India’s June lube demand stays high

India’s lube demand held firm in June, keeping pressure on importers and domestic refiners to sustain sufficient base oils supply to meet requirements.

An extended round of plant-maintenance in India this year and the delayed start-up of new production capacity curbed any pick-up in flows from domestic sources to cover those requirements.

The dynamic instead left buyers more reliant on base oils supplies from overseas markets.

India’s imported Group II cargo prices maintained a higher premium to FOB Asia prices in recent months.

The firmer price-differentials pointed to sustained requirements for additional shipments from overseas sources.  

The higher price-premium attracted additional arbitrage cargoes from markets like the US and Brazil, as well as higher-than-usual shipments from sources like South Korea and Singapore.

India’s lube consumption of 388,000 tonnes in June fell by 11% from year-earlier levels, government data showed.

The volume was still the second-highest in more than a decade for the month of June.

It also left total consumption of 2.36 million tonnes in the first half of the year at the highest level for that six-month period in more than fifteen years.

The sustained rise in lube consumption contrasted with domestic base oils output that mostly held in a relatively narrow range over the past five years.

The recent round of plant-maintenance work in India during the first half of the year compounded that contrast and added to the country’s requirements for additional supplies from overseas markets.

The expected start-up of new production capacity in India in the fourth quarter of the year should help to cover some of those requirements.

Any delays to the start-up of the new units would extend India’s tight supply-demand balance and increase its reliance on shipments from overseas markets.

Any further rise in India’s lube consumption would compound those tight fundamentals.