June 2012 Americas Crude

Copyright © 2014 Argus Media Ltd

Argus Americas Crude

Issue 14-160 Wednesday 20 August 2014

Overview

in the news

Key prices

Crude market prices and analysis

contentsWTI, Gulf coast and midcontinent 2West coast 3Latin America 4Canada 5CME Nymex and Ice 6Americas crude pipeline deals 7

Market summary $/blDiff to wti Diff to LLs price ±

LLS St James +3.64 99.71 +2.57

WTI Cushing -3.64 96.07 +1.59

WTI Midland -14.69 -18.33 81.38 +6.03

Mars Clovelly +1.21 -2.43 97.28 +2.60

WCS Hardisty -18.13 -25.07 74.64 +0.88

WCS Cushing -8.48 -15.41 84.30 -0.22

Argus Maya -6.65 -10.29 89.42 +1.17

Argus spread snapshots $/bl

wti/Brent 4:30pm London

wti/Brent 1:30pm

houston

cMe nymex light sweet

timing spread

ice Brent timing spread

Sep +2.62 -0.67

Oct -8.65 -8.83 +0.57 -0.48

Nov -9.86 -10.07 +0.31

� Crude futures jumped amid a larger-than-expected decline in US inventories and high refinery runs, regaining most of yesterday's drop. Nymex West Texas Intermediate (WTI) rose by $1.59/bl to $96.07/bl. Ice Brent rose by 72¢/bl to $102.28/bl. The Brent-WTI spread narrowed to $6.21/bl.

� Differentials at the US Gulf coast increased as US govern-ment data helped to reverse the pessimism that had taken over the market and pushed values weaker.

� The first spot volumes of Alaskan North Slope (ANS) crude for October delivery sold Wednesday at a premium of $6.55/bl to WTI, weaker than levels seen for September trades.

� A very prompt-loading Colombian medium sour Vasconia cargo traded at strong pricing did not firm the day's assess-ment. Low Asian-Pacific and Mediterranean market demand are expected to cap prices.

� In western Canada, trade was light as the market remains between cycles. Padd 2 crude oil imports declined by more than 10pc last week, according to the latest EIA data.

infrastructure � Citgo Corpus Christi refinery flaring � Motiva shuts Norco hydrocracker

industry � New US data could clarify condensate exports � US crude stocks take unexpected dive: EIA � Citgo sale could shift US downstream � North Dakota to examine Bakken treatment � Alaska votes to keep oil tax cuts intact

Analysis � Mexico zeroes in on 2015 auction

hh

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96

98

100

102

104

106

108

110

112

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

LLs outright $/bl

Copyright © 2014 Argus Media Ltd of 16

Issue 14-160 Wednesday 20 August 2014 Argus Americas Crude

Argus successfully completes iosco assurance review Argus has successfully completed an external assurance review of its oil price benchmarks, including those for petroleum products markets. The review was carried out by professional services firm PwC. An independent and external review of oil benchmark prices is required on an annual basis by international regulators in order to satisfy Iosco’s Principles for Oil Price Reporting Agencies (the PRA Principles). For more information and to download the report visit our websitehttp://www.argusmedia.com/About-Argus/How-We-Work

Us GULf cOAst AnD MiDcOntinent

September LLS, HLS, Mars and Poseidon all firmed by about $1/bl on Wednesday, with SGC moving higher by the least amount at an increase of about 35¢/bl.

The firming of September values spilled over into October, albeit to a lesser extent, with October Mars gaining 25¢/bl from the prior session’s lowest traded level.

The exchange of September for October LLS remained unchanged with October priced at a discount of $1/bl to September, although this consistency leads to a higher valued October LLS, given the nearly $1/bl rise in the front-month LLS

wti $/bl

timing Low high wti formula basis price

wti formula basis MtD

roll to next month

WTI Cushing Sep 96.05 96.09 96.07 97.75 +2.62

WTI Cushing Oct 93.43 93.47 93.45 +0.57

WTI Cushing Nov 92.86 92.90 +0.31

WTI Cushing Dec 92.55 92.59

timing price

CMA Nymex Oct 92.77

timing Base Diff low Diff highDiff

weighted average

Diff MtD weighted

averageLow high weighted

average

WTI Midland Sep Sep WTI -17.50 -12.50 -14.69 -12.95 78.57 83.57 81.38

WTI Midland Oct Oct WTI -11.00 -9.50 -10.25 -9.46 82.45 83.95 83.20

WTI diff to CMA Nymex Sep CMA +2.05 +3.00 +2.36 +1.43

WTI postings-plus Sep Postings +5.43 +6.38 +6.35 +4.85

Argus documentation links:

