Dubai: Despite rising geopolitical tensions between Israel and Iran, the base oil market has exhibited steady behavior, mirroring global trends in crude oil. After a brief price spike, energy markets have cooled, and crude benchmarks such as Brent and WTI are now trading lower — Brent is just below $67 and WTI is near $65.
This decline in prices is also influencing the lubricant supply chain. According to S&P Global Commodity Insights, the primary driver is a growing global oil supply that continues to outpace demand. This supply-demand imbalance is placing consistent downward pressure on base oil prices.
Jim Burkhard, Vice President and Global Head of Crude Oil Research at S&P Global, noted, “The fundamentals are the fundamentals – and the oil price trend remains the same: downward.” For lubricant manufacturers and blending operations in the UAE and beyond, this signals a period of price stability and potential cost advantages for procurement.
Why Base Oil Prices Are Still Falling
Despite recent market fluctuations, base oil prices continued to decline, reflecting broader trends in the global oil landscape. Last quarter alone, prices fell nearly 10%, mainly due to weaker lubricant demand and a surge in refined feedstock supply.
Although geopolitical tensions in June caused a temporary spike, the easing of hostilities quickly reversed that momentum. Now, with global base oil inventories rising and refinery output increasing, oversupply is putting consistent pressure on the lubricant market.
According to S&P Global, the second half of 2025 is expected to see a surplus of crude oil—exceeding demand by 1.2 million barrels per day. This surplus is likely to continue into 2026, further depressing Group I and Group II base oil prices.
Additionally, lubricant demand growth in 2025 is projected to be the slowest in over two decades, growing by only 870,000 barrels per day. Meanwhile, OPEC+ production is expanding rapidly, with countries like Saudi Arabia significantly boosting exports—further increasing the availability of key base oil feedstocks.
What UAE Lubricant Stakeholders Should Watch
Even with a temporary de-escalation in regional tensions, base oil feedstock availability across the Middle East remains strong. Over 4 million barrels per day of spare crude capacity could impact lubricant blending markets if tapped. Analysts also suggest that easing sanctions on Iran may boost the flow of Group I and Group II base oil components, further increasing supply.
OPEC+ is expected to approve additional crude output increases, with Saudi Arabia aiming to strengthen its position in the base oil and refined products market.
“The geopolitical risk premium has faded, and market focus has shifted back to fundamentals,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank [source].
In contrast, the U.S. is projected to see a production dip of 600,000 barrels per day by late 2026. This decline may impact the supply of certain synthetic base stocks and high-viscosity grades, which are typically sourced from American refineries.
Outlook for Base Oil Prices: A Shift Toward Stability?
S&P Global forecasts a sustained decline in crude benchmarks, with Brent expected to range between $50 and $60 per barrel through 2026 and WTI potentially dipping into the upper $40s. This projected trend has direct implications for the base oil and lubricant industry, particularly in terms of procurement and pricing strategies.
Despite ongoing geopolitical uncertainties, the fundamentals driving base oil prices remain the same: supply continues to outpace demand. “Even with uncertainty and conflict, the fundamentals haven’t changed,” said Jim Burkhard of S&P Global. “There’s more supply than demand.”
For lubricant blenders, distributors, and industrial buyers in the UAE, this indicates a shift toward long-term cost stability. While short-term headlines may cause brief volatility, the broader trend suggests lower feedstock costs and potential margin improvement in lubricant production moving forward.
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.
