Industry insiders called the data encouraging but added that production is not meeting demand because refiners have curtailed operations in response to large decreases in consumption of fuels. Those cutbacks have limited the amount of feedstock available for base oil plants, and led to base oil shortages that are pushing up prices.

“I suppose that’s encouraging, but I can tell you that anyone who sells base oil wishes they had a lot more to sell now because prices have been going to the moon,” said one base oil trader, who asked not to be identified. He noted that the U.S. is the world’s largest base oil producer and normally exports a large portion of its output, much of it through spot rather than contract sales. “There is precious little spot oil for sale now.”

Demand for finished lubricants and base stocks has fallen during the pandemic, but base oil production has fallen more proportionally. Sources agree that further recovery in base oil output will depend refinery operations scaling back up, which will only happen as demand for fuels recovers.

Monthly gasoline sales in the U.S. increased 35% between April – when they bottomed out at 26.1 million barrels – to November, the most recent month for which data is available according to Ycharts, a website with financial and markets statistics. But the November total of 35.1 million barrels was still significantly below pre-pandemic levels. In 2018 and 2019, sales ranged between 38.8 million barrels and 44.1 million barrels. Moreover, the pace of recovery plateaued during the fall, and monthly demand actually decreased 2% from October to November.

U.S. base oil output reached its nadir this year in May. Refiners produced 4.1 million barrels that month, 25% less than the running five-year average.

Of the 5 million barrels of base oil produced during October, 4.3 million barrels was paraffinic base oil – 7% less than the running five-year average. Output of naphthenic base oils was 759,000 barrels, down 11%.