Argus Americas Crude Methodology and Specification Guide

Argus Global Compliance Policy

Argus Media Editorial Code of Conduct

Gulf coast and midcontinent domestic $/bl

timing Base Diff low Diff highDiff

weighted average

Diff MtD weighted

averageLow high weighted

average

Bakken Oct CMA Nym -7.50 -6.25 85.27 86.52

LLS Sep Sep WTI +3.30 +4.05 +3.64 +3.83 99.37 100.12 99.71

LLS Oct Oct WTI +2.60 +2.75 +2.68 +2.55 96.05 96.20 96.13

HLS Sep Sep WTI +3.10 +3.65 +3.17 +2.66 99.17 99.72 99.24

Thunder Horse Sep Sep WTI +1.00 +2.25 +1.63 +1.42 97.07 98.32 97.70

Bonito Sep Sep WTI +1.50 +2.50 +2.00 +1.75 97.57 98.57 98.07

Eugene Island Sep Sep WTI +1.50 +2.50 +2.00 +1.76 97.57 98.57 98.07

WTS Sep Sep WTI -11.00 -10.00 -10.46 -8.26 85.07 86.07 85.61

WTS Oct Oct WTI -8.00 -7.00 -7.50 -6.68 85.45 86.45 85.95

Poseidon Sep Sep WTI +1.00 +1.65 +1.25 -0.45 97.07 97.72 97.32

Mars Sep Sep WTI +0.75 +1.65 +1.21 +0.52 96.82 97.72 97.28

Mars Oct Oct WTI -0.90 -0.50 -0.70 -0.91 92.55 92.95 92.75

Southern Green Canyon Sep Sep WTI -0.30 -0.15 -0.23 -0.35 95.77 95.92 95.84

WCS Cushing Oct CMA Nym -8.70 -8.25 84.07 84.52

Sep WTI -9.38 -8.93

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contract. Outright October LLS increased by almost 40¢/bl. Further North, Bakken for October pipeline injection at

Clearbrook, Minnesota, was discussed Wednesday at a discount of $7.50-$6.25/bl to October CMA Nymex, while September Bakken volumes at the Bakken Oil Express (BOE) terminal were discussed at a discount of $9.75/bl.

Differentials at the US Gulf coast were up on bullish US government data, showing on-going high refinery demand. Refinery utilization for the coastal region increased to just under 96.9pc for the week ending 15 August, from the prior week’s 94.4pc. Commercial crude oil stocks fell, in part owing to higher crude run rates which were up by 177,000 b/d from the previous week. Commercial crude oil stocks at the US Gulf coast fell by just under 5.5mn bl, to 191.2mn bl. Stocks have not been so low since the week ending 7 March. Refinery inputs other than crude oil were up by 112,000 b/d.

The stock drain was likely aided by the temporary stoppage of marine offloading at Loop, beginning 13 August. While Loop state that offloading will resume between 21 and 23 August it remains unclear how much of the stock drain was related to the tempo-rary stoppage, as imports to the coast did not appear to suffer.

Imports to the US Gulf coast for the week ending 15 August increased by 172,000 b/d to 3.53mn b/d, although the Loop closure occurred only 2 days prior to the end of the week.

At Cushing, Oklahoma, stocks increased to roughly 20.2mn bl, up by about 1.76mn bl from the previous week. Cushing stocks are the highest they have been since the second week of July.

In the midcontinent, refinery utilization is beginning to recov-er, moving to 92.6pc from the prior week’s 91.4pc. The increased utilization aided in the drain of 332,000 bl from commercial crude oil stocks in the midcontinent, exempting stocks in Cushing, Okla-

Us west cOAst

The first spot volumes of Alaskan North Slope (ANS) crude for Oc-tober delivery sold Wednesday at a premium of $6.55/bl to WTI.

Wednesday's trade represents a discount of $2.28/bl to global waterborne benchmark Ice Brent.

ANS for September delivery last sold 8 August at a pre-

Us west coast pipeline $/bltiming Base Diff low/high Low/high

SJLB P-Plus Sep Postings -0.15/+0.15 97.81-98.11

Implied WTI diff Sep Sep +1.74/+2.04

Line 63 P-Plus Sep Postings +1.10/+1.40 99.06-99.36

Implied WTI diff Sep Sep +2.99/+3.29

Midway Sunset P-Plus Sep Postings -0.27/+0.03 92.35-92.65

Implied WTI diff Sep Sep -3.72/-3.42

Light postings avg 97.96

Heavy postings avg 92.62

Us west coast waterborne $/bltiming Base Diff low/high Low/high

Isthmus USWC Aug Sep +0.38 96.45

K-Factor Aug +2.40

ANS del Oct Oct WTI +6.30/+6.80 99.75-100.25

hh

-9-8-7-6-5-4-3-2-101234

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

WTS = 0

wti Mid vs wts $/bl

hh

2

3

4

5

6

7

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

Mars = 0

LLs vs Mars $/bl

homa. Imports to the midcontinent fell to 1.9mn b/d, down by 230,000 b/d from the prior week, and lower than they have been since the week ending 11 July. The decision by CVR Energy to sell crude oil committed to their 115,000 b/d Coffeyville refinery may have reduced the need for imported crude.



LAtin AMericA

Colombian sour values are not supported by Mediterranean market demand with ample supplies there, weak Russian Urals pricing, and August-loading Basrah Light cargoes possibly still available while Asia-Pacific refining demand remains limited.

A very prompt loading medium sour Colombian Vasconia cargo was sold on Wednesday around a $7/bl discount to Octo-ber Ice Brent. But market sources said values were weaker for the assessed loading window of 10-60 days forward. October loading tenders are expected to be announced soon. The prompt Vasconia sale is not lending support to heavier sour Co-lombian Castilla Blend, which is meeting little buying interest.

