India's base oils exports fell to a three-month low in July, and for the first time in three months none of the cargoes were bound for the US, a market that has little room elsewhere to turn for additional Group III supply.

Exports fell to 14,000 tonnes in July from 28,900 tonnes in June and close to 31,000 tonnes in May, India's Ministry of Commerce and Industry data showed. Even so, the July total remained the third-highest on record, extending a surge in shipments that began in April.

Group III base oils have been in short supply since Middle East shipments collapsed from end-February. New production capacity at Indian Oil Corp's Haldia plant let the country fill part of that gap, while a surge in US and European Group III prices over Asia prices attracted Indian cargoes to those markets.

That arbitrage turned India into an improvised swing supplier for two markets with few other Group III supply options. July's pause showed how inconsistent that supply could be just as Group III plant maintenance elsewhere narrows the alternatives further.

Key Highlights

• Shipments to the UAE jumped to more than 5,000 tonnes, the highest since May 2022.

• More cargoes moved to Malaysia ahead of Group III plant maintenance in August.

• July shipments to Europe stayed scant, even as record volume of Indian cargoes arrived in the region that month.

• Base oils imports rose to 190,000 tonnes from 165,000 tonnes in June, still the second-lowest in 17 months.

• Imports from Saudi Arabia held above 22,000 tonnes, the second-highest in seven months and a fifth straight month of elevated shipments.

• Shipping data showed flows from Saudi Arabia slowing since July, an early signal that August imports could fall back.

• An unusual rise in imports from Oman extended a trend since May, with July's volume of more than 2,500 tonnes the highest since February 2024.

Market Repercussions

India's own base oils supply stayed tight in July, with domestic output at an eight-month low as lubricants demand recovered, leaving less material available for exports or restocking.

That pressure could intensify as Saudi Arabia's imports fall back in August after staying elevated for five straight months. The loss of those supplies would add to India's need for additional imports just as domestic demand enters its seasonal pickup.

CFR India Group II prices rebounded against FOB Asia export prices from early July, a move consistent with tighter domestic supply and one that improves the economics of bringing more cargoes into India.

Higher prices and tighter supply could reduce the volume available for overseas buyers. Competition from other markets, including Southeast Asia and the UAE, could further limit exports to the US and Europe.

South Korea, the largest established alternative source of Group III supply, is already shipping near-record volumes to the Americas and Europe. That leaves limited scope to raise them further if India's exports became less consistent.

With Group III plant maintenance taking place in Malaysia and Europe during the third quarter, US and European blenders face a smaller pool of established suppliers to replace lost Middle East volumes.