BofA Global Research bumped up its price objective for Saudi Aramco Base Oil Co. (SASE:2223), d/b/a Luberef, saying the company's risk-reward profile remains "attractive" on the back of strong base oil cracks amid persistent supply disruptions due to the Middle East conflict.
"Luberef continues to benefit from resilient base oil crack spreads, supported by ongoing Group III supply disruptions across the Gulf and elevated diesel margins, which have reduced base oil supply. While base oil prices have eased from July peaks, they remain around 80% above pre-crisis levels, resulting in crack spreads of 1.25x historical levels," according to a MENA Oil and Gas & Utilities report published Wednesday. "With refinery outages unlikely to be resolved before 2027, we expect elevated crack spreads to persist through 3Q26 and 4Q26, supporting strong earnings. Any prolonged disruption to regional refining operations or shipping routes would provide further upside to margins."
Against this backdrop, the price objective was lifted to 166 Saudi riyals from 165 riyals, while the buy rating on the stock was reiterated. Analysts also made "minor" changes to their 2026 and 2027 EBITDA estimates for the company.
"Beyond the current margin cycle, Luberef is also positioned for structural growth through its expansion program. The commissioning of its Group III base oil facility in 1H27 should support a richer product mix and higher-value sales," BofA added.