US base oil, lube output recovers in March

US base oil and lubricant production in March rebounded from a 12-year low the previous month, after several refineries restored production lost because of unprecedented winter storms.

Production rose to 4.46mn bl in March, up by 30pc from 3.44mn bl in February, according to the US Energy Information Administration (EIA). Output also edged up by 2pc from 4.38mn bl in March 2020.

Output in February fell to its lowest since March 2009 after severe winter weather shut down several refineries in the midcontinent and southern US. The unprecedented winter storms also delayed the planned restart of two key Group I refineries. The month-long planned turnarounds were extended by another four weeks.

The freezing weather shut down more paraffinic base oil production than naphthenic output. Paraffinic base oil production subsequently fell in February to its lowest level since the EIA began its records in 1981.

Output recovered to 3.7mn bl in March, up by 31pc from 2.83mn bl in February. But it was still down by 5.2pc from 3.91mn bl in March 2020.

Paraffinic base oil refiners worked to restore and increase production throughout March. The lost production in February-March created lengthy backlogs for refiners that trickled down the supply chain.

Delayed base oil shipments added to production delays and supply tightness of lubricant additives. The supply tightness and delayed shipments of lubricant feedstocks and other raw materials curbed supply availability and finished lubricant production for several months.

Several paraffinic and naphthenic refineries were unable to restore production in March as repair work continued throughout the month. Continuing Covid-19-related restrictions and reduced manufacturing output and labour curbed the availability of replacement parts and extended the downtime at several refineries.

The lack of sufficient feedstocks at several refineries also limited their ability to ramp up production to meet the unmet demand.

The unplanned and extended shutdowns kept paraffinic base oil production in March below the 2020 average of 3.98mn bl/month. Paraffinic base oil production was already lower throughout last year because of weaker demand amid the Covid-19 pandemic.

The drop in paraffinic output contrasted with a stronger recovery in naphthenic base oil production. Output rose to 759,000 bl in March even as several refineries had unplanned and extended planned shutdowns that month because of damage from the winter storms.

Output rose by 25pc from 608,000 bl in February and by 61pc from 472,000 bl the same month a year earlier.

Extended planned maintenance had curbed naphthenic base oil production in the spring of 2020 and helped to keep supplies balanced amid Covid-19 lockdowns.

Domestic and export demand for naphthenic base oils rose because of planned maintenance and reduced production at several key naphthenic refineries in the US, Europe and Latin America. The stronger demand incentivised producers that were unaffected by the winter storms to increase production in March.

By John Dietrich