India’s Dec lube demand holds firm

India’s lubricating oil demand rose to a nine-month high in December amid ongoing signs of firm economic growth.

The rise in the country's lube demand contrasted with dwindling base oils imports.

The trend increased blenders’ need to cover requirements with base oils supplies from domestic refiners.

The refiners’ competitive prices and buyers’ concern about exposure to price volatility for imported shipments boosted the attraction of domestic supplies.

High base oils production levels increased the availability of domestic supplies.

But the volume of domestic supplies increasingly lagged India’s domestic lube demand.

The trend raised the prospect of rising demand for overseas base oils supplies to cover requirements.

Any rise in requirements over the coming months was likely to coincide with a seasonal rise in demand in Asia-Pacific, including China.

India’s lube consumption of 424,000t in December rose by 4pc from 409,000t the previous month, government data showed. The volume was the highest since last March.

The firm demand lifted India’s total lube consumption to 4.62mn t in 2022. The volume rose by 2pc from 4.52mn t the previous year to a record high.

The rise in consumption contrasted with a slump in China’s lube demand last year. Demand in Europe also slowed, despite the region’s relaxation of Covid-19 restrictions from early last year.

The diverging demand trends reflected India’s rebounding economic growth and subsequent rise in lubricants consumption.

The country’s total automobile sales fell in December for the first time in five months amid a dip in demand for two-wheelers.

But sales of passenger cars, three-wheelers and tractors extended their rise.

Automobile sales could face more pressure over the coming months amid rising borrowing costs and higher vehicle prices as manufacturers pass on the higher costs for meeting stricter emissions targets.

But signs of firm services and manufacturing activity was likely to sustain steady lubricants demand.

The country’s manufacturing purchasing managers’ index (PMI) rose in December to the highest in more than two years amid strong output and new orders.

India's services PMI for December also extended its rise.

The prospect of firm lube demand this year, especially compared with other regions, was likely to increase blenders’ need to procure more base oils.

New base oils production capacity in India was scheduled to start up later this year.

Until then, the widening gap between domestic base oils supply and lube demand was likely to boost demand for base oils supplies from overseas producers.