The simultaneous severing of air, sea and land links has implications for international and regional base oil supplies. Doha signaled it will use ports in Oman to bypass the blockade after the UAE barred Qatari-flagged vessels and vessels destined to or arriving from Qatar from its ports. Uncertainty over the duration of the dispute and the possibility other countries, including Turkey, Iran and Russia, will be sucked into the crisis cast a long shadow over the Middle East as a base oil supply source.

Shell supplies base oils from the Pearl gas-to-liquids plant at Ras Laffan to a global network, and analysts say the blockade will be a major concern for the company. Shell, however, Shell is downplaying the fallout from the spat. Nureddin Wefati, head media relations, MENA at Shell EP International, said, Currently, we are focused on running our Qatar business as usual and are not experiencing any operational disruption as a result of the current situation.

Stefan Mueller, principal senior analyst at HIS Chemical, said there is little doubt Shell should be worried by recent developments. I would guess Shell is on high alert. The API Group III+ supply from Pearl is vital for its global lube business. Any interruption would mean theyll struggle to meet contracts and sales goals as they cannot get Group III+ from other sources.

International companies look particularly exposed, given the Gulfs complex matrix of energy assets, amid mounting speculation trade sanctions may be imposed on firms doing business with Qatar. Unsurprisingly, the sharp rise in tensions has led to calls from both the U.S. and U.K. for Gulf States to ease restrictions.

Bahrain, Saudi Arabia and UAE have become major suppliers of Group II/III base oils. While there is no current indication supplies from these sources will be interrupted, a dramatic intensification in the standoff could radically alter supply and price dynamics. By mid-June, there was little impact on prices, although that could be due to seasonality, according to Muhamad Fadhil, head of Middle East markets for ICIS.

Base oil prices in the Middle East are relatively stable since early June as market players digest the implications of this diplomatic crisis. Ramadan is typically a lull season, and buyers stock cargoes ahead of the fasting month, limiting any supply-side impact, he said.

Even without the dispute worsening, perceptions about base oil supplies from the Gulf may change. But any repercussions are likely to be temporary, Fadhil argued. The Gulf will remain a reliable source of base oils for international customers. This blockade may lead to logistical delays of several days due to rerouting of shipments, which will largely impact procurement and supply chain timelines.