[E-Daily Reporter Park Sun-Yeop ] Analysts report that prices and spreads for lubricating base oils in Asia are surging due to disruptions in refinery operations in the Middle East. With reduced supply from plant shutdowns compounded by raw material shortages and a seasonal recovery in demand, domestic refiners are expected to benefit indirectly.
Lee Dong-wook, an analyst at IBK Investment & Securities, stated in a report on the 7th, “Regional lubricating base oil prices and spreads are surging,” adding, “This is believed to be the result of a triple effect caused by the simultaneous convergence of refinery operational disruptions, raw material shortages, and a recovery in downstream demand.”

On the supply side, disruptions at facilities in the Middle East were identified as the key variable. According to the report, the destruction of a GTL facility in Qatar last March removed 30,000 barrels per day of Group III lubricating base oil from the market, a shortfall expected to last until at least 2028. Additionally, analysis indicates that approximately 2.8 million barrels per day of refining capacity—equivalent to about 3% of global demand—was affected after refinery facilities in the Middle East were struck.
Facilities affected by these disruptions included Saudi Arabia’s Sadara, the UAE’s Ruwais, Qatar’s Pearl GTL, Bahrain’s Sitra, and Kuwait’s KPC. Among these, Sadara, Ruwais, and Sitra are integrated complexes that produce lubricant base oils and related petrochemical feedstocks; consequently, disruptions in crude oil refining inherently affect the supply and demand of Group III feedstocks. Daol Investment & Securities projected that global Group III lubricating base oil production this year will decrease by about 30% compared to the annual average, with a supply reduction of about 12% continuing into the first half of next year.
Raw material shortages are also a factor driving price increases. The report explains that, amid overlapping scheduled maintenance at refineries, liquidity in the spot market for lubricant base oils has sharply declined as some refineries in the Middle East and Asia have prioritized using VGO for the production of highly profitable diesel and jet fuel. In other words, the assessment is that the situation goes beyond mere production line shutdowns; as the allocation of raw materials for lubricant base oils has decreased, the actual volume entering the market has shrunk by more than the reduction in production capacity.
On the demand side, upward pressure on prices is also intensifying. With inventories of automotive and industrial lubricants remaining low, blending demand is surging ahead of the seasonal peak period. In particular, high-viscosity Group III products are exhibiting greater price elasticity amid a supply contraction, as demand for premium lubricants for electric vehicles and high-efficiency engines is structurally increasing.
Consequently, while prices for raw materials such as VGO and high-sulfur fuel oil (HSFO) have also risen, the increase in prices for finished lubricant base oils has outpaced them, causing the spread to widen rapidly. The domestic lubricant base oil spread has also rebounded sharply since March of this year, soaring to the $130 per BARREL range in May.
The analyst stated, “Domestic refiners— SK Innovation(096770), and S-OilCorporation(010950), which account for approximately 40% of global production of high-value-added Group III lubricating base oils—are believed to be in the best position to benefit from the current global supply-demand tightness.”