India’s February base oils output falls

India’s base oils output fell to a six-month low in February because of plant maintenance work throughout the month.

The drop in output outpaced the size of the rise in India’s base oils imports in February.

But it lagged the steeper fall in the country’s lube consumption. Net supply rose in response.

Base oils output of 106,000t in February fell from 126,000t the previous month, government data showed.

The volume still rose 2pc from year-earlier levels despite scheduled plant maintenance work during the month.

Base oils output was likely to stay higher than usual even ahead of the start-up of new production capacity in India in the coming year.

Output rose strongly over most of the past year as refiners sought to maximise run rates in response to unusually high fuel margins.

India’s retail diesel prices held steady since May 2022. Crude oil prices were above $110/bl at that time.

Crude prices recovered in recent days but remained below $80/bl. Prices for crude of Russian origin were at steep discounts to those levels.  

The healthy availability of supply gave Indian buyers the flexibility to maintain lower base oils inventories and to top them up more regularly even ahead of the peak-demand season in March.

It gave buyers the option of turning down offers of overseas supplies whose prices they deemed to be too high.

It also countered the leverage of overseas producers in markets like South Korea to seek higher prices in response to firmer demand in China.

The same dynamic increased the importance for regional producers of a strong rise in Chinese demand to absorb more of their supplies.

Steady Asia-Pacific base oils prices in recent weeks reflected signs of sufficient availability even with the pick-up in Chinese demand and the plant maintenance work in India.