The ceasefire between the United States and Iran remained in limbo amid renewed military hostilities between the two countries, following an Iranian attack on a tanker in the Strait of Hormuz and U.S. retaliatory strikes on Iran. Crude oil prices had almost retreated to pre-war levels, but surged again as the attacks threatened a fragile truce. The ongoing conflict reignited concerns about base oil supply shortages, even though the API Group I and Group II segments have seen improved availability over the last six weeks. Group III was still extremely tight and shortages were anticipated to be more severe if the conflict was prolonged and additional vessels were not allowed to traverse the strait. Among other concerns, the global lack of availability was one of the main topics discussed during the 18th ICIS Base Oils and Lubricants conference in Singapore last week.
A number of ships have been able to exit the Persian Gulf since the signing of the memorandum of understanding on June 17, but ship operators were hesitant to continue transiting the strait given the ongoing threat of attacks. According to sources, Middle East refiners had started preparations to resume output following the tentative peace agreement. Most crude oil, LNG and base oil production in the United Arab Emirates, Qatar and Bahrain had been shut down or reduced given damage from strikes on facilities and the difficulties in shipping products out due to the closure of the strait.
Crude oil futures had fallen on Friday, but edged up again on Monday over concerns that crude supplies were still largely unable to move out of the Middle East. Brent crude futures rose by 1% and were hovering near $70 per barrel, but were still significantly lower compared to a high of $126/bbl in late April. Iran and the U.S. agreed to continue talks about the Strait of Hormuz, raising hopes of a peace deal that had been threatened by last week’s attacks.
The softer crude oil prices continued to exert downward pressure on base oil values, but the prevailing tight supply and demand balance was still the main factor impacting prices, particularly as far as Group III base oils were concerned as a severe shortage of these grades has catapulted prices to all-time highs.
Group I
The Group I base oils were still fairly snug in Asia, but not to the same extent as they had been a few weeks into the Iran war. At the time, Asian refiners had not been able to run refineries at full rates due to a lack of Middle East crude oil supplies, while governments in several countries had required that refiners focus on fuel production, leading to reduced base oil output.
However, run rates appeared to have increased in Asia as refineries have been able to tap into national strategic oil reserves and have received crude oil shipments from sources other than the Middle East. This has partly resulted in lower yields of some base oil grades as most facilities have been built to run on heavy Arab crude. At the same time, there have been growing concerns that strategic reserves have been drawn down to critical levels and refiners will not be able to receive oil if Middle East shipments do not resume soon.
Additionally, the steep prices that base oil prices had attained seemed to be unsustainable as buyers were unable to offset the mounting production costs through lubricant increases, and many had paused their purchases. This led to demand erosion, which experts explained was not the same as demand destruction because it will likely be a temporary dip in consumption until prices reach a more sustainable level.
Group I spot prices continued on a downward trend as more product has become available because of increased production rates and softer demand. Additional Group I spot cargoes have been reported in Southeast Asia and China, reflecting an increase in supply levels after several weeks of suspended offers.
A key Thai producer was heard to have offered a number of flexibag cargoes for June and July loading, with Group I SN500 mentioned near $1,615 per metric ton and bright stock at around $1,780/ton FCA Thailand.
There have also been reports of small volumes of bright stock on offer from Indonesia, at slightly lower levels than in the previous weeks.
As previously reported, a key Southeast Asian Group I and Group II producer has significantly reduced term supplies and the producer has informed customers that there may be reductions for Group II supplies in June and July as well.
In China, import prices were considered too high and importers have limited their purchases as buyers turned to domestic supplies. The reduced buying appetite was exacerbated by concerns that prices may be lower at a later date, together with a seasonal slowdown in demand.
Uncertainties in terms of demand for finished lubricants also led buyers to assume a cautious stance and secure only cargoes for immediate use instead of stockpiling.
In India, Group I import prices continued to edge down because of rising supplies and lower crude oil and feedstock values. The trend was exacerbated by weaker buying appetite due to the start of the monsoon season, which affects agricultural, transportation and industrial activities, particularly as the rains were forecast to be less intense this year, leading to possible droughts and reduced purchases of lubricants and finished products due to lower transportation and activity levels.
Imported Group I grades assessments have experienced downward adjustments of around $10 per metric ton on a CFR India basis week on week. There had been expectations that once the Strait of Hormuz reopened and hostilities ceased, Iranian Group I shipments to India would resume. These supplies are generally offered at competitive levels, but given renewed hostilities, the opportunity of acquiring these products has become less likely. The same situation applied to cargoes from other Middle East suppliers, which were less likely to reach Indian shores. Most buyers have turned to domestic supplies whenever possible to avoid uncertainties tied to logistics and freight rates.
