India's v light grade base oil imports fall

India’s imports of very light grade base oils fell in June to their lowest in more than 18 months and at a faster pace than the drop in the country’s total imports.

Imports of less than 130,000t in June dipped from close to 150,000t the previous month and from average levels of more than 220,000 t/month in second-half 2021, provisional customs data showed.

The 13pc slide in imports outpaced the 8pc fall in India’s total base oil imports in June to 305,900t.

Imports of very light grade base oils fell even as India’s lube demand rose strongly in the first half of the year. Demand rose on the back of rebounding economic activity following the removal of pandemic-related restrictions.

The disconnect between light-grade base oil imports and lube demand was similar to the disconnect between domestic and overseas diesel prices.

India’s domestic retail diesel prices rose during the first five months of the year. But the increase was smaller than the rise in regional crude and diesel prices.

A consequence of the smaller rise in diesel prices was their increasingly narrow premium to prices for imported supplies of light-grade base oils.

The diesel premium to light-grade prices narrowed from more than $550/t at the start of the year to less than $100/t in June.

A higher diesel premium has tended to coincide with strong demand for very light grade base oils. A low premium has tended to coincide with weaker demand for light grade base oils.

The sustained slowdown in imports of very light grade base oils has repeated that trend.