India’s February lube demand rises

India’s lube demand rose in February for the sixth time in seven months, keeping pressure on blenders’ inventories and sustaining requirements for large volumes of base oils from overseas markets.

Lube consumption of 358,000 tonnes in February rose by 8% from year-earlier levels, government data showed.

Rising demand coincided with signs of unexpectedly strong lube consumption in southeast Asia at the start of the year.

Strong demand slowed domestic blenders’ ability to build sufficient stocks to cover a typical surge in consumption in the month of March.

India’s lube consumption exceeded 400,000 tonnes in the month of March in each of the previous three years.

Those moves to build inventories overlapped signs of stock-building among some regional refiners to cover requirements during scheduled plant maintenance work in the first quarter of the year.

The maintenance work included several units in India, further complicating blenders’ ability to lock in sufficient supplies.

The tighter supply-demand fundamentals coincided with a rise in India’s imported Group II base oils cargo prices in February.

But the prices maintained a narrower-than-usual premium to FOB Asia cargo prices for the time of year.

The narrow premium complicated arbitrage opportunities despite the tighter supply-demand fundamentals.

The disconnect suggested that buyers were securing sufficient supplies to cover requirements but were holding off moves to build larger stocks.

A preference to maintain sufficient stocks coincided with concern about slowing economic growth in India and expectations of easing base oils supply tightness in the region in the coming months.

A slowdown in India's economic activity could have a knock-on effect on the country’s lube demand growth.

India’s automobile sales already fell in February for the second time in three months.

The country’s core sector growth rose by 4.4% in the ten months to January, slowing from a 7.8% growth rate during the same period a year earlier.