India's base oils exports surged to a multi-year high as widening overseas price premiums opened an unusually attractive export arbitrage
New domestic production capacity allowed India to export surplus volumes despite remaining heavily reliant on imports
Even with additional supplies from India and other producers, the market remained well short of replacing lost Middle East volumes
India's base oils exports surged to a multi-year high in May as widening price premiums in Europe and the US transformed the country from a major importer into an unexpected supplier of overseas markets.
Exports climbed to 31,000 tonnes in May from an already elevated 9,400 tonnes in April, Ministry of Commerce and Industry data showed.
The shift followed a dramatic change in global market fundamentals.
New production capacity in India started operations late last year, lifting the country's supply just months before supply disruptions drove prices sharply higher in Europe and the US.
The widening premium over Asian prices opened an unusually attractive export arbitrage across multiple grades, prompting the shipment of surplus material that would typically have remained in the domestic or regional market.
The change began with shipments to Indonesia and Singapore in April before expanding in May to Europe, the US and Brazil, and included premium-grade Group III base oils.
Key Highlights
· Exports to Europe included a surge in flows to Spain, as well as to the UK and the Netherlands.
· The surge in shipments to the US reversed the typical flow of surplus shipments from that market to India.
· The rise in exports contrasted with a slowdown in shipments to more regular outlets including Nepal and Kenya.
· New domestic capacity allowed India to export surplus volumes even while remaining heavily reliant on imports.
Market Repercussions
India went from the world's largest base oils importers to a supplier of premium-grade cargoes into the US and Europe, as the Middle East disruptions reshaped global trade flows.
The rise in India’s base oils production capacity added to Asia's growing self-sufficiency and contrasted with the US and Europe’s reliance on imports to cover most of their Group III requirements.
New production capacity in Asia helped absorb part of the regional supply shock, leaving prices rising less sharply than in Europe and the US, and freeing up some volumes to move to those markets.
Higher prices encouraged refiners to maximise production and redirect cargoes toward markets where shortages were more acute.
Even with those adjustments, supply remained insufficient to replace the large volumes that typically flowed from the Middle East before the disruption.