India’s January Base Oils Output Extends Rise to 34-Month High

India’s base oils output extended its rise in January, climbing to a 34-month high and cushioning the impact of slower imports ahead of a seasonal rise in consumption.  

Total output climbed to 141,000 tonnes in January, up from 138,000 tonnes in December and increasing year on year for the seventh time in eight months, Ministry of Petroleum and Natural Gas data showed.

The sustained rise in production pointed to new capacity coming online towards the end of last year, reducing India’s reliance on overseas supplies.

But the supply buffer remained thin at a time when seasonal demand is rising and Middle East shipments faced the risk of disruption.

Key Highlights

·         January production reached its highest since March 2023, with December volumes the second-highest since then.

·         Output exceeded 135,000 tonnes for two consecutive months for the first time in at least fifteen years.

·         Persistently elevated output points to new base oils capacity coming online in late 2025 following plant-maintenance work.

·         Higher production narrowed its shortfall versus domestic lubricants consumption to the smallest gap in five months.

·         Base oils output accounted for 33% of total supply, or production plus imports, the largest share since March 2023 and above typical 2025 levels of around 25%.

·         India’s base oils surplus over demand stayed tight for a sixth straight month, as firm lubricants consumption kept pressure on buyers to secure additional volumes.

Market Repercussions

Indian blenders’ dependence on base oils imports remained high despite the recent rise in domestic output.

That reliance is likely to persist in the near term  as growing lubricants demand absorbs much of the incremental production, limiting any meaningful build in surplus supply.

Firm demand and tight availability complicated blenders’ moves to build inventories ahead of the usual surge in consumption at the end of the financial year in March.

A smaller supply cushion would magnify the impact of any disruptions to flows from the Middle East.

The proximity of the region to India made those flows difficult to replace at short notice. The size of the volumes, accounting for around 20% of total imports, compounded the difficulty.