·         India’s imported very-light-grade N70 base oils price discount to domestic diesel narrowed in December, reaching its tightest level in nineteen months, with the trend extending into January.

·         A narrowing discount to domestic diesel typically reduces the incentive to import additional very light-grade base oils.

·         The CFR India N70 price premium to Singapore gasoil rebounded in December and January, climbing to its highest level in more than two years.

·         A wider N70 premium to gasoil typically incentivizes overseas refiners to increase output of very light-grade base oils, supporting higher export flows to India.

·         Current pricing dynamics simultaneously incentivize higher exports to India while dampening import demand.

·         The diverging price signals could point to tighter-than-usual overseas supply that is offsetting weaker demand conditions.

·         India’s imports of very-light grade base oils from Saudi Arabia fell in December, dropping to the lowest level in more than five years, reflecting such a dynamic.

·         India’s total imports of very-light grades still rose to a three-month high in December, supported by higher-than-usual shipments from South Korea.

·         Elevated import volumes and prices that incentivize more such shipments coincide with an expected recovery in flows from Saudi Arabia following the completion of plant maintenance work.

·         Rising supply, alongside prices that pressure demand, could trigger a growing mismatch between supply-demand fundamentals and subsequent response to correct the imbalance.