Group II
Group II prices were reported as stable-to-soft, as a rise in supply levels and lower crude oil prices were exerting downward pressure on numbers. However, given that suppliers also had the option of shipping product to other regions such as Europe, where prices were higher, there were expectations that the market in Asia would not be oversupplied.
Supply levels were expected to continue improving because refiners were now receiving crude shipments from other sources outside the Middle East, and some refiners have been able to use national strategic oil supplies. However, some of these stocks were nearing depletion and this could be very disruptive if Middle East flows do not resume soon.
The use of alternative crudes from origins outside the Middle East has led to reduced output of the heavy grades given the different crude oil slates utilized versus the heavier, sour Arab crude most refineries were built to run on.
At the same time, base oil demand has weakened in Asia because blenders had difficulties transferring the rising production costs onto finished products, with some blenders opting for running plants at reduced rates or stopping production temporarily.
There were reports of South Korean Group II offers coming to market, as plants were running well and spot supplies have improved, following a turnaround at the Hyundai Oilbank-Shell plant in Daesan which restarted during the first week of May. The company had also announced that it will expand its Daesan refinery to include a Group III base oil unit, with commercial production targeted for 2027.
A key Southeast Asian Group I/Group II producer was expected to maintain term supply allocations next month, particularly on Group II cuts. The situation should improve in August, according to sources.
The sole Taiwanese Group II producer, Formosa Petrochemical, has encountered difficulties in receiving enough feedstocks from its associated refinery due to production issues at the unit, with the supplier understood to have postponed some June term supply shipments to July. Given the reduced output of Group II 500N in Taiwan due to the feedstock supply issues, volumes moving into China were also expected to be trimmed this month and possibly the next.
In China, domestic supply levels have improved as well. Chinese refiners benefitted from high stocks of crude oil that the country had been acquiring since last year and were therefore less exposed to the Middle East crude supply disruptions.
The fact that Group II producers have offered Group II spot export cargoes for loading in late June or early July reflected that domestic availability has grown. Large Chinese base oil volumes have moved to India over the last couple of months and there were reports that cargoes had moved to Latin America as well. Sources expected prices to be competitive compared to South Korean offers, but acceptance of Chinese products might be limited in certain countries by formulations and approvals.
The price of imported Group II grades have moved up over the last several weeks in China and were considered too high compared to domestic supplies, which drew buyers to seek local base oil volumes. The scarcity of imported material supported the rise in domestic prices.
In India, Group II import prices continued to weaken because of lower crude oil and feedstock prices and increased availability. The Group II 150N and 500N grades saw downward adjustments of $10-20/ton on a CFR India basis. The 70N showed larger decreases because it is more directly related to gasoil prices.
Offers from Asian suppliers into India were more limited in general as prices were more attractive in other regions, although there were reports of Chinese Group II grades having been available. However, some buyers have adopted a cautious attitude because they expected prices to fall further and preferred to wait for as long as possible. While the lubricant market in India is huge and demand was expected to continue rising over the next few years, at the moment, uncertainties related to rising consumer prices and the Middle East conflict were dampening consumption.
Group III
News of the ceasefire agreement between the U.S. and Iran last week had fanned hopes that the Strait of Hormuz would be reopened, and crude oil and base oil flows from the Middle East would be reestablished soon.
This sentiment was evidenced in the fact that Middle East producers had started to prepare plants to resume production and shipments. For instance, there were reports that ADNOC had increased base oil operating rates at its plant at the Ruwais complex in Abu Dhabi. According to market sources, the producer had continued to run its Group II and Group III base oil facilities at reduced rates during the conflict for downstream consumption at its own lubricant facilities, but the producer was planning to increase operating rates to reestablish exports. The company’s 100,000-metric-ton Group II base oils unit and 500,000-ton Group III base oil plant had been temporarily shut down in early March following Iranian drone and missile attacks in Ruwais that started a fire at one of the refining units. Even though the base oil plant had not been damaged, ADNOC had shut down operations as a precautionary measure, but had restarted shortly after, according to media reports.
