After a fast start to the year, first-quarter U.S. base oil production seemed to be dampened by rising feedstock costs, numerous refinery turnarounds and wavering interest from buyers.
Although domestic producers loosed a hefty 5.1 million barrels of base oil on the market in January – their most promising start since 2008 – they quickly backed off from that pace, according to data released last week by the Department of Energy.
By the quarter’s close, U.S. refiners had mustered just 13.9 million barrels of base oil, 8 percent less than the 15.1 million barrels produced in the same period a year earlier.
The first quarter yielded 11.5 million barrels of paraffinic base oils, down 7 percent versus 1Q 2011, and 2.4 million barrels of naphthenics (off 11 percent).
Scheduled maintenance turnarounds at three naphthenic plants and brief outages elsewhere may have helped to limit output in some cases.
The weaker production as well may reflect rising feedstock costs. Crude and vacuum gas oil prices stiffened each month as the quarter progressed, and chipped away at base oil refining margins.
In the end, U.S. producers also had to concede that base oil demand in the quarter was decent, but not what they had hoped to see overall.
Base oil importers faced the same buying hesitancy as domestic producers. They managed to carry in 1.1 million barrels in January and again in February, but slipped to 0.7 million barrels in March.
By contrast, exports for the first quarter were quite strong at 6.6 million barrels, or 48 percent of all U.S. base oil production. Exports actually gained momentum as the quarter went on: January and February each saw exports of around 2 million barrels, and then in March they surged to 2.68 million barrels.
That made March the second-highest month ever for exports, surpassed only by May 2011 when U.S. base oil exports reached 2.7 million barrels. March 2012 exports were nearly 60 percent of what U.S. base oil refiners had produced that same month.