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India's base oils output stayed elevated in June, but higher exports absorbed much of the additional production, lifting total demand
Stronger overseas margins pushed refiners to prioritise export cargoes over the domestic market, with more supplies moving to the US again in June
India's export focus could ease in the third quarter if domestic buying revives and Saudi Arabia's August maintenance tightens regional supply
India's base oils output remained elevated in June, but higher exports absorbed much of the additional production while domestic demand slowed.
Base oils output edged up to 131,000 tonnes in June from 129,000 tonnes in May, Ministry of Petroleum and Natural Gas data showed.
Production remained below the peaks reached in March and April but stayed 14% above year-earlier levels, rising for a seventh straight month.
Second-quarter output reached 412,000 tonnes, the second-highest quarterly volume on record and up 27% year on year. Domestic production covered 37% of India's base oils and lubricants demand during the quarter, the highest share since 2023.
But much of that additional output moved overseas rather than into the domestic market. Record second-quarter exports lifted total demand despite weaker domestic lubricants consumption, as refiners targeted stronger overseas margins.
Key Highlights
· Base oils output accounted for 35% of India's domestic base oils and lubricants demand in June.
· Total supply fell to a nine-month low in May as imports continued declining.
· Total demand rebounded in May as record exports offset weaker domestic lubricants consumption, leaving a supply shortfall for the first time in four months.
· Higher overseas prices encouraged refiners to prioritise export cargoes over domestic sales.
· Base oils procurement in India typically revives from August as buyers secure supply for the festive season.
Market Repercussions
India's refiners used firm output and soft domestic demand to redirect a growing share of barrels to Europe and the US as arbitrage windows opened, helping fill gaps left by Middle East disruptions.
Once the monsoon season ends and festive-season procurement begins from August, a pick-up in domestic demand could narrow the pool of supplies available for export.
The timing would coincide with Saudi Arabia's planned August plant maintenance. The shutdown was expected to slow Red Sea exports, at the same time as domestic demand recovery narrowed India's own export availability.
India and Saudi Arabia were both redirecting spare barrels to plug the same Middle East shortfall during the second quarter. Both had reason to pull back at the same time in August, even as that shortfall showed little sign of easing.
