India's June Base Oils Exports Stay High For Second Month

India's base oils exports stayed unusually high for a second straight month in June, as new production capacity turned the country into one of the global Group III market’s key swing suppliers.

Exports came to 29,000 tonnes in June, down from 31,000 tonnes in May but still the second-highest on record, according to India's Ministry of Commerce and Industry.

Before April, monthly exports typically ran below 2,000 tonnes, with most supplies moving to nearby markets including Nepal, Kenya and the UAE. The recent surge has instead gone to markets that had previously seen only scant flows from India.

The surge followed the start-up of new base oils capacity at Haldia late last year, just before the collapse in Middle East Group III shipments from late February.

The pause in flows left the global market with a growing Group III shortfall, driving prices higher in Europe and the US especially. The shipments from India tapped the shortfall and the resulting price gap with those markets.

A wave of exports to the US in May extended through June. Shipments to Malaysia also surged, despite that country also being a major Group III producer and exporter.

Key Highlights

·         Exports to the US reached 11,700 tonnes, the second-highest monthly volume on record, despite falling from May.

·         Shipments to Malaysia surged above 10,000 tonnes from about 700 tonnes in May and zero in the first four months of the year.

·         Exports to Europe fell to less than 500 tonnes from more than 6,200 tonnes in May

·         Imports from China and Iraq reached more-than-two-year highs, pointing to a shift toward more competitive supply sources.

·         Total net imports, imports minus exports, fell to less than 140,000 tonnes, a multi-year low.

Market Repercussions

The global market faces a seasonal rise in Group III demand in the final weeks of the third quarter, coinciding with planned maintenance in both Asia and Europe.

In Europe, more Spanish supplies have stayed within the region amid a round of stock-building ahead of maintenance; India's own shipments to Malaysia point to a similar pattern, arriving ahead of plant maintenance there starting in August.

A seasonal rise in India's own demand could curb the volume available for export, further tightening Group III supply. That rise would follow a sustained decline in India’s base oils imports since March, cutting the country’s inventory levels and increasing reliance on domestic production.

Lower cargo prices have kept the import arbitrage shut, while higher Group III prices in the US and Europe have pulled more Indian barrels toward export.

An extension of that trend could keep India’s exports elevated even as global supply tightens and domestic demand revives.