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Updated to Q3 2019
Since the US’ decision to re-impose sanctions on Iran in November 2018, there has been heightened uncertainty and tighter restrictions related to supply from Iran. Demand from the UAE market for Iranian material also slowed because of the availability of deep-sea and Russian cargoes. Q2 demand remained slow and sentiment was further dampened by concerns on the Middle Eastern geopolitical environment.
Demand from the UAE is expected to be stable to soft in the third quarter as buyers fret about the deteriorating relations between the US, its Gulf allies and Iran. Demand for Iranian Group I cargoes could also persist from countries such as India. However, reduced demand could be expected from other countries in northeast Asia that are facing pressure from the US to reduce trade with Iran.
Middle East Group II 150N and 500N spot supply in the third quarter is expected to be stable to higher as some major refiners appear to have more spot supply available. However, pricing pressure is likely to persist amid stiff competition. The supply of deep-sea cargoes is not expected to be abundant, but Asian Group II suppliers also face tough price competition from Middle Eastern producers. Regional geopolitical tensions could also affect supply.
Demand is expected to remain largely stable in the third quarter as the Middle East is not a major consumer of Group II base oils relative to Asia. US sanctions on Iranian crude exports, the US-Iran dispute as well as US-China trade tensions continue to serve as major uncertainties for the base oils market and demand is expected to show only mild improvement. Further clarity would be needed to spur demand.
Middle East Group III supply is expected to be stable in the third quarter. Supply could increase if rumoured expansion plans become reality. But Middle Eastern refiners are largely tied to contractual obligations and focused largely on certain export markets, so available spot volumes are likely to be tight. The actual volumes to be offered to local buyers are expected to be limited because of the relatively small size of the market there.
Middle East Group III demand is expected to be stable in the third quarter as the key producers in the region remain focused on export markets in Asia and the US. Group III consumption in the Middle East is limited and largely opportunistic. No fundamental changes are expected for Group III in the third quarter, but some local market participants are still eyeing some arbitrage deals, buying at local prices and re-exporting.
We offer the following regional Base oils-Lubes analysis and news coverage to keep you informed of factors and developments affecting prices in the Base oils-Lubes marketplace.
News & analysis
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