“Margins on spot trade, as well as on lagged postings, are showing a downward cash margin trend. Since June of 2014, as Brent crude oil has collapsed from $110/Bbl to around $60 today, VGO and refined products have followed suit quickly. Base oil prices, notably on contract business linked to postings, have weakened also, as evidenced by the latest round of posting adjustments recorded in mid-December. If the free fall in mainstream oil prices is finally halted by end-2014, we expect to see a slide in contract cash margins as the embedded lag in base oil price adjustments finally catches up with real time market conditions. Underlying fundamentals continue to be weak, as new capacity has come on line in Europe (SK-Repsol ), and in Korea (Shell-Hyundai Bank)”
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 Consulting Practice.