Gulf Oil Lubricants India Faces Ongoing Base Oils Costs Pressure

Gulf Oil Lubricants India (Gulf Oil Lubricants) may need further price adjustments in the current quarter as base oil costs remain elevated despite lower crude prices, with Group III prices continuing to rise.

Asia's Group III prices averaged 36% higher in July than in the second quarter, when prices already more than doubled from the first three months of the year. The premium over crude oil rose to almost five times its first-quarter level, while Group II prices were steadier but still remained elevated relative to crude.

Gulf Oil Lubricants’ raw material costs rose 60% year on year in the second quarter, outpacing a 33% rise in sales and pushing raw materials to 70% of total costs, up from a three-year average of 58% to the first quarter of 2026.

The company raised prices during the quarter and again from July 1, but said further adjustments may be required if base oil costs remain high.

Base oils have stopped following crude down. Crude fell sharply from its second-quarter levels, but base oil prices did not follow, with some higher-grade products continuing to rise as supply remained constrained.

Key Highlights

·         Operating profit in the three months to end-June rose 33% year on year to 1.72 billion rupees ($18.1 million).

·         Sales rose 33%, outpacing a 32% rise in costs but lagging the 60% increase in raw material costs.

·         Lubricants sales volume rose 17%, with growth across across B2C, B2B and OEM segments.

Market Repercussions

Lower crude prices have provided little relief to lubricant blenders including Gulf Oil Lubricants, with base oils prices driven by supply conditions as well as feedstock costs.

Supply continued to face disruptions in the third quarter, especially for Group III base oils, with the Strait of Hormuz still largely closed.

Gulf Oil Lubricants secured sufficient base oils supplies for the current quarter through long-term refinery agreements, spot purchases and inventories covering 30 to 45 days. But it said the supply outlook remained difficult to predict while Middle East disruptions continued.

There could be some margin protection if input costs eventually ease.

Gulf Oil Lubricants said B2C prices have historically been slower to fall after sharp increases, allowing blenders to retain some of the earlier adjustments, although competition limits how much can be retained.

“It’s a very competitive industry, but in the past we have seen that there have been typically some margin retention in B2C,” Chief Financial Officer Manish Gangwal said in an earnings call.