After Israel and USA attacked Iran on 28th of February supply/demand balance shifted a lot as Persian or Arab gulf is one of the most important hubs not only for crude oil but also for base oils supplies.
There are three Group III base oils producers locked in the Gulf: ADNOC in Abu-Dhabi (production capacity 600,000 mt/y), Shell GTL plant in Qatar (1.4 million mt/ y) and Bahrain’s Bapco( 400,000 mt/y), all three exported heavily worldwide with significant presence in Europe and USA market.
The region is a big supplier of Group I base oils, most of them coming from Iran. With strain of Hormuz blocked, all export shipments have stopped.
Group II base oils are less impacted in terms of real supply balance. But it is of course impacted through higher feedstock prices. Growing feedstock prices already forced major suppliers to halt back offers and re-view the price for March loading. Сrude oil prices went up 13% on Monday morning trading session.
Shipping lines imposes war-risk surcharge for all shipment near the region which. For example, CMA CGM has informed the clients on 1st March that all the shipments from the region (including ports in the Red Sea Saudi Arabia, Jordan, Egypt and the Gulf countries like UAE, Bahran, Qatar) of 2000 USD per 20-feet container and 3000 USD for 40-feet.
In case of attacks on the vessels in the Red sea form Houthis troops supplies from Asia to West could be impacted again. Such disruptions are bad for global trade.
Oil market believes that the conflict will end up quickly as in case of long-term blockage of Hormouz straight, oil’s prices should be above $100/bl.
