Heavy-grade imports stay below typical levels for a second month, squeezing blender stocks
Falling prices could encourage blenders to delay restocking and refiners to trim output
Squeezed inventories and any output-cuts raise the risk of tighter supply as demand peaks
India’s imports of Group I and Group II heavy-neutrals base oils stayed lower than usual in January for a second month, leaving blenders with tighter inventories ahead of peak seasonal demand.
Total combined Group I and Group II heavy-grade imports held below 50,000 tonnes for a second month, well below typical monthly levels of more than 67,000 tonnes through 2025, provisional customs data showed.
Imports slid even as consumption of heavy grades in lubricants formulations likely held relatively steady.
Without a sharp rise in domestic base oils output, blenders would need to draw down inventories to meet demand.
Key Highlights
· Combined Group I and Group II imports in December and January fell to less than 90,000 tonnes, the lowest two-month volume since mid-2023.
· Group II heavy-grade imports held below 40,000 tonnes in January for a second straight month, with shipments last falling below that level at the end of 2024.
· Unlike September-October 2024, when maintenance-work in South Korea curbed flows, imports fell despite stable production in Asia.
· Group II heavy-grade volumes dipped even as imported cargo prices held at increasingly competitive levels versus light grades and Group I heavy neutrals.
· Group I heavy-neutrals imports fell to a seven-month low in January and would have dropped further without the arrival of a large Russia-origin cargo.
Market Repercussions
The extended slowdown in imports could reflect buyers’ moves to cut inventories to limit exposure to the sustained fall in heavy-grade prices.
The price-drop could also have incentivized buyers to delay replenishment until prices showed clear signs of bottoming out.
Such a strategy carried risks, with blenders heading into the peak-demand season at the end of the first quarter with increasingly stretched inventories.
Growing pressure on heavy-grade base oils margins also incentivized refiners to trim output and shift production to other grades instead.
The dynamic could leave the market facing a sudden pick-up in replenishment demand alongside tighter supply if refiners adjust output accordingly.