Base Oils Continued Recovery in July

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Base oil production in the United States continued in July to gradually recover from the impacts of the COVID-19 pandemic. Output for that month was 17% lower than the running five-year average, according to data released last week by the U.S. Energy Information Administration.

July base oil production totaled 4.9 million barrels, compared to an average of 5.9 million barrels for that month the previous five years. That marked the second consecutive month of improvement since output bottomed out at 4.1 million barrels in May, which was 25% below the running five-year average. In June production totaled 4.3 million barrels, 22% below the five-year average.

Like many industries, the base oils and finished lubricants markets are suffering through their biggest crisis in decades due to the pandemic. Demand has sagged as measures taken to contain the disease have sharply curtailed driving and overall economic activity. Base oil production also dropped as refiners reduced operations to align with lower demand for fuels.

Refiners produced 4.2 million barrels of paraffinic base stocks in July, which was also 17% below the running five-year average. Output of naphthenic base stocks was 687,000 barrels, 20% less than the five-year average. The latter number was up from the 613,000 barrels of pale oils made in June. Compared to the running five-year average, naphthenic output had dipped from a 17% deficit in May to 27% in June.

Paraffinic output has been on the same trajectory as overall output, hitting a nadir in May before improving the following two months.

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