However, the attack on a vessel in the Strait of Hormuz this week and the renewed hostilities have dashed some of the hopes for increased supplies as the market continues to deal with dramatic shortages of Group III grades. Approximately 35% of the world’s Group III capacity remains trapped in the Middle East. Numerous customers had been able to receive Group III cargoes because some shipments were on the water when the war started, or suppliers were able to ship from storage, but these volumes appeared to have dried up for the most part.
Aside from the fact that fresh shipments are unable to traverse the Strait of Hormuz, the Shell Qatar Pearl gas-to-liquids (GTL) base oil plant in Ras Laffan, Qatar–the world’s largest GTL base oils facility–was expected to be only able to run one of its two trains after suffering Iranian drone attacks.
The Pearl GTL plant was built with two production units (trains) of equal size. Each of these two trains is capable of processing around 800 million standard cubic feet of feed gas per day. The integrated base oils unit within the plant has a production capacity of 30,000 barrels per day. Following an Iranian missile strike on the Ras Laffan industrial complex on March 18, one of the two trains suffered damages, prompting a full shutdown for assessment and initial repairs. Given the complex equipment of a GTL unit, the repairs may take up to one year to be completed, market experts said. While the second train might be able to produce base oils, there were rumblings that it would be undergoing a turnaround, which could exacerbate supply shortages even if the strait reopened soon.
The Qatar Energy refinery that supplies feedstocks to the Pearl plant also suffered major infrastructure damage during the drone attack in March, prompting the company to declare force majeure. However, undamaged portions of the Ras Laffan site are operating, and the Mesaieed refinery has begun selling crude for export, athough production remains below full capacity.
A deadly explosion that occurred at a gas processing facility in the Ras Laffan energy complex on June 21, killing at least thirteen people and injuring dozens, reportedly did not affect Qatar Energy’s liquefied natural gas facilities, but production there had been shut down temporarily after the accident as a preventative measure.
Meanwhile, all eyes were on Group III production in Asia. However, even if plants in Asia run at full rates, their capacity is not deemed sufficient to fill the gap left by the absence of Middle East Group III supplies. Asian producers have increased production rates after securing crude oil from alternative sources in regions outside of the Middle East.
At least one South Korean producer and the Malaysian producer were heard to have been running plants at high rates despite Middle East crude shortages because the South Korean supplier’s refinery has diversified its crude sources over the last few years, and the Malaysian supplier has been able to utilize domestic crude oil.
However, there were reports that the producer in Malaysia was planning to start a 45-day turnaround in August and would be building inventories to cover term commitments, which would restrict spot availability.
In China, Group III spot offers from Chinese producers have emerged as a result of weakening Chinese demand, especially of the heavy grade, but acceptance was more limited than for products from other Asian and Middle East producers due to approvals and specific formulations.
Local prices in China have moved up because of shortages of Middle East products, with some buyers rushing to secure domestic supplies as there were still uncertainties as to when Group III base oils from the Persian Gulf would become available.
In India, Group III import prices continued to edge up, with prices moving up by $20-50/ton on a CFR India basis, depending on the grade. The 8 cSt cut saw upward adjustments closer to $20/ton because this grade is not as widely utilized. However, India as a destination for Group III grades was more difficult in terms of pricing than other markets such as Europe and the U.S., where extremely tight supplies were driving prices up.
Indian buyers were also favoring domestic Group III supplies, which have grown in volume because the local producer was optimizing Group III production and was directing more barrels to commercial and export sales versus its own lubricant operations. An international trader was heard to have secured a large Group III cargo from India in recent weeks, but it was not clear where the cargo would be delivered.
Additional domestic Group III capacity was not expected to come online in India until the third quarter of 2026, when Indian Oil Corp. was expected to bring a new 235,000-metric-ton/year Group II and Group III plant online in Gujarat, according to a presentation at the ICIS conference last week.
Shipping
Details of recent transactions emerged during the week, with a 2,650-metric ton cargo heard to have been shipped from South Korea to Port Klang, Malaysia, between June 10-15 on the Super Eastern. A 7,000-ton lot was understood to have been lifted in Yeosu, South Korea, to Port Klang between June 20-23 on the New Silver. About 16,000 tons were heard to have been shipped from Yanbu, Saudi Arabia, to West Coast India between June 10-15 on the Luo Jiashan. A 9,000-ton lot was reportedly loaded in Singapore for JNPT and Mumbai, India, in early June on the Saehan Kostar. A 1,000-ton parcel was shipped from Port Klang, Malaysia, to Mumbai in mid-June on the Phoenix.
