Despite significant geopolitical tensions and fluctuations in feedstock crude oil prices, base oil prices in Saudi Arabia remained largely range-bound throughout June 2025. This stability was primarily due to low demand from the downstream lubricant sector, which offset the upstream market volatility.
The base oil prices in Saudi Arabia continued to remain rangebound throughout June 2025 despite the escalated geopolitical tensions. The Israel-Iran war has escalated the feedstock crude oil prices, which were later subsidized after a ceasefire was broken by the US government. Despite this volatility in the feedstock crude, the supply of base oil within the Middle East was unaffected due to low demand from the downstream lubricant sector.
As per ChemAnalyst, the base oil prices in Saudi Arabia are expected to remain rangebound during July 2025. A foreseen decline in the base oil orders from the importing nations, including India and the UAE, is expected due to the monsoon season. Moreover, after the significant rise, crude oil futures could subsidize, lowering the manufacturing costs for base oil.
When the war was first reported in June 2025, crude oil futures jumped as much as 13%. But when it became evident that the energy infrastructure was unharmed, these advantages were essentially undone. Fears of supply interruptions in the Middle East were quickly allayed by a ceasefire agreement between Israel and Iran that was mediated by US President Donald Trump. The crude market stabilized as a result of this de-escalation and Iran's subdued reaction to US bombings.
The availability of API Group I and Group II base oils bound for Middle East Gulf centers, such as the United Arab Emirates, Qatar, Bahrain, and Kuwait, was seriously threatened before the ceasefire. Middle East Gulf blenders were naturally concerned that their operations, which feed both domestic and foreign markets, would come to a standstill if they were unable to obtain key base oils.
In addition, Base oil purchasers were rushing to acquire large amounts before any Iranian operations, but they had a difficult time locating ships that would approach the area. Due in significant part to the evident hazards to crew and cargo as well as the skyrocketing prices of war risk insurance, customers of major producers such as Bapco, Adnoc, and Shell also had difficulty organizing timely cargoes.
Group I and Group II base oil shipments from Yanbu and Jeddah, Saudi Arabia, continued loading in spite of these significant obstacles. This showed that the Iranian threat to seal the Strait of Hormuz was apparently disregarded. Additionally, these ships passed through the Red Sea's Bab-al-Mandeb Strait without running afoul of Yemeni Houthi fighters, guaranteeing the supply would continue.
Soon after the ceasefire, base oil offers to UAE ports that had been canceled or suspended while shipping risk assessments were being conducted resumed. Operators' capacity to reroute ships that were already at sea also assisted in reducing the possibility of supply shortages. Furthermore, the market has already adjusted for the periodic summer slowdown in the downstream lubricant industry, which kept domestic sales muted.
