India’s Dec Group II Base Oils Imports Fall to Eighteen-Month Low

India’s Group II base oils imports slid to an eighteen-month low in December, magnifying the mismatch between supply and demand and tightening blenders’ stocks.

Total imports of Group II light and heavy grades fell to less than 75,000 tonnes in December, down from close to or more than 100,000 tonnes in each of the previous eleven months, provisional customs data showed.

The simultaneous drop in both light and heavy-grade imports was unusual at a time when there was scant refinery maintenance work across Asia.

A dip in Group I heavy-neutrals imports to a six-month low added to the pressure by curbing blenders’ ability to substitute to Group I grades.

Key Highlights

·         Group II light-grade imports fell to less than 40,000 tonnes, the lowest in eighteen months and down from typical monthly levels of more than 50,000 tonnes during the past year.

·         Group II heavy-grade imports slid to less than 35,000 tonnes, dipping to a fourteen-month low and down from average levels of more than 57,000 tonnes/month in the six months to November.

·         Imports of Group I heavy neutrals fell for a third straight month year on year to the lowest since June, curbing substitution options for blenders.  

·         Very-light grade base oils imports were the outlier, rising 11% year on year and lifting shipments to a three-month high.

·         The rise in very light-grade shipments masked the steep fall in India’s total imports of other base oils grades, which dipped to the lowest level in almost three years.

Market Repercussions

The steep fall in Group II imports was unusual at a time when Asia’s base oils output remained at more elevated levels, suggesting refiners were targeting other markets instead such as southeast Asia and China.

India’s imported Group II heavy-grade cargo prices had faced sustained pressure during the final months of last year amid persistent surplus supply.

The weak fundamentals added to a reluctance to buy, compounding downward pressure on prices.

Heavy-grade imports duly slumped in December.

The subsequent drawdown in blenders’ stocks could now trigger moves to seek replenishment supplies, supporting a recovery in heavy-grade fundamentals.