A few cargoes were being discussed for possible shipment this month and the next:
A 9,000-metric ton lot was discussed for shipment from Yeosu, South Korea, to Southeast Asia between July 1-10.
Approximately 5,500-6,500 metric tons were mentioned for possible shipment from West Coast India to West Africa between June 27-July 5.
A 2,000-ton cargo was quoted for loading in Thailand to Mid China in the first half of July.
Approximately 5,000-10,000 tons were on the table for shipment from China to West Coast India at the end of June.
A 2,000-4,000-metric ton cargo was discussed for shipment from Thailand to West Coast India in late June.
About 1,500 tons were expected to be shipped from Onsan, South Korea, to Merak, Indonesia, at the end of June.
A 3,000-6,000-ton lot was mentioned for possible shipment from Thailand to Greece in the second half of July.
A 6,400-ton parcel was quoted for shipment from Yeosu, South Korea, to Vietnam and/or Malaysia in the first half of July.
Production
Qatar Energy halted production of liquid natural gas (LNG) and other products following drone attacks on its facilities in Ras Laffan and Mesaieed in early March. The facility will not be able to return to normal production for a long time, likely years, and has declared force majeure on LNG shipments, according to the company’s website. One train at the Shell/Qatar Petroleum Pearl gas-to-liquids base oil unit in Ras Laffan, which suffered some damage during an attack as well, was heard to be shut down. The unit utilizes natural gas from the Qatar Energy refinery to produce Group III base oils. The plant has a nameplate capacity of 1,372,000 metric tons of Group II/Group III base oils and its shutdown caused global availability of Group III base oils to tighten significantly. The damaged train was expected to remain shut down for several months, possibly a year.
Fire erupted at Bapco’s refinery in Maameer, Bahrain, on March 5 following an Iranian attack. The country’s Ministry of Interior reported that the fire had been brought under control without providing further details about potential damages. Bapco operates a 400,000-metric tons per year Group III base oil facility in Sitra, within the Bapco refinery complex. Sources familiar with the plant’s operations said that Group III production was unaffected by the fire, but some reports indicated that production had stopped temporarily for damage assessments. An official report was not available by the publishing deadline.
In the United Arab Emirates, a suspected drone strike triggered a fire at the Ruwais Industrial Complex, leading authorities to shut down the country’s flagship refinery as a precautionary measure on March 10. The Ruwais complex houses ADNOC’s Group II and Group III base oils plant. According to sources familiar with ADNOC’s operations, the base oil unit was not damaged during the drone attack as only one train of the refinery had been affected by the strike, although it was reportedly running at reduced rates, and the company may have resorted to shipping products from ports on the Red Sea, although this could not be confirmed. The latest information indicates that ADNOC was preparing to ramp up production following news of a ceasefire in the Middle East on June 21.
The latest plant turnaround information for 2026 is provided below, along with plant shutdowns that took place in the second half of 2025 as they may have impacted base oil pricing at the time of completion and beyond.
Group I
CNOOC Taizhou started a turnaround at its Group I/II plant in Jiangsu, China, in mid-April that will be completed in mid-June.
Petrochina Fushun started a turnaround in early May that will be completed in late June at its Group I plant in Fushun, China.
Idemitsu was expected to start a scheduled turnaround at its Group I plant in Chiba, Japan, in mid-May that will last until July. The company secures Group III base oils required for its high-performance and eco-friendly engine lubricants through a partnership and a memorandum of understanding (MOU) with Saudi Aramco Base Oil Company (Luberef).
Eneos’ plant in Kainan, Japan, suffered an unplanned shutdown in February 2026. The company’s Mizushima A plant underwent maintenance from October to November 2025.
Two Eneos Group I plants were permanently closed in recent years.
Pertamina was expected to embark on a one-month turnaround at its Group I plant in Cilacap, Indonesia, in April.
Luberef scheduled a 30-day turnaround at its Group I/Group II plant in Yanbu, Saudi Arabia, in August 2026. The company had previously completed maintenance at the unit from mid-November until December 2025. The plant underwent an expansion in 2017.
Luberef has secured a new feedstock supply agreement for the company’s Jeddah facility. The facility had been expected to close by mid-2026, but the new supply agreement will allow it to continue operations beyond 2026. As a result, the company will maintain its current production capacity of 275,000 tons per year of Group I base oils. With the completion of the Growth-II Project in Yanbu, Luberef’s total production capacity will reach 1.53 million tons per year, making it the only supplier in the region able to offer Group I, Group II, and Group III base oils.
