Stability to place Saudi Arabia as ‘key player’ in lubricants market: ICIS

Jeff Skelton, CEO of Independent Commodity Intelligence Services (ICIS)

Jeff Skelton, CEO of Independent Commodity Intelligence Services (ICIS), said the lubricant oils market in the Middle East is promising despite its relatively small size, as it accounts for less than 7% globally.  

In an interview with Argaam on the side lines of the 18th ICIS Middle Eastern Base Oils and Lubricants Conference in Jeddah, Skelton said the region has a lot of natural resources and a strong commitment to innovation to fulfil the needs of the global base oils and lubricants market.

He indicated that one of the region's main strengths is its distinguished location between developing African countries and the European market, thus meeting the diverse needs of these markets.

Furthermore, each market has unique dynamics, while the Middle East market constitutes a smaller part of the global base oil market as a consumer, said the CEO, indicating that it plays a pivotal role as a production hub as it works to supply Europe, the US and Asia.

Regarding the Saudi market, the CEO said that the long-term stability in the Kingdom and the work to establish a lubricants hub positions it as a major player in the field of lubricants and base stockpile in the region.

He added that players need to maintain flexibility and adaptability, noting that the lubricants industry is characterized by diverse conditions and varying impacts that each sector within the market may witness, such as base oil grades and distinct price trends, which necessitates a careful approach.

He pointed out that Saudi Aramco's acquisition of Valvoline Global Operations, a subsidiary of US-based Valvoline Inc., in March 2023, confirms the region's growing influence, as Aramco is set to have a presence in the US market and global markets.

Skelton also noted that, although the year 2023 witnessed a rebound in demand compared to last year, it has not yet reached pre-COVID levels, attributing this to several factors, including the ongoing political conflicts that led to challenges to the recovery of demand.

Markets like China are still struggling with long periods of recovery. The base oil market currently represents a difficult space due to the abundance of supply and incomplete recovery in demand, and it is important to take into account that not all grades of base oil face the same dynamics, as the first group shows different trends from the second and third groups, Skelton said.

He pointed out that the complex interaction of markets means that prices are closely monitored by producers to identify the most appropriate market opportunities.