US base oils and lube output rose to a five-month high in December at a time of year when demand typically faces a seasonal slowdown.
US base oils imports also rose in December, adding to supply and putting growing pressure on US base oils prices.
US output remained lower than usual in December. But the pick-up in availability highlighted the impact of even a small rise in surplus supplies.
The higher volume compounded the seasonal demand weakness by prompting buyers to hold back because of concern about exposure to lower prices.
US base oils and lube output of 4.70mn bl (662,000t) in December rose from 4.65mn bl the previous month, government data showed.
The volume was the highest since last July but still fell for an eighth month from year-earlier levels.
The sustained slowdown cut US base oils and lube output to 57.5mn bl in 2022. The volume fell by 6pc from 61.2mn bl in 2021.
Excluding the year 2020, the volume was the lowest since 2012.
Output fell because of prolonged plant-maintenance work throughout the second half of the year and as refiners focused on maximizing middle distillates production instead of other products like base oils.
A rise in US base oils imports in 2022 helped to cushion the fall in domestic production.
It also highlighted the US’ growing demand for Group III base oils as a share of its total consumption.
US supply still fell in 2022 even with the addition of the imported volumes.
US base oils prices maintained a steep premium to prices in other regions, reflecting the tighter supply.
But the firm prices magnified the impact of even those tighter supplies at year-end by complicating arbitrage shipments to other markets. Prices fell in response to the subsequent rise in surplus supply.
The trend highlighted the ease and speed of a build-up of surplus volumes even when supply remains lower than usual.