Global Lubricant Basestocks: Market Analysis and Opportunities

Kline’s June Index of Base Stock Production and Re-refining Cash Margins Indicates Decreased Margins for Base Oil Producers

In January 2014, Kline & Company, 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. 

“Margins for conventional refiners and re-refiners fell from March to April, as both types of refiners experienced slight increases in feedstock prices over the past month,” noted Ian Moncrieff, Vice President of Kline’s Energy Practice. “Furthermore, with Brent crude slowly firming from its January lows, cycling in the low $60s per barrel range over the past month, lagged margins are approximately equal to their un-lagged counterparts from two-months ago. It appears as though base oil producers have been able to limit further discounts to postings, due to the slow firming of feedstock prices. However, indicative of the oversupply of light neutrals, Motiva announced a reduction of 18 cents/gallon in its N110 posting on June 5, while the heavy N600 grade was raised by 18 cents/gallon.”

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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