“September changes in base oil cash margins resulted from increased VGO feedstock costs for virgin refiners on one hand. On the other hand, re-refiners benefitted from reduced resid prices which serve as a leading proxy for used oil supplied to re-refiners,” said Ian Moncrieff, who manages Kline’s price forecasting activities. “Group II base oil posted prices were unchanged in September, despite the progressive weakening of the cash market. Motiva responded with posted price cuts on October 1, shortly followed by other producers. Looking forward, oversupply and nervous buyers continue to weigh negatively on the market. Declining crude oil prices may sustain base oil contract margins in the near term, since feedstock prices respond faster to downward price pressures than base oil postings, but a further round of downward posting adjustments is almost inevitable in the 4th quarter.
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.