Global Lubricant Basestocks: Market Analysis and Opportunities

Kline’s August Index of Base Stock Production and Re-refining Cash Margins Shows Improved Margins Base Oil Producers

In January 2014, Kline, a worldwide consulting and research firm serving the needs of organizations in the lubricants and base stocks industry, introduced its monthly Base Stock Margin Index, a characterization of recent cash margin contributions in the U.S. base oil market over the past 24 months.

The Index estimates cash margin contributions associated with U.S. Group II base stock production. It simulates EBITDA before the deduction of corporate SG&A expenses for typical VGO-based virgin base stock plants and RFO-based re-refineries. 

“The modest strengthening which occurred in crude oil prices in May and June was reversed in July, with Brent dropping from around $60/Bbl at the beginning of the month to the low $50s by month-end. VGO cracks over crude also declined modestly in July, allowing base oil margins to increase over the previous month,” noted Ian Moncrieff, Vice President of Kline’s Energy Practice. “The improvement in July instantaneous cash margins was due entirely to lower cost feedstocks. Although Motiva kept its Group II postings constant for the month of July, modest downward adjustments were made during the first week of August. Motiva’s sensitivity in adjusting postings to reflect changes in market and cost/price fundamentals is markedly different from other U.S. Group II producers. Only one other Group II producer has changed its Group II postings during 2015 (being Chevron on March 11). Phillips66 and Flint Hills Resources last made changes to their 100N through 600N grades in mid-December of 2014.”

For more information on the Kline Index, or to inquire about our pricing and margin analysis services to the base stocks industry, please contact Ian Moncrieff, Vice President ( at (973)-615-3680 in Kline’s Energy Practice.

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