Where Is the World's Base Oil Coming From Now?
When Gulf base oil supply was disrupted from late February 2026, buyers didn't stop needing product — they scrambled for alternative origins wherever they could find them. Six months on, trade data shows a genuine reshuffling of global base oil flows, not just a temporary price spike. Some of it reversed quickly. Some of it looks like it's here to stay.
What the US import data shows
The clearest picture comes from US Group III and Group III+ base oil import figures. In a normal month, Asia and the Middle East together supply more than 90% of US Group III base oil imports, according to Base Oil News. In March 2026, that share fell to under 60% — and notably, it had already started slipping before the late-February disruption had fully worked through shipping schedules.
Middle East shipments to the US fell to a four-month low, with Qatar-origin cargoes dropping to their lowest level in fifteen months. What filled the gap was unusual. Netherlands-origin shipments rose to their highest level in more than a decade, briefly making the Netherlands the largest single source of US base oil imports for the month. Spain climbed to a six-year high. Neither is a typical major supplier to the US market — both moves point to buyers pulling in whatever cargoes they could find rather than following normal trade patterns.
South Korea's role was more complicated. Its exports to the US initially dipped to a thirteen-month low, with cargoes redirected toward China instead. But within weeks, Korean exports to the US rebounded to a nineteen-month high, supporting arrivals through April. That whiplash is worth noting on its own — it shows how quickly suppliers were reallocating cargoes between destinations as the crisis evolved.
South Korea's swing role, and its limits
South Korean refiners normally supply around 30% of US Group III base oil, according to the Independent Lubricant Manufacturers Association (ILMA). But Korean base oil production itself depends on Middle East crude oil as feedstock — so Korea's ability to keep exporting finished base oil hinged on securing crude from elsewhere first.
Korea moved fast on that front. Within about six weeks of the conflict starting, the country's Middle East crude dependency fell from 69% to 56%, according to figures from the presidential office reported by Korean media, with new volumes secured from Algeria, Brazil, Ecuador, Gabon, Kazakhstan, Oman and the Republic of Congo. The UAE separately pledged to give South Korea priority access to its crude allocations. That combination of crude diversification is what let Korean base oil refiners keep running and become a genuine swing supplier for other markets during the disruption.
Korea's capacity wasn't unlimited, though. A 1.3 million tonne-per-year South Korean Group II plant had a scheduled turnaround in early April 2026, which S&P Global had flagged before the conflict began — a reminder that even a well-positioned supplier has its own maintenance calendar to work around.
Europe: squeezed from two directions at once
Europe's Group III supply relies heavily on imports from the Middle East and Asia, and several of the plants nearest the Strait of Hormuz were the ones affected in March, according to ICIS. European buyers who had cargoes en route found themselves uncertain whether vessels could even leave the region, with shipping insurance costs climbing sharply. Group III supply into Europe contracted sharply as a result, pushing spot prices to record levels.
Europe's squeeze wasn't only geopolitical. Refiners across the region were separately favoring diesel production over base oil, because diesel crack spreads had widened enough to make that the more profitable use of the same feedstock. The two pressures — a Middle East import shortfall and a domestic preference for diesel over base oil — reinforced each other rather than offsetting.
One piece of genuine new capacity landed at the right moment for Europe, even if it didn't touch the premium end of the market. Poland's PKN Orlen brought a 400,000 tonne-per-year Group II expansion online at its Gdansk refinery in the first quarter of 2026, a project S&P Global had already flagged as a potential step toward Group II self-sufficiency for Europe. It doesn't address the Group III shortfall, but it took some pressure off the Group II side of the ledger just as Middle East barrels became unreliable.
The bigger structural shift
Before any of this happened, the market's own forecasts pointed the other way. Kline Group had projected a Group III surplus of roughly 5 million tonnes for 2026 — more than 10% of expected supply — with a further 1.4 million tonnes of new Group III/III+ capacity in the pipeline. The conflict didn't just tighten an already-balanced market; it reversed a market that was expected to be oversupplied.
That reversal appears to be changing how buyers think about sourcing, not just what they're paying. Verified Market Research has described a shift among blenders toward prioritizing supply security over cost efficiency — moving toward more regionalized sourcing even where it disrupts trade patterns that have held for years. Whether that shift outlasts the current disruption, or reverts once Gulf supply normalizes, is one of the open questions for 2027.
What this means for buyers
The trade data points to a practical lesson: origins that look marginal in normal times can become critical within weeks when a dominant supply region goes offline. Buyers who had a second qualified origin on file before March were able to move faster than those starting from zero. For Group III specifically, qualification lead times — sample approval, OEM formulation checks — run into weeks, which means the qualification work has to happen before the disruption, not during it.
It's also worth separating durable capacity shifts from emergency substitutions. Poland's Group II expansion is a structural addition that will still be there in 2027. A one-off surge of Spanish or Dutch cargoes to the US is not — those were opportunistic reallocations of existing product, not new supply, and they are unlikely to repeat at the same scale once Gulf flows normalize.
Malaysia's position in the reshuffle
Malaysia's Group III and Group III+ base oil production runs on domestic crude and ships through the Strait of Malacca, giving it no direct exposure to the Hormuz disruption or the refinery outages described in our Hormuz base oil shock timeline. A scheduled maintenance turnaround at a Malaysian Group III facility, flagged by S&P Global before the conflict, meant Malaysia wasn't a source of emergency spot relief during the acute March-April window — but its underlying supply to term customers continued uninterrupted throughout. For ASEAN buyers, Malaysian-origin base oil also carries a standing ATIGA duty advantage with Form D Certificate of Origin, independent of how the broader reshuffling plays out.
Frequently Asked Questions
Which countries stepped up to fill the Group III base oil supply gap in 2026?
US import data shows unusual surges from the Netherlands (highest in over a decade) and Spain (six-year high) in March 2026, alongside a rebound in South Korean exports to the US after a brief redirection toward China. None of these are typical major suppliers to the US market, reflecting emergency reallocation rather than planned supply.
Why did South Korea remain able to supply base oil during the Middle East conflict?
South Korea moved quickly to diversify its crude oil sourcing away from the Middle East, cutting its dependency from 69% to 56% within about six weeks by securing new volumes from Africa, Latin America and Central Asia, plus a priority supply pledge from the UAE. That crude security let Korean base oil refiners keep operating and increase exports even as Gulf producers went offline.
Is Europe facing a base oil shortage too?
Yes. Europe's Group III supply is heavily import-dependent on the Middle East and Asia, and several affected plants were close to the Strait of Hormuz. Group III prices in Europe reached record levels. A separate, unrelated pressure — refiners favoring diesel production over base oil due to wider crack spreads — compounded the shortage.
Has new base oil refining capacity come online to help ease the shortage?
Some, though mostly on the Group II side rather than the premium Group III segment most affected by the crisis. Poland's PKN Orlen brought a 400,000 tonne-per-year Group II expansion online at Gdansk in Q1 2026, aimed at moving Europe toward Group II self-sufficiency.
Sources
Base Oil News; ICIS; S&P Global Commodity Insights; Independent Lubricant Manufacturers Association (ILMA); Korea Herald; The Asia Business Daily; Korea Economic Institute of America; Verified Market Research; Kline Group (as cited in industry reporting).
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Sanyang Petroleum supplies Malaysian-origin base oils into Southeast Asia, South Asia and the Middle East, with full quality documentation and ATIGA Form D where applicable.