Base oil production in the United States slipped 2.5 percent from 2006 to 2007, according to data released Monday by the Department of Energys Energy Information Administration.
U.S. refiners produced 65.1 million barrels of base oil last year, down from 66.8 million barrels a year earlier. Paraffinic production fell 2.7 percent to 54.7 million barrels, while naphthenic production decreased 1.5 percent to 10.4 million barrels.
On the paraffinic side, the biggest drop in production occurred during the months of September to November. Compared to the same months in 2006, refiners produced 1.1 million fewer barrels in September 2007- the single largest one-month slide for the year; 670,000 fewer barrels in October; and 440,000 fewer barrels in November.
Stephen Ames, managing director of SBA Consulting LLC, Pepper Pike, Ohio, told Lube Report that in the second half of 2007, refiners diverted some feedstock from base oils to fuels manufacture. With refineries running at maximum capacity, operating decisions were based on [whether to] make base oil for the merchant market or additional ULSD [ultra-low sulfur diesel].
Although base oil prices may seem to be high by historical standards, their relationship to soaring fuel prices has not kept pace, explained Ames. Instead of maximizing Group I/II base oil production, some refiners opted to alternatively upgrade some of the VGO [vacuum gas oil] feedstock to ULSD and/or gasoline.
But the stall in paraffinic production for September points to Mother Nature. The decline in production on paraffinic during September 2007 was due to Hurricane Humberto, which struck the Texas coast on Sept. 13 and caused power outages, said Eric Johnson, Motivas base stock sales manager, based in Houston.
Ames said he believed that the trend towards manufacturing fuels rather than base oils would continue through the first quarter of 2008.