The U.A.E. had been the main destination for Iranian base oil exports in recent years, as shipments were sent to Emirati ports and then re-shipped elsewhere as a way of dodging U.S. sanctions. Last year 70 percent of Iranian base oil exports went to the U.A.E., according to ICIS data, but that traffic has largely halted since the U.S. strong-armed Abu Dhabi to comply with its latest sanctions.

Iran, which produces only API Group I base stocks, exported 392,000 tons of them in 2018, down from 480,000 tons in 2017, Ahmad said. The drop-off was most acutely felt in the U.A.E., where many base oil businesses have ceased trading, amid reports local banks are actively shunning the sector. Earlier this month, Mumbai, India-based Petrosil reported prices for solvent neutral 500 base oils from Iran declined 15 percent since the beginning of 2019 and that at the end of September prices had fallen 25 percent year on year.

Prices for Group I oils in general are expected to come under further pressure when the International Maritime Organizations 2020 sulfur cap regulation comes into effect on Jan. 1. The new rule will limit sulfur content in fuels to 0.5 percent, a move which is widely expected to dampen supply and demand for Group I base stocks.

Despite uncertainty over global Group I availability, Irans capacious Group I base stocks might yet be thrown a lifeline by China, as a settlement in the trade spat with the U.S. could positively stoke sentiment. India, historically a major buyer of Iranian base oils, may also lobby for new import waivers, analysts say.

The U.S. has imposed more than 1,000 sanctions on Irans oil exports and its wider economy, as well as the countrys political and military leadership, International Crisis Group, a non-governmental conflict-prevention group based in Brussels, recently stated.

To skirt U.S. sanctions, Iran has been forced to adopt a campaign of subterfuge. Reviving instability in Iraq may signal supplies of Group I base stocks will be erratic in the months ahead.