Fixtures reports show a VLCC is scheduled to move from

Latin America $/bl

timing Base Diff low/high Low/high

Mexico

Maya (USGC) Aug Sep -6.65 89.42

K-Factor Aug +0.25

Olmeca Aug Sep +1.17 97.24

K-Factor Aug +2.35

Isthmus Aug Sep -0.77 95.30

K-Factor Aug +1.25

Colombia

Vasconia Prompt Oct WTI +0.83/+1.58 94.28-95.03

Oct Ice -8.00/-7.25

Castilla Prompt Oct WTI -6.67/-5.67 86.78-87.78

Oct Ice -15.50/-14.50

Argentina

Escalante Prompt Oct WTI +0.08/+0.58 93.53-94.03

Oct Ice -8.75/-8.25

hh

-20

-15

-10

-5

0

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

WTI Midland = 0

sGc vs wti Midland $/bl

Panama to China starting in early September. Shell has char-tered a Suezmax vessel from Brazil to the US Gulf coast or the Caribbean, also in early September. Houston Refining is scheduled to take a Panamax vessel from the Pacific coast of Mexico to the US Gulf coast starting later this week. Lukoil is chartering a Panamax from Covenas, Colombia, to the US Gulf or Bahamas to begin at the end of the month.

hh

0

1

2

3

4

5

6

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

Mars = 0

hLs vs Mars $/bl

mium of $6.50/bl to WTI. That trade represented a discount of 87¢/bl to Ice Brent.

A total of 2.97mn bl of ANS traded for west coast delivery in October 2013, when spot volumes accounted for 20pc of total PADD 5 ANS receipts.

The projected catalytic cracking margin for ANS crude in San Francisco Tuesday reached $20.81/bl. Margins have climbed as Shell worked last week to complete unplanned maintenance at its 165,000 b/d refinery in Martinez, California. In addition, Valero the previous week reported emissions con-nected to the shutdown of an unidentified unit at its 170,000 b/d refinery in Benicia, California.

By comparison, catalytic cracking margins for ANS in the Pacific Northwest have remained between $9.17/bl and $12.36/bl over the past week.



cAnADA

In western Canada, trade was light as the market remains between cycles.

Western Canadian Select (WCS) crude was discussed at a discount of $18.75-$17.50/bl, up from a discount of $19.00-$18.00/bl during the previous session.

WCS at Cushing, Oklahoma, was discussed at a discount of $8.70-$8.25/bl after trading at a discount of $7.60/bl on Tuesday.

Syncrude was discussed at a discount of $3.95-$2.00/bl after trading Friday at a discount of $4.25-$4.00.

Padd 2 crude oil imports declined by 230,000 b/d, or 10.66pc, to 1.928mn b/d in the week ending 15 August, accord-ing to the latest EIA data released earlier in the session.

canada domestic $/bl

Grade timing Basis Diff low/high Low/highDiff daily weighted

average

Daily weighted

average

Daily deals

Daily volume

b/d

trade month weighted

average

Monthly deals

Monthly volume

b/d

Syncrude (SYN) Oct CMA Nym -3.95/-2.00 88.82/90.77 -2.98 89.79 0 0 - - -

WCS Oct CMA Nym -18.75/-17.50 74.02/75.27 -18.13 74.64 0 0 - - -

Condensate Oct CMA Nym -4.25/-3.75 88.52/89.02

MSW Oct CMA Nym -7.43/-6.93 85.35/85.85

LSB Oct CMA Nym -7.85/-6.85 84.92/85.92

LLB Oct CMA Nym -19.00/-17.75 73.77/75.02

WCS Cushing Oct CMA Nym -8.70/-8.25 84.07/84.52

Sep WTI -9.38/-8.93

canada waterborne prices $/bl

timing Basis Diff low/high Low/high

Hibernia Dated North Sea -0.90/-0.50 98.73/99.13

Terra Nova Dated North Sea -0.90/-0.50 98.73/99.13

hh

-5

-4

-3

-2

-1

0

1

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

Mars = 0

sGc vs Mars $/bl

hh

-9

-8

-7

-6

-5

-4

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

Ice Brent = 0

escalante vs ice Brent $/bl



cMe nymex light sweet $/bl

Timing Open Low high 4:30pm London

1:30pm houston

settle±

Sep 94.70 94.70 96.47 95.46 96.07 +1.59

Oct 92.80 92.73 93.58 93.23 93.45 +0.59

Nov 92.39 92.26 93.04 92.72 92.88 +0.54

Dec 92.13 92.03 92.74 92.44 92.57 +0.47

ice Brent $/bl

Timing Open Low high 4:30pm London

1:30pm houston

settle±

Oct 101.50 101.44 102.37 101.88 102.28 +0.72

Nov 102.50 102.21 103.03 102.58 102.95 +0.65

Dec 102.78 102.73 103.50 103.07 103.43 +0.61

hh

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-4

-2

0

2

4

6

8

25 Feb 14 24 Apr 14 23 Jun 14 20 Aug 14

Mars = 0

vasconia vs Mars 2 $/bl

hh

-5

-4

-3

-2

-1

0

1

21 Feb 14 23 Apr 14 23 Jun 14 20 Aug 14

Basrah Light = 0

vasconia vs Basrah Light fob sidi Kerir $/bl

hh

5

10

15

3 Feb 14 2 Apr 14

Oriente = 0

Ans del Uswc vs Oriente del Uswc $/bl

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-14

-12

-10

-8

-6

-4

-2

0

20 Feb 14 21 Apr 14 19 Jun 14 20 Aug 14

C5 at USGC = 0

edmonton condensate vs c5 at UsGc $/bl

hh

-10

0

10

20

25 Nov 13 26 Feb 14 23 May 14 20 Aug 14

Eugene Island vs ASCI (5 day MA)Eugene Island vs WTI (5 day MA)