PetroChina’s Dalian refinery began a permanent shutdown in 2023. The base oils unit closed in late 2024, with full closure completed in July 2025. Inventory clearance was scheduled by end of August 2025.
CNPC’s Fushun plant in Liaoning was expected to increase Group I production to offset the Dalian closure. Bright stock capacity is estimated at 60,000 t/y.
Group II
Hyundai Oilbank Shell Base Oils shut down its plant in Daesan, South Korea, in early April 2026 for approximately 45 days. The plant had run at reduced rates for several days in February due to a technical problem. The turnaround was completed around May 8 and spot shipments were expected to resume in June.
GS Caltex shut down its Group II/Group III plant in Yeosu, South Korea, in early May to complete a month-long turnaround. The plant was expected to have been restarted.
CNOOC has scheduled a turnaround at its Taizhou, China, plant in the second quarter of 2026.
State-owned Sinopec Jingmen Co. plans to have a turnaround at its plant in Jingmen City, China, in November 2026. It is the largest production plant for base oils and waxes in Central-South China.
Formosa Petrochemical postponed a scheduled turnaround and catalyst change at its Mailiao, Taiwan, plant from the fourth quarter of 2025 to third quarter of 2026.
ExxonMobil completed a capacity expansion at its Singapore Resid Upgrade Project and commenced on-spec production in August 2025. The producer has started to offer an ultra-heavy Group II grade with similar characteristics to bright stock. The project is an upgrade of the company’s integrated manufacturing complex, which will allow it to expand large-scale production of its global EHC Group II slate and meet growing demand for high-performance lubricants in the Asia-Pacific region, the company said.
Indian Oil Corp. was understood to have completed a one-month turnaround at its Group II plant in Haldia in November 2025. The producer also completed an expansion of its Group III capacity in Haldia in December 2025.
Group III
SK-Pertamina (Patra SK) will complete a 40-day turnaround at its plant in Dumai, Indonesia, which started in early May, in mid-June.
In China, Shanxi Lu’an started a partial turnaround at its plant in Changzhi in late May and was expected to restart around June 22.
Petronas was heard to have postponed a turnaround at its Group II/III Melaka plant in Malaysia from June to August 2026.
Indian Oil Corp. completed an expansion of its Group III capacity in Haldia and a start-up of the expanded plant was achieved in December 2025.
The restart of Shanxi Lu’an’s base oil plant following an unplanned shutdown in December 2025 should bring more Group III supplies to the market in early 2026.
Prices
Crude Oil
Crude oil futures rose on Monday following an exchange of hostilities that threatened to disrupt the ongoing peace negotiations between the U.S. and Iran. The memorandum of understanding that had been signed by both countries on June 21 had caused prices to tumble the previous week.
Brent August 2026 futures were trading at $72.55 per barrel on June 29, down from $79.26/bbl for front-month futures on June 22 (ICE Futures Europe).
Dubai crude futures (Platts) for July 2026 settled at $66.37/bbl on June 26, down from $73.62/bbl for front-month futures on June 18 (CME). (There was no posting on June 19 due to the Juneteenth holiday in the U.S.)
Base Oils
Spot base oil prices in Asia were mixed again this week, with some assessments reported as stable, others softening on expectations of improved supply and lower feedstock costs, and some edging up on persistently tight fundamentals. Prices have been notionally adjusted to reflect current market conditions and sentiment, but trading continued to be limited and transactions remained difficult to track, especially for Group III grades.
The price assessments portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore
Group I
SN150 steady at $1,660/t-$1,700/t
SN500 adjusted down by $10/t to $1,670/t-$1,710/t
Bright stock lower by $10/t at $1,830-$1,870/t.
Group II
150N adjusted down by $10/t to $1,790/t-$1,830/t
500N lower by $10/t at $1,780/t-$1,830/t
FOB Asia
Group I
SN150 edged down by $10/t to $1,530/t-$1,570/t
SN500 lower by $20/t at $1,540/t-$1,580/t
Bright stock prices steady at $1,660/t-$1,700/t
Group II
150N assessments heard down by $10/t at $1,760/t-$1,800/t
500N down by $10/t at $1,760/t-$1,800/t
Group III
4 cSt grade rose by $40/t to $2,950/t-$2,990/t
6 cSt higher by $40/t as well at $2,930/t-$2,970/t
8 cSt assessed up by $40/t at $2,780/t-$2,820/t
Gabriela Wheeler can be reached at gabriela@LubesnGreases.com
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.