already drawn down inventories and alternative suppliers operating at high rates.
The lag, combined with lingering uncertainty over further disruptions, is also giving buyers a reason to keep diversifying rather than wait.
More Group III demand from Asia, Europe and the Americas has already shifted toward South Korea, India and China during the gap.
The moves mean that buyers that found workable alternatives to plug some of the shortfall have little incentive to fully switch back when Middle East cargoes reappear.
