OUR OBSERVATION
Dear Readers,
April didn’t just build on March. It exposed what kind of market we’re really in.
What started as a supply disruption story quickly evolved into something more structural. Flows didn’t normalize. If anything, they became more restricted, more controlled, and more strategic. The conversation shifted again. This time from “how tight is it?” to “where is material even coming from?”
Across the board, buyers adjusted. Some pulled back. Others scrambled. But one thing became clear. This is no longer a market reacting to price. It’s reacting to availability.
Quick Highlights – Group I, Group II, and Group III
April was defined by one overarching theme: a fragmented supply system under pressure.
At the center of it all is the ongoing disruption tied to the Middle East. The effective closure of the Strait of Hormuz didn’t just tighten supply. It reshaped trade flows entirely. Material that would normally move freely into Asia, Europe, and the U.S. simply hasn’t been available, forcing refiners and traders to rethink how barrels move globally.
That shift alone would have been enough to tighten the market, but what really stood out was how refiners responded.
Instead of pushing more base oil into the system to capture higher prices, many leaned the other way. Across multiple regions, output was reduced as producers prioritized gasoline, diesel, and jet fuel where margins remain stronger. That decision kept base oil supply constrained, even as prices continued to move higher.
At the same time, another dynamic started to surface. This isn’t just a supply issue. It’s also a timing issue.
The crude that feeds base oil production doesn’t move instantly. Middle Eastern barrels typically reach Asia in a couple weeks, Europe in three, and the U.S. closer to Seven. So, the disruption that began at the end of February didn’t hit all regions at once. It moved through the system in stages.
Asia felt it first. Europe followed. The U.S. is now entering into that window where earlier shipments are running out and replacement barrels are harder to secure. Refineries don’t have much cushion to absorb that shift. Most operate with less than two weeks of crude storage. They continue running until the last shipment arrives, and once that buffer is gone, tightening happens quickly.
That’s part of why the market feels disconnected at times. You can see crude pricing move lower while base oil pricing stays elevated. Gasoline reacts faster because it’s tied closer or in lock step with lighter crude futures hence quicker price movements within the system. Base oils don’t. They rely on heavier, more specialized crude and move on a delay.
Crude for Fuel and Crudes for Base Oils are simply not the same. And so even when refiners adjust, not all crude replaces itself evenly. U.S. shale crude is widely available, but it’s lighter and better suited for fuels. Middle Eastern grades are heavier waxy crudes, which is what drives strong Group II and Group III yields. When those barrels are disrupted, refiners can shift slates, but they don’t get the same output. Yields drop, especially on higher viscosity grades and Group III.
That impact is just starting to show up now and will become more visible as we move into May and June, and you can already see it beginning to play out across each of the base oil grouping.
Group I tightened steadily throughout the month, but remained the most workable of the three. Supplies were limited, particularly for heavy grades and bright stock, as refineries reduced output and in some cases suspended deliveries. The result wasn’t just higher pricing. It was reduced visibility on forward availability.
Group II shifted into a controlled market. Refiners moved toward stricter allocations, limiting buyers closer to contract minimums while keeping spot volumes scarce. At the same time, global demand pulled U.S. barrels into export markets, tightening domestic availability and reinforcing the imbalance.
Group III remained the most constrained and the most telling. With Middle East production effectively stranded and Asian output curtailed, global supply collapsed into a short market. Allocation became the norm, not the exception, and buyers increasingly looked for substitutes wherever formulations allowed. What made April different wasn’t just the level of tightness. It was how uneven everything became.
Some regions were dealing with real shortages, while others started to slow as buyers struggled to keep up with rising costs. Blenders across Asia and Europe adjusted operating rates, not because demand disappeared, but because base oil supply was constrained while simultaneously, they couldn’t pass increases along fast enough. At the same time, certain markets leaned more heavily on domestic or re-refined supply, which created brief pockets of perceived stability in an otherwise constrained system. That unevenness is where the shift starts to become more apparent.
The market isn’t moving as one system right now. It’s reacting differently depending on where you are and what access you have to supply. Geopolitics, refinery decisions, and logistics are all pulling in different directions, and that’s starting to show up more clearly in how pricing and availability behave across regions.
For base oils, that has real implications. Feedstock flexibility becomes more important. Refinery configuration matters more. And downstream players are being forced to adjust more quickly than the system is settling.
You can see that shift clearly in how North America is positioning itself. With global supply disrupted, U.S. barrels are being pulled into international markets to help fill gaps. That supports supply globally, but it also tightens availability at home and creates a different pricing dynamic depending on where those barrels end up.
