Refiners in the United States cranked out just under 30 million barrels of paraffinic and naphthenic base oils in the second half of 2009, according to refinery production data from the Energy Information Administration, part of the U.S. Department of Energy.
That’s a marked improvement over the 25 million barrels produced in the year’s first half, but still the weakest showing since the early 1990s. More commonly, volumes have reached 32 million to 34 million barrels in the second six months of each year.
But demand “absolutely picked up in the last two months,” according to San Joaquin Refining’s Ryan Eberly in Bakersfield, Calif., and that’s allowing it to hit the accelerator. “We were running at around 90 percent for a good portion of ’09,” he said, “and now we’re starting to look at whether we can go back up to 100 percent beginning in April. The big issue is that certain products, like the heavier viscosity naphthenics, are high in demand. But you get a mix of heavy and lights for every barrel of crude, and the lighter grades are still surplussed and difficult to place.”
Things are looking better in 2010, insisted Jackson. “The first quarter was decently O.K., and crude and base oil prices were able to go up. The spring pickup in demand is going to happen — that’s not a matter of if, but when. Asia-Pacific is seeing some demand, and so the U.S.-to-Asia Pacific trade could see some increased activity, too.
“Now the big question is, what will the second quarter do?”