eugene island vs Asci $/bl



eiA weeKLy DAtA

US refinery inputs ’000 b/d

14,800

15,300

15,800

16,300

16,800

Oct 13 Jan 14 Mar 14 Jun 14 Aug 14

— EIA Inputs 4 Week Moving Avg

Us crude inventories mn bl

340

355

370

385

400


— EIA Stocks 4 Week Moving Avg

Us crude imports ’000 b/d

6,400

6,900

7,400

7,900

8,400


— EIA Imports 4 Week Moving Avg

industry statistics ’000 b/d

eiA change

Production 8,577 21

Imports 7,459 -387

Total Stocks 362,545 -4,474

Runs 16,418 204

Percent Utilization 93.4% 1.8

Stocks Padd 1 10,665 -310

Stocks Padd 2 86,507 1,423

Stocks Padd 3 191,218 -5,469

Stocks Padd 4 20,638 -254

Stocks Padd 5 53,516 135

Imports Padd 1-4 6,310 -436

Imports Padd 1 521 -468

Imports Padd 2 1,928 -230

Imports Padd 3 3,530 172

Imports Padd 4 331 90

Imports Padd 5 1,149 48

Runs Padd 1 1,099 -37

Runs Padd 2 3,525 48

Runs Padd 3 8,737 177

Runs Padd 4 605 -7

Runs Padd 5 2,452 23

— EIA



DeALs DOne

Us pipeline deals doneGrade Location trade month Basis month Differential basis Differential price $/bl volume b/d

WTI Cushing Oklahoma Oct Oct CMA Nymex Trade Days +0.64 6,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.05 3,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.10 3,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.22 10,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.25 5,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.29 2,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.30 5,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.30 10,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.31 625WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.45 3,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.50 3,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.53 3,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.55 1,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.56 1,667WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.85 2,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +2.95 2,000WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days +3.00 1,000WTI Cushing Oklahoma Sep Sep Phillips 66 Posting +6.35 5,000WTI Midland Texas Sep Sep WTI -17.50 500WTI Midland Texas Sep Sep WTI -17.00 1,000WTI Midland Texas Sep Sep WTI -17.00 1,000WTI Midland Texas Sep Sep WTI -17.00 1,000WTI Midland Texas Sep Sep WTI -17.00 1,000WTI Midland Texas Sep Sep WTI -17.00 1,000WTI Midland Texas Sep Sep WTI -16.50 1,000WTI Midland Texas Sep Sep WTI -16.00 1,000WTI Midland Texas Sep Sep WTI -15.00 1,000WTI Midland Texas Sep Sep WTI -14.00 975WTI Midland Texas Sep Sep WTI -13.75 1,000WTI Midland Texas Sep Sep WTI -13.75 1,000WTI Midland Texas Sep Sep WTI -13.50 2,000WTI Midland Texas Sep Sep WTI -13.00 1,000WTI Midland Texas Sep Sep WTI -13.00 1,000WTI Midland Texas Sep Sep WTI -12.75 1,000WTI Midland Texas Sep Sep WTI -12.75 2,000WTI Midland Texas Sep Sep WTI -12.50 1,000HLS Empire Louisiana Sep Sep WTI +3.10 1,000HLS Empire Louisiana Sep Sep WTI +3.10 1,000HLS Empire Louisiana Sep Sep WTI +3.50 415LLS St. James Louisiana Sep Oct LLS +1.00 1,000LLS St. James Louisiana Sep Oct LLS +1.00 1,000LLS St. James Louisiana Sep Oct LLS +1.00 1,000LLS St. James Louisiana Sep Oct LLS +1.00 2,000LLS St. James Louisiana Oct Oct WTI +2.60 1,000LLS St. James Louisiana Oct Oct WTI +2.75 1,000LLS St. James Louisiana Sep Sep WTI +3.30 1,000LLS St. James Louisiana Sep Sep WTI +3.30 1,000LLS St. James Louisiana Sep Sep WTI +3.30 1,000LLS St. James Louisiana Sep Sep WTI +3.30 1,000LLS St. James Louisiana Sep Sep WTI +3.30 1,000LLS St. James Louisiana Sep Sep WTI +3.40 1,000LLS St. James Louisiana Sep Sep WTI +3.40 1,000



DeALs DOne (cOntinUeD)

