India’s Base Oil Imports Decline in November Amid Weaker Demand and Rising Domestic Production

Key Highlights

1. Price Trends: Base oil prices showed regional variations, with Silvassa, Kandla, and Mumbai witnessing diverse rates.
2. Import Decline: November imports fell 5.4% YoY, despite a strong overall 2024 growth of 19%.
3. Economic Influence: Slower GDP growth (6.4% for 2024-25) impacted industrial lubricant demand.
4. Market Forecast: Stability expected, with domestic production potentially reducing import dependence.

Base Oil Prices: Variations Across Key Indian Markets

• Base oil prices varied across key Indian markets. In Silvassa, N500 was priced at ₹91.5/kg, while in Kandla, SN150 and SN500 stood at ₹62/ltr and ₹83.4/kg, respectively. 
• Mumbai saw 8cST at ₹73/ltr, N70 at ₹61/ltr, and 4cST at ₹75/ltr. In Kandla, N220 and N60 were priced at ₹72/ltr and ₹65/ltr, respectively, while BS-150 in Delhi reached ₹122/kg. Meanwhile, N150 in Mundra was available at ₹62.5/ltr.

Demand & Supply Trends: Declining Imports & Rising Domestic Production

• India’s base oil imports declined for the second consecutive month, totaling 202,580 tons in November 2024, marking a 5.4% year-on-year decrease. This downturn was primarily driven by weaker-than-expected demand for finished lubricants post-Diwali and an increase in domestic refinery production after plant restarts. 
• Despite the recent decline, India’s base oil imports for the January-November 2024 period remained robust, registering a 19% increase compared to the same period in 2023.
• On the supply side, imports from South Korea, a key supplier, fell by 28.2% year-on-year in November, though the year-to-date (YTD) figures indicate a 35% rise. The reduction in November shipments suggests a shift in trade flows, possibly driven by changing demand patterns or pricing considerations. 
• The UAE emerged as a significant supplier, with imports rising by 61.5% year-on-year, reflecting the growing preference for premium-grade base oils. Conversely, Saudi Arabian shipments posted a modest 9.5% increase, while imports from Singapore and Taiwan declined by 6.2% and 41.9%, respectively, due to reduced market activity and shifting sourcing strategies.

Economic Impact: Slowdown Affecting Lubricant Demand

• The decline in imports was also influenced by sluggish demand in the finished lubricants sector. The Indian economy exhibited signs of slowing, with GDP growth projected at 6.4% for the financial year 2024-25, down from 8.2% the previous year.
• This deceleration affected industrial activity, leading to lower lubricant consumption in key sectors such as automotive, manufacturing, and construction. The post-Diwali market did not witness the anticipated demand recovery, contributing to the subdued base oil import figures.
• Despite the recent dip, India’s refining capacity has been increasing, with major domestic refineries ramping up production. The increase in local supply could reduce the country’s reliance on imports in the coming months, though global price movements and demand recovery will continue to play a crucial role in shaping import trends.

Petroleum News: U.S. Sanctions on Iran & Global Market Impact

• U.S. President Donald Trump has signed a new executive order imposing stricter sanctions on Iran’s oil exports, aiming to exert "maximum economic pressure" on Tehran. The order empowers the U.S. Treasury and State Department to penalize entities violating Iran-related sanctions and work towards eliminating Iran’s oil exports.
• While Trump acknowledged the severity of the measures, he expressed hope that they would not need to be fully enforced, signaling a willingness to negotiate with Iran on its nuclear program and Middle East peace. The move follows previous U.S. sanctions on Iran’s oil industry, though Iran continues to sell crude, mainly to China. The stricter measures are expected to impact global shipping and crude markets, potentially benefiting tankers like VLCCs and Suezmaxes.
• Trump's decision came ahead of a meeting with Israeli Prime Minister Benjamin Netanyahu, who has long advocated for tougher actions against Iran’s nuclear ambitions. Iran maintains its nuclear program is for civilian purposes and has previously threatened to close the strategic Hormuz Strait in response to U.S. aggression.

Market Expectations: Stability with Potential Import Adjustments

• Looking ahead, the Indian base oil market is expected to remain stable with moderate fluctuations. Demand recovery is anticipated in the first quarter of 2025 as industrial and automotive activity picks up post-holiday season. However, given the projected GDP slowdown, demand growth may be more measured compared to previous years.
• Supply-side factors will also be crucial. With increased domestic refinery production, import dependence may decline, especially if local refiners continue to meet the demand for various base oil grades. However, imports from premium-grade suppliers such as the UAE may continue rising due to quality requirements from high-performance lubricant manufacturers.
• Price volatility in the global crude and base oil markets will also influence India’s import dynamics. If global prices remain stable, imports could see a gradual uptick, but any sharp price increase may prompt buyers to rely more on domestic sources. Overall, the market is likely to witness a balanced supply-demand scenario in early 2025, with a cautious approach from buyers amid economic uncertainties.