“Margins for Group II base oil refineries and re-refineries rebounded for the month of March, as profit improvements were derived from Group II price increases, accompanied by declines in feedstocks and consumables costs,” said Ian Moncrieff, who manages Kline’s price forecasting activities. “During March, we saw most base oil producers introduce posting increases of around 2.5% for low viscosity grades (≈ $4/Bbl) and 5% for higher viscosity grades (≈ $8/Bbl), together with selective reductions in TVAs. Improved market conditions, allied with cost pressures, contributed to the upward base oil posting adjustments. On the cost side, LSVGO prices dropped by nearly $4/Bbl during March and greatly helped the profitability of virgin base oil refiners.” Kline expects that the margin improvements registered in March will continue into April as the full effects of the recent round of upward base oil price increases are felt and fundamentals remain tight. However, the impending impact of Chevron’s Pascagoula plant start-up in May/June continues to cast a cloud over the ability of producers to raise margins to pre-2013 levels in the medium term.
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 (Ian.Moncrieff@klinegroup.com) at (973)-615-3680 in Kline’s Energy Practice.