“Since last month’s release of the Margin Index, there has been a slight pullback in conventional and re-refining profitability,” said Ian Moncrieff, who manages Kline’s price forecasting activities. “While volatile pricing dynamics of feedstocks and products have been experienced since the introduction of the Margin Index, not much changed between April and May. The modest decrease in profitability for both types of producers stems from stagnant base oil prices, slight decreases in by-product prices, and a slight increase in VGO pricing.”
As was noted for last month’s Margin Index, short-term margins are still well below historical norms. In late-May ExxonMobil introduced posting increases on Group I products of between $0.10-$0.15/gallon on Group I products, and 8 cents on Group II. This increase was followed shortly thereafter by Chevron and several other producers. The motivations for posting increases may be driven as much by a cost-driven push to raise currently low margins as they are by anticipated tightness in supply entering the traditional summer turnaround cycle. However, Chevron’s Pascagoula plant is now on-stream, and expects to reach full production by the end of July. It remains to be seen if the recent round of posting increases is sustainable, barring uplifts in raw materials prices.
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.