“The Index was adversely affected in January by the run on distillates in the second half of the month,” said Ian Moncrieff, who manages Kline’s price forecasting activities. “We saw, for the first time, Gulf Coast prompt low sulfur VGO trading at above ULSD values, while FCC-derived light cycle oils were on par with heating oil. While distillate:VGO premiums have been narrowing structurally, we see last month’s events as unsustainable, which should result in some near term recovery in conventional Group II base oil margins.” Moncrieff continues, “To add to the uniqueness of January’s events, the Index’s re-refining cash margin exceeded that of conventional VGO-based plants for the first time. Finally, the Group II posted prices dropped by $0.15/gallon for light/medium neutrals, and a little more for 600N, reflecting the continuing weakness in the cash markets for base oils.”
To learn more about Kline’s Base Stocks Margin Index, please visit our Knowledge Hub, or contact Ian Moncrieff, Vice Presitdent, Energy at (973)-615-3680.
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