India's base oils and lubricants demand rose 5% year on year in May, marking the first increase in three months and signalling resilient underlying consumption
Record May vehicle sales and strong lubricants demand helped offset higher fuel prices, extreme heat and supply-chain disruptions
A typical monsoon-season slowdown could ease domestic demand and free up additional base oils volumes for other markets
India's base oils and lubricants demand rose in May for the first time in three months, pointing to firm underlying consumption despite higher fuel prices and supply disruptions.
Total demand rose to 382,000 tonnes in May, up 5% year on year, Ministry of Petroleum and Natural Gas data showed.
The recovery followed a slowdown in March and April that had raised concerns that higher prices and supply-disruption risks were beginning to curb consumption.
May's gains instead pointed to continued underlying strength rather than a structural slowdown.
“Overall, the year remains a good year,” Gulf Oil Lubricants India Managing Director Ravi Chawla said in an earnings call at end-May.
Gulf Oil Lubricants India reported its highest-ever revenue and lubricants sales volumes in the first three months of the year, adding to signs of sustained demand strength.
Key Highlights
· India's automobile sales rose 10% year on year in May, climbing for a tenth straight month to the highest May volume on record, Federation of Automobile Dealers Association (FADA) data showed.
· Fuel prices were raised multiple times during May, after holding steady in March and April.
· Market activity typically slows during the monsoon season, which began in early June.
Market Repercussions
Lubricants demand and automobile sales held firm despite multiple fuel price increases, an above-normal heatwave and supply disruptions linked to the Hormuz closure.
"That growth held through this confluence of pressures underlines the resilience of the underlying demand," said FADA President C S Vigneshwar.
Gulf Oil Lubricants India pointed to similarly robust lubricants demand, with customers willing to accept higher prices to secure supply.
"If we are in a position to keep supplying the material to our customers, customers are willing to pay higher price also," said Manish Gangwal, Gulf Oil Lubricants’ chief financial officer.
Stronger lubricants demand absorbed more of India’s rising domestic base oils output and sustained import requirements from suppliers including South Korea, Singapore and Saudi Arabia.
Demand typically eases in July and August as monsoon rains slow transport and agricultural activity.
Any such slowdown could free up more domestic and overseas base oils supplies for other markets.