In January 2014, Kline & Company, 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.
“Since the last release of the Margin Index, Brent crude oil prices have increased by one-third,” noted Ian Moncrieff, Vice President of Kline’s Energy Practice. “Brent crude oil increased from an average of $33.70/Bbl in quarter one, to $45.52/Bbl in quarter two, and then held steady through the first two months of quarter three. While VGO feedstock price increases for conventional Group II refiners were similar to those for Brent (i.e., VGO cracks remained stable), re-refiners experienced a smaller increase in UMO feed prices from quarter one to quarter two, as used oil collector/aggregators were able to limit reductions in pay-for-oil fees required of used oil generators as heavy fuel oil prices increased.”Continue reading