LLS St. James Louisiana Sep Sep WTI +3.40 1,000LLS St. James Louisiana Sep Sep WTI +3.40 1,000LLS St. James Louisiana Sep Sep WTI +3.50 630LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 1,000LLS St. James Louisiana Sep Sep WTI +3.50 2,000LLS St. James Louisiana Sep Sep WTI +3.60 1,000LLS St. James Louisiana Sep Sep WTI +3.70 1,000LLS St. James Louisiana Sep Sep WTI +3.70 1,000LLS St. James Louisiana Sep Sep WTI +3.75 1,000LLS St. James Louisiana Sep Sep WTI +3.75 1,000LLS St. James Louisiana Sep Sep WTI +3.80 1,000LLS St. James Louisiana Sep Sep WTI +3.80 1,000LLS St. James Louisiana Sep Sep WTI +3.85 1,000LLS St. James Louisiana Sep Sep WTI +3.90 1,000LLS St. James Louisiana Sep Sep WTI +3.90 1,000LLS St. James Louisiana Sep Sep WTI +3.90 1,000LLS St. James Louisiana Sep Sep WTI +4.00 1,000LLS St. James Louisiana Sep Sep WTI +4.00 1,000LLS St. James Louisiana Sep Sep WTI +4.00 1,000LLS St. James Louisiana Sep Sep WTI +4.00 1,000LLS St. James Louisiana Sep Sep WTI +4.00 2,000LLS St. James Louisiana Sep Sep WTI +4.05 1,000Mars Clovelly Louisiana Oct Oct WTI -0.70 1,000Mars Clovelly Louisiana Oct Oct WTI -0.70 1,000Mars Clovelly Louisiana Oct Oct WTI -0.70 3,000Mars Clovelly Louisiana Sep Sep WTI +1.25 1,000Mars Clovelly Louisiana Sep Sep WTI +0.75 1,000Mars Clovelly Louisiana Sep Sep WTI +0.75 1,000Mars Clovelly Louisiana Sep Sep WTI +1.00 1,000Mars Clovelly Louisiana Sep Sep WTI +1.00 1,000Mars Clovelly Louisiana Sep Sep WTI +1.00 1,000Mars Clovelly Louisiana Sep Sep WTI +1.25 1,000Mars Clovelly Louisiana Sep Sep WTI +1.25 1,000Mars Clovelly Louisiana Sep Sep WTI +1.25 2,000Mars Clovelly Louisiana Sep Sep WTI +1.45 2,000Mars Clovelly Louisiana Sep Sep WTI +1.65 2,000Poseidon Houma Louisiana Sep Sep WTI +1.25 1,000Southern Green Canyon Nederland / Texas City Sep Sep WTI -0.30 1,000Southern Green Canyon Nederland / Texas City Sep Sep WTI -0.15 1,000WTS Midland Texas Sep Sep WTI -11.00 500WTS Midland Texas Sep Sep WTI -11.00 500WTS Midland Texas Sep Sep WTI -11.00 1,000WTS Midland Texas Sep Sep WTI -11.00 1,000WTS Midland Texas Sep Sep WTI -11.00 1,000WTS Midland Texas Sep Sep WTI -10.50 1,000WTS Midland Texas Sep Sep WTI -10.35 1,000WTS Midland Texas Sep Sep WTI -10.00 1,000WTS Midland Texas Sep Sep WTI -10.00 1,100WTS Midland Texas Sep Sep WTI -10.00 2,400

Us pipeline deals doneGrade Location trade month Basis month Differential basis Differential price $/bl volume b/d



infrAstrUctUre news

Citgo Corpus Christi refinery flaringCitgo reported flaring this morning in the east plant of its 165,000 b/d refinery in Corpus Christi, Texas.

The refiner, a subsidiary of Venezuelan national oil firm PdV, notified a community alert system of "minor flaring" at 10:08am ET. Citgo issued a follow up report of normal opera-tions nearly three hours later, at 12:45pm.

A gasoline-producing fluid catalytic cracking (FCC) unit trig-gered malfunctions earlier this month and in July at the refinery. Today's filing did not attribute the flaring to any specific unit.

A company representative could not be reached for comment.

Motiva shuts norco hydrocrackerMotiva shut a hydrocracker yesterday at its 225,000 b/d refin-ery in Norco, Louisiana.

State environmental regulators said the refinery was shut-ting the unit down following flooding from storms in the area.

The company, a joint venture of Shell and Saudi Aramco, confirmed flaring from the refinery but declined to identify the unit involved or the status of operations today.

inDUstry news

new Us data could clarify condensate exportsThe US government could shed some light on the murky topic of distilled condensate exports in January, when the Census Bureau may unveil a revised system that tracks condensate separately from other refined products.

US distilled condensate exports are set to grow substan-tially after the Commerce Department recently clarified its regulations to determine that condensate is a refined product and not subject to a 1970s-era ban on most US crude exports.

US midstream company Enterprise Products Partners and US independent Pioneer Natural Resources have acknowledged that the Commerce's Bureau of Industry and Security (BIS) has allowed them to export distilled condensate from Texas' Eagle Ford shale formation. Enterprise exported a 400,000 bl ship-ment in July, most of which was supplied by Pioneer. Pioneer said it expects equivalent monthly shipments through year-end.

Condensate now accounts for a sizeable percentage of Eagle Ford crude production, which averaged about 1.5mn b/d in Sep-tember. At the same time, new splitters in South Korea, Singa-pore and China are boosting Asia-Pacific demand for condensates.

