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March 4, 2015

Volume 17 Issue 52

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EIA: Base Oil Up 1% in 2014

U.S. refiners produced close to 60.4 million barrels of base oil in 2014, a 1 percent gain over 2013, according to data published Friday by the Energy Information Administration. Total U.S. output of base oils was 59.8 million barrels in 2013 and 57.5 million barrels in 2012, the EIA data show.

Much of the gain for 2014 came from the 25,000 barrel per day API Group II plant opened by Chevron in Mississippi at mid-year – although that jolt of supply was tempered somewhat as other refiners responded by trimming their operating rates.

Paraffinic base oil production for the year hit 50.8 million barrels, or 84 percent of the total volume. That’s a gain of 2.6 percent over 2013, when paraffinic production was 49.5 million barrels.

By contrast, naphthenic base oil output declined by 6 percent, with only 9.7 million barrels produced all last year versus 10.3 million in 2013.

A closer look at EIA’s monthly data indicates that Chevron came on strong after bringing its Pascagoula, Miss., plant on stream in June. Throughout first-half 2014, before the plant opened, U.S. paraffinic base oil refiners were averaging about 132,500 barrels of daily supply, coasting along at 77 percent of their potential capacity, according to Lube Report calculations.

With the extra oomph of Pascagoula’s capacity and supply though, paraffinic production zoomed to 165,000 barrels per day in August and September, and operating dials were cranked up to 84 percent.

For 2014’s final quarter, suppliers did pull back and allow production to drift back to around 136,000 b/d. Nationwide, that represents an average operating rate of just 69 percent of nameplate capacity. For some refiners it was undoubtedly lower.

The fourth quarter is traditionally the weakest quarter of the year, when seasonal demand for lubricants tends to be most slack and base oil buyers strive to draw down inventories before the year closes. This time, refiners could also be seen taking steps to avoid getting swamped by Pascagoula’s cannonball dive into the marketplace.

Paraffinic refiners located in the Texas Gulf Coast region, for example, damped their units to about two-thirds of their usual productive rates. Despite such cutbacks, the quarter’s supply/demand fundamentals were poor, and U.S. base oil prices spent the final months of the year in a downward spiral.

EIA also collects data on wax production at petroleum refineries. In 2014, total U.S. wax output fell to 2.6 million barrels, a drop of 13.6 percent from the prior year’s 3.0 million barrels. It also marks the absolute nadir of U.S. wax output recorded by EIA, whose data on wax production extends back to 1981.