India’s lubricants demand rebounded in July after a weak second quarter, pointing to firmer underlying consumption
CFR India prices stayed unusually weak against FOB Asia prices, pointing to sufficient supply despite firmer demand
A sustained demand recovery could tighten regional supply further, magnifying pressure when Asia's usual seasonal demand revival approaches later in the third quarter
India’s lubricants demand rose in July for the first time in five months, a rebound that could put pressure on Asia’s shrinking base oils surplus at a time of year when it typically widens.
Lubricants demand rose to 420,000 tonnes in July, up 7% year on year and 14% from 370,000 tonnes in June, according to India's Ministry of Petroleum and Natural Gas. It was the highest level in four months.
“July, we are seeing, obviously, normal July, normal August, depends a lot on the agri season,” Ravi Chawla, Managing Director at Gulf Oil Lubricants India, said in an earnings call last week. “So, that seems to be going positively.”
India is Asia’s largest lubricants market after China, making its demand an early indicator of the region’s wider consumption trend. A stronger recovery would come as Asia enters the third quarter with a smaller-than-usual base oils surplus, leaving less supply to absorb higher requirements.
Key Highlights
· Lubricants demand rose after consumption fell in the second quarter to its lowest level since the end of 2024, after lubricant prices increased in response to higher base oils costs.
· Automobile sales rose 26% year on year in July, the fastest pace in nine months, with every vehicle category posting its best July on record.
· A pick-up in India’s base oils exports showed signs of extending into August despite stronger domestic demand.
Market Repercussions
The July rebound raised the prospect of a tighter base oils balance, with more supply needed for domestic consumption and less available for overseas markets.
India’s imported base oils cargo prices instead pointed to healthy domestic availability. Prices remained well below FOB Asia levels, making imports unattractive for overseas refiners, while Indian suppliers continued to target higher returns in overseas markets.
That combination suggested India still had sufficient supply to meet domestic requirements.
Even so, lower imports and higher overseas shipments could leave the market facing a tighter supply balance if July’s demand recovery extends through the rest of the quarter.
A stronger pick-up in replenishment requirements would then coincide with a seasonal recovery in other parts of Asia, adding to pressure on the region’s already-squeezed supply balance.