But US exports will be hard to track comprehensively un-less Census, which tracks trade data, breaks distilled conden-sate shipments out as a specific export category. Reliable data on US condensate exports is hard to come by, because industry is currently not required to disclose its applications or other communications with the BIS.

If Census decides to list condensate in its own category, it will not become public until the agency issues its annual list of export categories on 1 January. The agency would not clarify

how existing condensate exports have been categorized to date. Stabilizers distill condensate to lower vapor pressure and

remove volatile lighter hydrocarbons to meet industry stan-dards for safe storage and transport. That process also changes the nature of the liquids enough to qualify as a refined prod-uct, which are not subject to an export ban.

Other companies have sought their own rulings from BIS, including some producers in the Utica shale field. But since the export of distilled condensate is so new, it remains unclear how Census will classify these shipments.

Federal law requires US imports and exports to be categorized, and the Census Bureau’s Foreign Trade Division is responsible for establishing those categories. Other federal agencies, including the Energy Information Administration (EIA), rely on those categories to report export volumes for various energy products.

EIA said it has not received any word from the Census Bu-reau as to how distilled condensate exports have been classi-fied or whether they will be assigned a new export category. If Census assigns condensate its own category, EIA said, it will be simple to track export volume and destination. If condensate is lumped in with another refined product, however, it could be more difficult to differentiate the condensate exports from the rest of the exported products.

“If this is placed into an existing category that already has suffi-cient volumes and a variety of destinations, it will be very difficult to discern how much of an increase of that statistical category might or might not be [condensate],” an EIA spokesman said.

The Census Bureau said it is open to public suggestions on its Harmonized Tariff Schedule, including the creation of a



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new export category. The agency would not confirm that it is considering adding a new category for condensate exports.

Such nominations are reviewed collectively by Census, the US International Trade Commission and US Customs and Border Protection. For a new category to be approved, it must have sufficient volume to warrant its own category, but must not be so specific as to be traceable to a single company, Census said. Changes made to the export categories are published only once per year, on 1 January, and require consensus between the three agencies.

Condensate production in the US has been growing steadi-ly, with the EIA estimating 749,000 b/d of lease condensate production in 2012.

US consultancy RBN Energy put total US condensate pro-duction above 1mn b/d last year, thanks to output from Eagle Ford and the Permian, Anadarko, Bakken and Utica formations.

Us crude stocks take unexpected dive: eiAUS crude stocks posted a larger-than-expected 4.5mn bl draw last week to 362.5mn bl amid a gain in refinery runs and a drop in imports, according to data released today by the En-ergy Information Administration (EIA).

Refinery rates climbed by 1.8 percentage points to 93.4pc of capacity, with crude throughputs rising by 204,000 b/d to 16.4mn b/d. Imports fell by 387,000 b/d to 7.5mn b/d last week.

Expectations had been for a 1.3mn bl decline in US stocks and a 0.4 percentage point decline in run rates.

The drop was driven largely by a sharp decline in Gulf coast inventories, which fell by 5.5mn bl to 191.2mn bl. Im-ports rose by 172,000 b/d to 3.5mn b/d, while refinery runs gained by 2.5 percentage points to 96.9pc of capacity. Crude runs climbed by 177,000 b/d to 8.7mn b/d.

Crude stocks in the pipeline and trading nexus of Cushing, Oklahoma, rose by 1.8mn bl to 20.2mn bl, a five-week high.

Gasoline stocks rose by 585,000 bl to 213.3mn bl, compared to expectations for a 1.4mn-bl decline. Distillate inventories fell by 960,000 bl to 121.5mn bl, compared to expectations for a decline by 471,000 bl.

citgo sale could shift Us downstreamThe largest potential US refining transaction in at least a de-cade is more likely to bolster smaller or entirely new US down-stream players than the current large independent refiners.

But ongoing litigation and supply obligations may yet

stymie the proposed sale of PdV subsidiary Citgo's refining and midstream assets.

Venezuelan state-run oil company PdV contracted French bank Lazard recently to assist with the sale of its US down-stream subsidiary after considering offers through several investment banks.

PdV wants to find a single buyer for all of its assets, includ-ing three refineries totaling 757,000 b/d of crude capacity, 48 terminals in 22 states, three wholly-owned US pipelines and stakes in six others. The purchase would also include a long-term supply agreement for Venezuelan crude, a commitment that could unnerve some buyers concerned about PdV s reli-ability. PdV said it has received offers as high as $15bn.

The largest US independent refiners have so far shown little interest in the assets publicly. Phillips 66 has focused on midstream and chemical spending and Marathon Petroleum said it was satisfied with its existing footprint. Tesoro and Valero did not rule out interest but neither appeared to be piqued during quarterly earnings discussions.

That may leave the Citgo facilities open to bolder moves by smaller companies looking to make a major change.

For HollyFrontier, the largest US independent refiner with more cash than debt at the end of the second quarter, purchasing Citgo would nearly triple its US crude processing capacity to 1.2mn b/d and lift the company to fourth largest US independent refiner.

"It's obviously a large bite if it's actually for sale," chief executive Mike Jennings said during a call to discuss quarterly results, but the company is open to such growth.

