INSIGHT
Samantha Wright, Senior Editor Manager
Base Oil Report Europe
Prices in Europe saw a big uptick running up to early May, with the conflict in the Middle East causing rising feedstocks and diesel prices which put pressure on Group I values. Group III prices shot up amid significant tightness on this grade amid a huge reduction in imports. Imports from the middle East were non-existent while imports from Asia were reduced and any shipments were delayed. Strong gasoil margins were diverting refinery output away from base oils, tightening availability across all groups, and though gasoil prices have reduced so far in May refineries have not switched production back to optimise base oils. In the short term, Group III is acutely tight because a substantial share of exportable Persian Gulf capacity remains operationally constrained or logistically trapped, choking flows of 4 and 6cSt.
US
Prices increased amid the global geopolitical issues, with posted prices nearing and in some cases reaching, historic highs while the discount on spot export values narrowed amid shortening supply. Higher crude, energy and freight costs linked to Middle East disruptions are pushing base oil prices higher and restricting trade, especially in import dependent markets. Strong diesel margins are diverting refinery output away from base oils, tightening availability across all groups, with particular pressure on Group III and spillover effects on Group II. US Group II producers are expected to remain under pressure amid the ongoing disruptions to global diesel supply.
Asia and Middle East Middle East spot prices increased in April before developing a stable to soft trend in early May. This is mainly due to the lack of activity in the market given the extreme uncertainty geopolitically. Tightness was seen across all three Groups, with a lack of crude
availability causing problems for Group I and Group II, while Group III shortages were compounded by substitution demand from Group II. Asian base oils prices saw a firm rise in April, with some stability seen in early May. Asian refineries have been facing major supply concerns amid a lack of Middle Eastern crude. Elevated crude and diesel cracks, constrained feedstock supply and Asian refinery run cuts/maintenance are jointly causing concerns for the market. But in the long term, new Group II/III capacities will help strengthen supply resilience.
Automotive outlook Dealership traffic remains subdued, with new car sales continuing to be weak. Global automotive output in 2026 is expected to contract by 0.8% year on year. The automotive outlook for 2026-2027 remains concerning because of uncertainty that is challenging for decision making and risk management, especially in the context of the transition to electric vehicles. Restructuring and layoffs continue in the European automotive industry. Moreover, with the influx of Chinese electric vehicles (EVs) European regulators are reintroducing EV subsidies to support EU made EVs.
icis.com
LUBE MAGAZINE NO.193 JUNE 2026
61
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