Base oil spot discussions in India have risen as buying interest heightens and price expectations between buyers and sellers narrow, market participants said.
India's Group II N150 and N500 cfr import prices rose by $10/t in the week to 28 August to $1,560/t cfr India and $1,650/t, respectively.
The country's southwest monsoon season typically ends in September, and demand typically receives a boost from October as inventories deplete. But replenishment demand is currently firmer because of limited spot imports over the last few months.
Lower bids from India had previously incentivised Asian refiners to divert more spot volumes to higher-priced markets, including the Americas, Europe, and other parts of Asia. Demand from these outlets has since waned. This is incentivising suppliers to prioritise September-loading cargoes to India.
Price expectations between buyers and sellers in India have also narrowed as Group II export prices from Asia extended its drop over the last three months. This is facilitating trade and spot discussions.
India's Group II N150 cfr import prices were at a $20/t discount to Asia fob export values in the week to 28 August. The discount is significantly lower than its peak of $260/t at the end of April, when prices in Asia surged because of higher feedstock costs and supply disruptions during the US-Iran war.
India's Group II N500 cfr import prices rose to a $50/t premium to Asia fob export values in the week to 28 August. This is a reversal from a $250/t discount at the end of April. Group II heavy-grade availability in the country is more limited compared with light grades as domestic production yields higher output of the latter because of the crude slate and production technology utilised.
Some market participants have held back purchases even as spot activity rises, given that production at a new 160,000 t/yr Group II base oil unit in Koyali, Vadodara, Gujarat is set to stabilise from September. This raises the prospect of more supplies for the domestic market.