As an operator in niche positions in the US Gulf coast, mid-continent and Rocky Mountains, and a focus on regional crudes, HollyFrontier might find Citgo a challenging purchase. Any buyer of Citgo would need heavy sour crude expertise, since all three refineries run crudes similar to Venezuela's own production. And although Citgo has steadily pared its imports over the past five years, according to Energy Information Administration data, the refining system still imported more than five times the crude HollyFrontier brought into the US last year. The refiner imported just 84,000 b/d of heavy Canadian crudes in 2013.

US independent refiner PBF Energy, meanwhile, has re-cently gained flexibility to consider expansions after founding equity partner Blackstone exited its position in the company, chairman Tom O'Malley told analysts during an earnings confer-ence call earlier this month.



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PBF last week expanded its revolving credit line to up to $2.75bn, a move that would support a larger company but not necessarily support a purchase of Citgo assets.

"It's certainly something we would follow up on," O'Malley said, referring to Citgo. "But you can assume we follow up on absolutely everything."

Citgo's Illinois refining and terminal assets could fit with PBF's existing Ohio business. PBF also manages a wide range of crude imports and heavy processing, operating the US Atlantic coast's only coking capacity.

But PBF has more hungrily eyed California refining assets, stating repeatedly this year its interest in the state.

CVR Energy, operating 185,000 b/d of US midcontinent capacity, ruled out California and the US Atlantic coast for ex-pansion. The company and its subsidiaries hold more cash than debt, equity of roughly $1bn and consider both US Gulf coast and midcontinent refineries attractive for expansion.

Citgo's refineries may prove the least enticing part of the offer-ing. Midstream assets have consistently fetched more than refining in recent years, even as the purchasers keep prices close to vest.

Tesoro will not disclose split prices for its $1.1bn purchase of BP's California business last year, but it has since dropped logis-tics assets associated with the purchase into its master limited partnership at a value of $1.3bn. Marathon Petroleum purchased BP's Texas City, Texas refinery and associated pipeline and terminal infrastructure for $598mn in 2013. Only about $9mn of that was for the refinery itself, according to the company.

Such assets could also be of interest to relative newcomers to the refining space. Par Petroleum last year bought Tesoro's Hawaii business, including the 95,000 b/d Kapolei refinery, terminals and a retail operation, for $75mn plus up to an ad-ditional $40mn over three years if certain conditions are met. Commodities firm TrailStone purchased in June US Oil and Refining's rail- and marine-connected 43,500 b/d refinery in Tacoma, Washington, for an undisclosed sum.

Ultimately, any Citgo purchase could be hampered by poten-tial legal entanglements related to an ongoing battle over assets Venezuela seized from ConocoPhillips and ExxonMobil in 2007.

In arbitration filings the companies say they should be compensated a total of $42bn for the seizures, claims the World Bank's International Center for Settlement of Investment Disputes (Icisd) may soon rule on. Caracas-based attorneys monitoring the proceedings estimate the final ruling will total roughly $10bn, with $7bn for ConocoPhillips and $3bn for ExxonMobil.

north Dakota to examine Bakken treatmentNorth Dakota regulators will hold a special hearing next month to consider amending field rules that affect how crude produc-tion is treated before being shipped out by rail and pipeline.

The issue has come into sharper focus amid intense scrutiny on the volatility of Bakken crude, particularly after a long-reaching study by the Department of Transportation (DOT) found that region's crude tends to be more volatile and flammable than other crude.

The state’s Department of Mineral Resources (DMR) will look at the transportation safety and marketability of crude and consider amending field rules that apply to Bakken, Three Forks and Sanish crudes.

The DMR today issued a call for testimony during the 23 September hearing on topics including field operation methods to reduce light hydrocarbons in crude oil.

The agency is also looking for information on operating temperatures, costs and pressures of equipment used to treat crude. Director Lynn Helms said he is “very hopeful” that tackling the issue will help fill a gap in addressing crude-by-rail safety. State and federal regulators are looking at or have al-ready strengthened oversight involving tank cars, train speeds, emergency response preparedness and track safety.

Officials will look at ensuring that “if it's entitled Bakken crude oil that everybody knows what that is and that [whether it is] summer or winter it's gone through the right processes to fit it into that category so that it doesn't contain things that doesn’t belong in there,” Helms said in a call with reporters last week, adding that most producers support the efforts. “The majority of operators whose big production is Bakken crude oil, they look forward to having a name brand just like West Texas Intermediate (WTI) does so that they get a premium price.”

The agency may be looking particularly closely at the con-ditions under which equipment is operated. Field treatment typically consists of separating gas from crude, then moving it through a heater treater that removes water, sediment, light ends and additional gas. The equipment must be operated at the correct temperature and pressure ranges. Crude must also sit in storage tanks for a certain amount of time to allow light ends and gas to vaporize, according to the DMR.

“That may be the toughest thing in North Dakota because those tanks are sitting out there are -30[°F], -40[°F] some days and at 110[°F] other days,” Helms said.

Companies could face some replacement costs depending



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on what new parameters the agency decides on, but so far officials are not looking at changes that would require major increases in capital investment on equipment, he added.

Alaska votes to keep oil tax cuts intactVoters in Alaska’s primary election yesterday defeated a ballot initiative to overturn legislation passed in June 2013 that cut taxes on crude and and natural gas production.

