India's Aug v light grade imports fall

India’s imports of very-light grade base oils extended their fall in August to their lowest in more than 20 months amid muted demand and a dearth of arbitrage supplies.

Base oils imports of less than 130,000t in August fell from almost 135,000t the previous month, provisional customs data showed.

The drop in imports for a fifth straight month cut total shipments to 1.26mn t in the first eight months of the year. The volume was down 9pc from 1.38mn t during the same period last year.

The slide in India’s very-light grade base oils imports contrasted with steadier demand for other base grades.

The slowdown partly reflected a seasonal drop in demand during the monsoon season.

The lower volumes also coincided with a fall in regional base oils prices. Buyers tend to hold back until they are comfortable that prices have bottomed out before they seek to lock in more supplies.

The drop in imports in recent months also coincided with low domestic retail diesel prices and high imported light-grade cargo prices. The premium of diesel to light-grade cargo prices narrowed sharply in response.

The diesel premium to light-grade base oils prices recovered in August to its widest since April. But it remained far below levels in 2021 and early 2022.

The lower base oils prices that buyers were targeting also complicated arbitrage opportunities from other markets. The base oils prices were similar to regional diesel prices.

The similar prices incentivized regional refiners to redirect the base oils back into their own diesel pools.

The prices also kept shut the arbitrage from other key sources like the US. Base oils imports from that market have slumped in recent months.