Surge in Saudi Arabian Base Oil Prices Post-Ramadan Festivities

The Base Oil market in Saudi Arabia surged during April on the back of tight spot flow and heightened demand following the Ramadan festive season. The traditional post-Ramadan period witnesses a significant increase in lubricant sales. This year, lubricant blenders across the Middle East, particularly after the Eid al-Fitr holiday, experienced a surge in demand. To meet this rise in lubricant production, businesses actively replenished their Base Oil stocks. This surge in buying activity, coupled with a limited supply, resulted in a Base Oil price hike in April 2024.

Around this time of year, Arabian markets typically exhibit some strength as key businesses emerge from their winter hibernations and start to prepare for the busy seasons of spring and summer. Secondly, due to the Ramadan festival, many companies pre-purchased and stocked up on Base Oil supplies. This has increased satiated demand and increased pressure on immediate price adjustments. On top of the demand surge, the situation was significantly impacted by ongoing regional tensions. Attacks by the Houthis, a Yemeni rebel group backed by Iran, reportedly caused significant delays or cancellations of Base Oil shipments from Luberef, a major producer in Saudi Arabia. This disrupted the supply chain, limiting the availability of Base Oil in key ports like Fujairah and Jebel Ali. These crucial ports serve as vital hubs for the regional and global distribution of Base Oil. Further complicating the situation was escalating tensions between Iran and Israel. An Iranian missile and drone attack on Saudi Arabia, albeit causing minimal damage, triggered a retaliatory strike by Israel on an Iranian facility. This geopolitical tit-for-tat further disrupted the already strained supply chains, making Base Oil exports from Saudi Arabia more challenging. The combined effect of the post-Ramadan demand surge, a limited global supply, and geopolitical disruptions led to a significant increase in prices to settle at USD 1546/MT Base Oil Group-III 4cSt FOB Dammam, Saudi Arabia with a hike of 2.4% during April 2024.

As per ChemAnalyst, the Base Oil prices in Saudi Arabia are expected to showcase a further uptrend as the reduction in supplies is anticipated during this timeframe. While the post-Ramadan demand peak may subside, the underlying global demand for lubricants is expected to remain strong. The geopolitical situation in the Middle East remains volatile, and any further disruptions to production or exports could exacerbate the supply constraints. Beyond regional trends, global demand is foreseen to pick up due to the upcoming summer driving season with buyers seeking Base Oil to prepare for anticipated growth in lubricant sales during the coming months.