Through all of this, refiners have remained in a strong position. Whether it’s fuel margins or controlled base oil supply, they have flexibility across the system that most buyers don’t.
The Key Takeaway This Month
This isn’t a temporary spike.
This is a structurally tighter market where:
- Refiners are actively managing output
- Supply chains are less predictable
- Availability is driving decisions
The market hasn’t just tightened.
It’s changed shape.
RECENT HEADLINES
U.S. REFINERIES
Chevron says Venezuelan oil imports are helping curb U.S. gas prices
Chevron’s stepped-up imports of Venezuelan oil are helping ease fuel prices for U.S. consumers, according to a senior executive with the energy giant.
Andrew Walz, Chevron’s president of global refining, told CBS News that the company is running its Pascagoula, Mississippi, refinery around the clock to process crude from Venezuela.
Walz said Chevron is moving to curb prices for consumers as the war in Iran constrains global oil supplies and pushes U.S. gasoline prices up to their highest level since 2022.
A tanker carrying 400,000 barrels of Venezuelan crude will supply Chevron’s Mississippi refinery for four days. The oil imports are helping both “bring revenue to Venezuela, and it’s helping Americans,” Walz said. Continue Reading Here
ExxonMobil Greenlights Baytown Refinery Reconfiguration Project
Exxon Mobil Corporation XOM, a U.S.-based integrated energy giant, has taken a final investment decision on a reconfiguration project at its Baytown refinery in TX. The project will support the increased production of higher-demand products, such as diesel and base stocks. This is expected to reinforce XOM’s position as a leader in the evolving energy landscape and support its growth.
ExxonMobil’s investment is aimed at shifting production toward high-quality base stocks and liquid fuels, such as diesel. This allows the company to increase its range of offerings and include high-quality Group III base stocks, which are critical raw materials for making lubricants. This investment also enables XOM to position itself as the sole supplier of the full range of Group I-V base stocks. The demand for diesel and other high-quality base stocks is expected to remain strong, and upon completion, the Baytown complex will likely meet this growing demand. The project is expected to commence operation in 2028. Continue Reading Here
NON U.S. REFINERIES
Saudi Arabia’s SATORP Refinery Shut Down After Attack
Saudi Arabia’s SATORP refinery, jointly owned by Aramco and TotalEnergies, was shut down after one of two refining units was damaged by incidents earlier this week, the French supermajor said in an update to the market on Friday.
The SATORP site was affected by incidents that occurred during the night of April 7 to 8, causing damage to one of the refinery’s two processing trains, TotalEnergies said today.
“No casualties were reported. As a safety precaution, the units were shut down. An assessment of the consequences for the refinery’s operations is currently underway,” said the French group, which owns 37.5% in the refinery. Continue Reading Here
Ukrainian drones strike Russia’s Yaroslavl oil refinery, General Staff says amid latest mass attack inside Russia
An oil refinery in the Russian city of Yaroslavl and several targets inside Russian-occupied territories were struck by Ukrainian drones overnight on April 26, Ukraine’s General Staff confirmed.
The refinery was hit, resulting in a fire on the premises, the General Staff said, adding that the extent of the damage was still being assessed.
“The Yaroslavl oil refinery is a strategically important enterprise and one of the key facilities in the Russian oil refining industry,” the General Staff said.
The facility operates with a refining capacity is around 15 million tons of crude oil per year, the post added.
A drone attack threat was declared in Yaroslavl Oblast earlier in the night, regional governor Mikhail Yevrayev said, as independent Telegram news channel Exilenova Plus reported strikes on an oil refinery in Yaroslavl. Continue Reading Here
Iran missile strike hits Bahrain’s BAPCO refinery, causes limited material damage
A massive explosion rocked Bahrain after an Iran ballistic missile reportedly struck the Bahrain Petroleum Company (BAPCO) oil refinery in Maameer, triggering large fires at one of the Gulf nation’s most critical energy facilities. Videos circulating on social media showed large flames and thick black smoke billowing from the refinery complex as emergency crews worked to control the blaze.
The strike is part of a broader wave of Iranian drone and missile attacks targeting sites linked to the United States Navy presence in the region, including the headquarters of the United States Fifth Fleet at Naval Support Activity Bahrain.
In a statement, the Bahrain Interior Ministry confirmed that one of its facilities in an industrial zone housing an oil refinery had been hit. “The fire that broke out in one of the facilities in Maameer, which was targeted by the Iranian aggression, has been brought under control. Limited material damage was reported, with no loss of life,” it added in a follow up post. Continue Reading Here
THE CRUDE SIDE
UAE’s shock OPEC exit: What it means for the oil cartel’s future and for crude prices
The United Arab Emirates’ exit from OPEC this week will weaken the influence of the cartel and its leader Saudi Arabia on the oil market, a development that could prove bearish for prices over the long term.
