HF Sinclair’s lube and specialty products unit turned to a loss in the third quarter amid slower demand and as it consumed feedstock supplies based on a ‘first-in, first out’ (FIFO) valuation, boosting costs.
The unit turned to an operating loss of $4.99mn in the three months to end-September, from a $62.36mn profit during the same period last year.
The loss also contrasted with a $256.97mn profit in the first half of the year.
The loss reflected a 24pc rise in sales in the third quarter that lagged a 44pc increase in costs.
The trend contrasted with a rise in sales in the second quarter that outpaced the rise in costs during that period.
“We know FIFO will even out over time as it unwinds,” HF Sinclair President and Chief Operating Officer Tim Go said in a conference call.
US base oils prices peaked in the second quarter of the year before slipping during the summer months.
The slower rise in third-quarter revenue also coincided with lower lubricants and specialty products production and sales volumes.
Production of its lubricants and specialty products slipped to 17,870 b/d during the third quarter, from 20,260 b/d during the previous three months.
The output level was the lowest since the second quarter of 2020, when lockdowns during the Covid-19 pandemic slashed consumption.
The lower output contrasted with a rise in HF Sinclair’s total refinery throughput in the third quarter from the previous three months to record-high levels.
The higher refinery run-rates tapped unusually high refined product prices relative to crude oil.
High diesel prices and increasingly tight middle distillates supply in the US contrasted with a seasonal slowdown in lube consumption and growing pressure on base oils prices.
The trend incentivized US refiners to prioritise middle distillates production over other products like base oils.
HF Sinclair’s specialty products sales fell back to 32,610 b/d in the third quarter, down from 34,000 b/d during the previous three months and the lowest in a year.
