United States refiners churned out a robust 5.7 million barrels of base oil in June, according to new data from the U.S. Energy Information Agency, beating pre-pandemic levels for the second consecutive month.
It was also represented a further increase from the 5.6 million barrels produced in May of this year and was the market’s highest output in nearly three years.
June’s production was 24% better than the same month of 2020, when the U.S. economy was emerging from the two-month recession caused by the coronavirus crisis. The figure for June 2021 was also 4% higher than the average June output for the five years preceding the pandemic, suggesting the market has fully rebounded.
U.S. refiners have not made more base oil in any month since July of 2018 when they produced 6.2 million barrels.
That’s great news for base oil producers, who are enjoying very healthy margin, and it indicates that refiners are once again supplying enough feedstock for base oil plants to run at near capacity. Feedstock availability had been constrained since the start of the pandemic as refineries were forced to cut back on operations due to a downturn in fuels demand.
Combined with healthy demand for finished lubricants and base oils, the feedstock constraints caused base oil shortages and a long, steep run-up in prices.
The U.S. produced 4.9 million barrels of paraffinic base oil in June, 33% higher than the same month of 2020 and 5% better than the average of the preceding five Junes. Naphthenic base oil output was 800,000 barrels, 31% better than June of 2020 though still 5% below the average for that month from 2015-2019.
Now lubricant blenders are crossing fingers that the industry can avoid major disruptions during the current hurricane season.