The UAE was the most influential member of OPEC behind Saudi Arabia. It was one of the few members, along with Saudi Arabia, that had meaningful spare production capacity to influence prices and respond to supply shocks, said Jorge León, head of geopolitical analysis at Rystad Energy.
Spare capacity is the idle production that can be brought online quickly to address major crises. Saudi Arabia and the UAE together control a majority of the world’s total spare capacity of more than 4 million barrels per day, making them particularly influential during periods of distress. Continue Reading Here
US Crude Oil Exports Surge to Record
U.S. crude exports surged to a record above 6 million barrels a day last week as the Iran war sends overseas buyers hunting for replacements to Middle Eastern oil.
The surge in the volatile weekly crude exports figure helped send overall shipments of US oil and fuel abroad to a fresh record high above 14 million barrels a day. Even as the US and Iran have held on to a fragile ceasefire, oil buyers across the world are still grappling with the worst disruption to global energy supplies in history.
American exports have been critical to help fill the gap, with President Donald Trump pushing for more production as part of his energy dominance agenda. Continue Reading Here
Energy security comes first for Indonesia as it defies EU over Russian oil
Jakarta’s move to press on with importing 150 million barrels of Russian oil despite latest EU sanctions against an Indonesian port underscores a growing divide between Western efforts to isolate Moscow and Asia’s push for energy security.
On Thursday, the European Commission announced its 20th package of sanctions against Russia, which includes Indonesia’s Karimun Oil Terminal for its “connections with the shadow fleet and circumvention of the oil price cap”.
The sanction on Karimun, located in a free-trade zone island some 30km (19 miles) southwest of Singapore, is the first time that a non-Russian oil terminal has been sanctioned by Brussels since Russia’s invasion of Ukraine in 2022. Continue Reading Here
Surprising Fun Facts About the Oil Industry
- The First Oil Boomtown Had No Roads – Early towns like Titusville were so unprepared that crude oil had to be moved through mud paths and makeshift tracks, often taking longer to move oil a few miles than it does today across oceans.
- Oil Storage Tanks Were Invented Because Barrels Ran Out – During early booms, there weren’t enough barrels available, forcing producers to build the first large wooden storage tanks, which later evolved into steel tank farms.
- The Railroad Industry Tried to Control Oil Pricing – Before pipelines took over, railroads charged wildly fluctuating rates sometimes determining whether an oil field lived or died based on transport costs.
- Early Oil Speculation Happened on Street Corners – Before formal exchanges, traders gathered on sidewalks and hotel lobbies in oil towns to buy and sell production rights and contracts.
- The First Oil Millionaires Invested in Banks, Not More Oil – Many early oilmen quickly moved their profits into banking and finance, helping build the capital systems that later funded industrial expansion.
- Oil Drilling Helped Advance Steel Manufacturing – Demand for stronger drilling equipment pushed innovation in steel production, indirectly benefiting industries like railroads and construction.
- Some Oil Wells Were Guarded Like Gold Mines – In boom periods, valuable wells were protected by armed guards to prevent sabotage or theft by competitors.
- Early Oil Refineries Operated 24/7 by Necessity – Crude oil couldn’t be stored long-term in early days, so refineries ran nonstop shifts to prevent spoilage and overflow.
- Oil Was Once Measured by Guesswork – Before accurate metering systems, early producers estimated output by visual inspection of tanks, leading to frequent disputes.
- The First Global Oil Companies Were Built on Shipping, Not Drilling – Companies like early Shell grew by moving oil, not producing it—proving logistics was the real competitive edge from the beginning.
SUGGESTED READING
Oil Man: The Story of Frank Phillips and the Birth of Phillips Petroleum by Michael Wallis
From small-town beginnings to building an oil empire. In Oil Man, author Michael Wallis tells the story of Frank Phillips, a determined entrepreneur who rose from modest roots to found one of America’s most successful oil companies. Blending grit, timing, and bold decision-making, Phillips navigated boom-and-bust cycles to create a lasting legacy in the petroleum industry. A compelling read for anyone interested in the people who built the backbone of American oil.
WE’VE COME A LONG WAY!
Thank you for joining us in this edition of the Beyond the Barrel Newsletter. Feel free to reach out to the Signal Fluid Solutions team for any inquiries or discussions.