India’s September base oils output rises

India’s base oils output rose to a five-month high in September amid strong domestic lube demand and firm prices relative to diesel.

The pace of the increase in output lagged the speed of the drop in India’s base oils imports, leaving supply lagging demand for the first time in eight months.

Base oils output of 108,000t in September rose from 101,000t the previous month and by 13pc from year-earlier levels to the highest since April, government data showed.

The rise in output coincided with a seasonal pick-up in lube demand in September at the end of the monsoon season.

Demand typically extends its rise in the fourth quarter when a raft of festivals boost consumption.

Unlike other countries, India’s unchanged retail diesel prices since May left their premium to crude far below 2021 levels. The move boosted refiners’ incentive to produce more base oils.

Base oils production as a share of refined products output rose to 0.54pc of the total in September. The share was up from 0.48pc in August and the highest since early 2021.

The easy availability and competitive price of domestic base oils supplies boosted their attraction at a time when sliding regional base oils prices deterred interest in overseas supplies.

Buyers preferred to hold back until they were confident that prices had bottomed out.

India’s base oils imports slowed in response.

Shipments slumped in September to a 27-month low.

The trend cut India’s base oils supply, or production plus imports, to 352,000t in September. The volume was the lowest in more than two years.

The volume was also lower than India’s lube consumption of 385,000t in September.

The last time that supply lagged domestic lube consumption was in January.

The trend suggested that Indian buyers would need to increase their base oils import volumes, even with higher-than-usual domestic supplies, to make up the shortfall.