Industry experts credited this drop almost exclusively to fallout from the pandemic, which prompted a steep drop in demand and spurred extended turnarounds at a number of refineries in the second quarter.

The second half of the year presented a different story. From July through December, the country’s base oil production recovered slightly as demand slowly increased, and a total of 29.7 million barrels of base oils were produced – only 7% behind production from the same period in 2019.

For the entire year, the U.S. produced only 55.6 million barrels of base oils, lagging about 9% behind 2019’s full-year total.

Fortunately, production spiked in October and November. One reason for this may be that Excel Paralubes’ 22,200 barrel per day API Group II plant in Westlake, Louisiana, came back online in November after shutting down for a full two months after Hurricane Laura. This contributed to a 12% bump in paraffinic production from November 2019 – the first time that happened since the onset of the pandemic.

The U.S. produced 47.4 million barrels of paraffinic base oils in 2020, down 6.3% from 2019’s 50.6 million barrels.

Naphthenic production also suffered in 2020 and was never on par with 2019 levels. A significant drop in production occurred in March when the pandemic reached the U.S., with production that month down nearly 38% from March 2019. Production picked up a bit after the initial fall in March but stayed well below 2019 levels for the rest of the year.

According to Stephen Ames, managing director of SBA Consulting LLC, naphthenic production took a tumble in March as the two largest producers of it in the U.S. – Ergon and San Joaquin Refining – took extended turnarounds. Together the two producers account for about two-thirds of U.S. pale oil production. Ergon can make 22,000 b/d in Vicksburg, Mississippi, while SJR in Bakersfield, California, has capacity to produce 8,100 b/d.

Parity with 2019’s naphthenic production seemed more realistic in June when production was only 183,000 barrels less than it was in the same month in 2019. Things looked even better in July and August, when the gap shortened to 158,000 barrels and 105,000 barrels, respectively.

That optimism was short-lived, however, when September ushered in another significant drop in naphthenic production, dropping to 640,000 barrels that month – over 270,000 barrels less than September the year earlier. This drop is likely the result of Ergon’s plant closing for nearly a month after Hurricane Laura.

Naphthenic production picked up a bit in the last quarter of the year, but levels still fell short of those from 2019. At nearly 8.2 million barrels, output for the year was down more than 2 million barrels, or 20%.

Demand for base oil exports from the U.S. helped to offset subdued domestic demand in 2020. Although the pandemic and a series of hurricanes along the Gulf Coast stunted export volumes for part of the year, exports did experience some recovery and were high year over year each month beginning in August.

For the full year, the U.S. exported over 35 million barrels of base oils – only 6% below 2019’s total exports. The top recipients of U.S. base oils were Mexico, with 10.8 million barrels; Belgium, with 4.3 million barrels; Brazil, with 4.2 million barrels; Canada, with 2.9 million barrels; and India, with 1.3 million barrels.

Brazil and India were two relatively unexpected drivers of U.S. export demand last year, with Brazil increasing its share of U.S. exports to 12% from 9% in 2019 and India upping its share to 3.6% from 2.3%.

According to Ames, “In addition to the numerous worldwide maintenance shutdowns that could have prompted replacement U.S. cargoes, Petrobras had reduced throughput and cut production at its Duque de Caxias plant, which represents 80% of Brazil’s total base oil production. That may have prompted [Petrobras’] customers to step up imports from the U.S.”

As for India, demand for Group II oils started to take off after its COVID-19 restrictions were lifted in May and June.

In late August, several U.S. plants were forced to shut down due to a series of hurricanes, and production suffered as a result. This set-back in production meant that producers were only able to make enough product to meet domestic demand, leaving very little for spot export business in September and October.

Total imports for 2020 clocked in at 13.2 million barrels, down 19%.

Imports were on par with the previous year’s levels until June when the level fell to only 327,000 barrels for the month. While the pandemic started in March, it likely took some time for the market to feel the effects of the slump in demand for lubricants and fuels, as mobility was constrained by lockdowns and other measures.

Ames explained another reason for the steep decline in imports in June. “Most of the base oil imports into the U.S. are Group III from Qatar, Bahrain, UAE and Korea.” The Bahrain Petroleum Co. and Neste joint venture plant in Bahrain, Abu Dhabi National Oil Co.’s plant in the United Arab Emirates and SK Lubricants’ and S-Oil’s plants in South Korea underwent turnarounds mid-year, he said, “likely limiting shipments to the U.S. that had already experienced greatly reduced demand from COVID lockdowns.”

July and August also brought lower than normal imports—747,000 and 790,000 barrels, respectively. Imports began to rebound a bit from June through December, indicating that demand in the U.S. picked up slightly as the year went on. However, imports from the last half of the year totaled only 6.5 million barrels, down about 27% from the same period in 2019. Per usual, most U.S. imports in 2020 came from South Korea (2.9 million barrels), Qatar (2.8 million barrels), Canada (2.3 million barrels), the U.A.E. (1.3 million barrels) and Indonesia (1 million barrels).