Global Lubricant Basestocks: Market Analysis and Opportunities

Kline’s November Index of Base Stock Production and Re-refining Cash Margins Shows Second Straight Month of Declines

In January 2014, Kline, a worldwide consulting and research firm serving 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. 

“During October, light, medium, and even heavy Group I and II grades saw cuts in U.S. posted prices,” noted Ian Moncrieff, Vice President of Kline’s Energy Practice. “These downward adjustments were approximately 5% for low viscosity grades, 4% for medium viscosity grades, and 3% for high viscosity grades. Overall cuts in Group I and II postings were in the 7-10 cents/gallon range. In addition, TVAs were reported higher, as the industry enters the end of year destocking season. The net result was a decline in weighted average sales realizations of around $5/Bbl. This decline in top line unit base sales prices was only partially offset by a drop in U.S. Gulf Coast LSVGO prices (of some $1.50/Bbl). As a result, cash margins for both conventional base oil producers and re-refiners fell during October.  Given the traditional end-year weakness in base oil markets, prospects for a short term rebound in cash margins are limited. Producers need to balance the desire to maintain market share against the prospect of losses on marginal production, most notably in export markets and for low-viscosity materials.”

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 ( in Kline’s Energy Practice at (973)-615-3680.

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