US’ October base oils supply falls

US base oils and lube supply fell in October mostly because of a slump in imports.

The country’s base oils output by contrast held steady even as plant maintenance work slashed production levels in the US West coast region to a two-year low.

Total base oils and lube output of 5.08 million barrels (715,000 tonnes) in October edged down from 5.11 million barrels the previous month, government data showed.

Output held at similar levels in July and August.

Production levels held steady in October as higher output in the US Gulf coast and East coast regions countered the slump in production in the US West coast market.

Output held firm even at a time of year when demand faced a seasonal slowdown and US domestic and export base prices extended their fall into the fourth quarter.

Steady output suggested that prices remained at levels that limited any pressure on refiners to trim run-rates, and that refiners were comfortable with the current supply-balance at the start of the fourth quarter of the year.

Steady output and still-firm margins in turn raised the risk of a faster build-up of surplus supplies at year-end, especially if base oils imports extended their rebound into the fourth quarter of the year.

US base oils imports instead fell back to 1.09 million barrels in October, from 2.06 million barrels the previous month.

The drop in imports cut total US supply, or output and imports combined, to less than 6.20 million barrels in October, from close to 7.20 million barrels the previous month.

The sharp fall in supply highlighted the larger impact of base oils imports on the change in the US’ monthly base oils supply.

The size of that change in supply was in turn a key factor determining the extent of any pressure on refiners to move surplus volumes to overseas markets.

That pressure likely rose in November especially as the completion of the plant maintenance work and signs of a surge in base oils imports coincided with a seasonal fall in domestic demand.