Fubex

Oil Prices Hold Steady, But Change Could Be Ahead

Summer Demand Supports Base Oil Prices—But U.S. Output Cuts Could Shift the Outlook

For now, base oil prices are holding steady, supported by seasonal demand for lubricants, particularly in the automotive and industrial sectors. Recent market strength reflects increased summer consumption and optimism surrounding global trade developments.

However, lubricant producers and traders in the UAE should remain cautious. While Group I and Group II base oil prices have firmed up slightly, underlying supply trends—especially potential U.S. output cuts—could introduce volatility in the coming months.

As discussions between major economies unfold, any shifts in trade policy could influence refined base stock exports, feedstock availability, and pricing structures globally. Beneath current stability, structural changes in crude production and refining operations may reshape the lubricants supply chain in unexpected ways.

Summer Demand and Trade Sentiment Support Base Oil Market

There’s some positive momentum in the base oil and lubricant sector. Renewed trade discussions between the U.S. and China have sparked cautious optimism among base oil traders. Combined with the usual summer spike in lubricant consumption—driven by increased vehicle use, air conditioning systems, and industrial activity—regional base oil prices are finding temporary support.

“The spot market signals remain relentlessly bullish,” noted SEB analyst Bjarne Schieldrop. With peak lubricant demand season underway, it’s challenging to maintain a bearish outlook.

This is reflected in the market structure: spot-based oil prices are trending higher than future delivery contracts—a typical sign of tight supply conditions and strong short-term demand for lubricant feedstocks.

Base Oil Market Faces Mounting Pressure

Looking ahead, the outlook for the lubricant and base oil industry appears increasingly challenging. According to S&P Global Commodity Insights, global lubricant demand is expected to rise by just 770,000 barrels per day in 2025—marking one of the slowest growth years in decades, excluding major downturns.

At the same time, supply-side dynamics are shifting rapidly. With OPEC+ easing production cuts, crude oil output is expected to rise by 2.2 million barrels per day in the second half of 2025. This surge in feedstock availability—nearly triple the pace of demand growth—will likely lead to continued oversupply in the base oil market.

For UAE-based blenders and distributors, this imbalance signals potential downward pressure on Group I and Group II base oil prices, adding uncertainty to procurement and inventory planning strategies.

U.S. Base Oil Feedstock Supply Faces Future Decline

The global base oil supply chain is shifting. The United States—long a key supplier of lubricant feedstocks—is expected to experience a significant decline in production. By 2026, U.S. crude output could fall by 640,000 barrels per day from mid-2025 levels, according to S&P Global Commodity Insights.

This matters for the lubricant industry, as U.S. refiners play a significant role in supplying Group II and synthetic base stocks. The decline is primarily due to the price-sensitive nature of U.S. shale producers, who often scale back their investments when market prices fall. Unlike Brazil or Canada, U.S. output responds more quickly to economic and investor pressure.

“In a lower price environment, U.S. operators are likely to reduce upstream spending,” said Jim Burkhard of S&P Global. “This could slow output significantly by late 2025, with the largest drops in 2026.”

For lubricant manufacturers in the UAE and GCC, this sets up a complex second half of the year. While base oil prices may remain steady in the short term, supported by seasonal demand and regional stability, an underlying oversupply could eventually push prices downward.

S&P now forecasts Brent to range from the mid-$60s to below $50 at times. If prices continue to fall, refinery economics may shift, potentially affecting global base oil output and creating uncertainty across the lubricant supply chain.

Bottom Line

While summer lubricant demand is keeping base oil prices stable for now, the outlook remains weak. Unless global lubricant consumption improves or OPEC+ cuts production, prices may face further downward pressure.

For UAE lubricant producers and traders, rising supply and soft demand could lead to tighter margins in the second half of the year. Monitoring feedstock availability and blending costs will be key.

Editor-at-Large
A passionate writer in the lubricant industry, Awais Iqbal has been covering oils, greases, and industrial fluids since the start of his career. At 25, he’s already written for blogs, catalogs, and brand guides across the UAE. Awais’s insights help companies connect with their audience, and his clear, helpful writing style is trusted by brands in the region.

Leave a Comment

Your email address will not be published. Required fields are marked *

Product Enquiry

Scroll to Top