The Slow Decline of Group I in the Middle East—and What Blenders Must Do Next | Group I Base Oil Phase-out Middle East

Regional growth does not automatically protect Group I. Mordor Intelligence forecasts the Middle East and Africa as the fastest-growing geography, at a 3.33% CAGR between 2026 and 2031, even as the market shifts to more hydroprocessed grades. IndexBox adds that capacity additions have been concentrated in the Middle East and Asia-Pacific and have largely targeted Group II and Group III production, aligning with demand trends but sometimes creating regional oversupply scenarios. A separate market note published on openPR.com (DataHorizzon Research) describes capital reallocation toward Group II and Group III at the expense of legacy Group I production that is steadily being phased out or converted. Taken together, these signals frame the Group I base oil phase-out in the Middle East as a gradual but persistent direction of travel, shaped by investment choices and tightening quality requirements.

What Middle East Blenders Should Do Next

Blenders should treat formulation flexibility as a commercial capability, not a technical nice-to-have. IndexBox notes that within a blender’s formulation there is often flexibility to switch between Group II and Group III, or to use re-refined stocks, depending on price parity and performance requirements. That matters because competitive intensity is rising fastest in Group III, with capacity additions from Asian and Middle Eastern producers beginning to pressure pricing in markets previously dominated by North American and European supply, according to the openPR.com note. For blenders, that combination can create opportunity: qualify multiple base-stock slates, validate additive treat rates across acceptable Group II/III alternatives, and keep procurement options open so you can react when price parity shifts.

Blenders also need to align products with tightening specifications and disclosure expectations in the GCC. MarkWide Research says evolving national petroleum product regulations and carbon intensity disclosures will redefine base oil sourcing strategies and refinery upgrade timelines. It also states that extended drain intervals mandated by OEM specifications are compressing lubricant consumption volumes while elevating per-liter performance requirements across Saudi Arabia and the UAE. That “specification squeeze,” in MarkWide’s words, rewards suppliers with synthetic formulation capabilities and penalizes commodity blenders dependent on Group I base stocks. The practical response is to prioritize higher-performance formulations, increase the share of products designed around Group II/III and synthetic components where required, and build a compliant documentation trail that supports customer audits and disclosure-driven procurement.

Finally, sourcing risk management should be explicit, especially where local hydroprocessing is constrained and import exposure is high. MarkWide Research states that Middle East refiners lack sufficient hydrocracking capacity for synthetic-grade feedstocks and that blenders rely on Asian and European suppliers, exposing margins to freight rate volatility and currency fluctuation. At the same time, regional investments are pointing to more Group III+ supply: Grand View Research reports that in January 2026, Saudi Aramco and Luberef signed a memorandum of understanding to explore a new base oil plant at the Jazan Refinery in Saudi Arabia aimed at expanding Group III+ capacity. Meanwhile, IndexBox’s transformer-oil report reminds blenders that Luberef produces Group I base oils at Yanbu and Jeddah, but transformer-oil-grade specifications require additional hydrotreating and additive formulation. Blenders can respond by qualifying more suppliers, contracting with clearer price and freight terms, and targeting segments where upgraded processing and additives support defensible specifications.