The vote was a victory for big Alaska producers including the state's leading producer, US upstream independent ConocoPhil-lips, who had said that the new tax structure advanced by gover-nor Sean Parnell was key to reversing declining production there.

Unofficial returns posted by the Alaska Division of Elections show the ballot measure to repeal last year’s state tax law was defeated, with 52pc of voters rejecting the measure and 47pc supporting it, with 98.6pc of precincts reporting.

ConocoPhillips has invested $1.7bn in Alaska this year, including on the CD-5 oil satellite project in the North Slope's Alpine field. ExxonMobil, BP and ConocoPhillips are moving forward with the Alaska LNG terminal, a $45bn-65bn project that would export up to 2.4 Bcf/d of gas.

Vote No On 1, an industry-backed campaign to block the ballot measure, said today that the measure’s defeat shows that Alaskans “made a choice to keep tax reform and give it a chance to work.”

The campaign to support the ballot initiative did not re-spond to requests for comment.

The ballot measure would have rescinded Senate Bill 21, which was passed last year by the Republican-controlled state legislature. The bill replaced the state's previous progressive tax structure with a flat 35pc tax rate, and was greatly favored by oil and gas producers. The law went into effect in January.

The bill was designed to boost throughputs along the 800-mile Trans-Alaska Pipeline System (Taps), which delivers North Slope crude production to the southern Valdez marine termi-nal for export to destinations at the US west coast.

Throughputs along Taps have fallen steadily with the state's dwindling oil production, with flow rates down from 2.1mn b/d in 1989 to current average flows of 523,000 b/d this year-to-date.

The oil and gas industry accounts for 90pc of state rev-enues, according to the Alaska Department of Revenue, and as a result is subject to frequent changes.

Alaska’s legislature in 2006 passed a bill setting a 22.5pc tax rate on oil producers' profits, with a modest progressive tax to track the rising price of oil. The following year, newly-

elected governor Sarah Palin (R) championed a bill setting a 25pc tax on oil companies' margins above $30/bl, with an ad-ditional 0.4pc increase for every dollar of profit above $30/bl. Alaskan production fell by 5-8pc/yr in 2008-13, although state revenues have fluctuated with crude prices. Senate Bill 21 was meant to boost production by incentivizing investment.

The Alaska Department of Revenue estimates that $10bn has been invested in Alaskan oil fields since the law came into effect in January.

But the bill spurred a backlash among some Alaskans, who argued that the new tax rate is too favorable to oil companies and will reduce tax revenue. The state Revenue Department forecasts $5.3bn in revenues for fiscal year 2014, down from $6.9bn in 2013 and 8.4bn in 2012.

Opponents of Senate Bill 21 are faced with limited options. The deadline to include a measure on the 4 November general election ballot passed on January 21. A Republican-controlled legislature is also unlikely to take up another tax bill when the body convenes this coming January, Vote No On 1 campaign director Willis Lyford told Argus.

“This validates what the legislature did last year,” Lyford said. “I do not think there is any appetite in the majority in the legislature to revisit this.”

Argentina seeks to shift bonds to state bankShale-rich Argentina is seeking to skirt a US court ruling by paying holders of restructured debt in Buenos Aires rather than New York, the government s latest effort to dilute a bit-ter conflict with holdout bondholders that pushed the country into default last month.

President Cristina Fernandez de Kirchner has sent a bill to congress that she said last night would protect restructured bondholders from a US judge who has ruled that the country cannot pay them unless it also pays a group of hedge funds that declined to restructure. The move appears to be a tacit recogni-tion that any negotiated solution to the debt morass is far off.

The 30 July default, which could delay investment in the country’s shale play and lead to increased costs for the energy sector, further isolates Argentina from international markets at a time when its economy is already in recession.

Argentina is banking on its abundant shale resources to reverse a long trend of declining oil and natural gas production that has transformed the country into a major net importer of products and LNG in recent years.



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Although there had been hope that negotiations between private banks and the holdouts could provide Argentina a way out of the default, talks collapsed last week.

Argentina’s government has staunchly denied the country is in default. The government has deposited the latest restruc-tured payment into a US bank account, but US District Judge Thomas Griesa has ordered that money frozen. Credit rating agencies have declared Argentina is in selective default.

Under the legislation that the government hopes will be ap-proved before its next coupon payment due on 30 September, the government would make payments through state-owned Banco Nación rather than Bank of New York Mellon. Bondholders can also choose to swap their bonds for new paper under local law.

“This is absolutely voluntary,” Fernandez said.Under proposed legislation, Argentina would also begin to de-

posit coupon payments for the 7.6pc of bondholders who rejected 2005 and 2010 restructurings in a move that economy minister Axel Kicillof said today shows “our unbreakable willingness to pay.”

The move steps up the government’s offensive against Griesa, who has previously warned that any effort to open a new debt swap or change jurisdiction on the bonds could be considered contempt of court.

Yet a ruling of contempt “is not applicable to a sovereign country,” cabinet chief Jorge Capitanich said this morning.

Initial reaction suggests that Argentina s bid to shift the bond jurisdiction has little chance of widespread acceptance. “Argentina’s leaders have literally chosen to be outlaws. They have chronically flouted US court orders, lied to our courts, and proclaimed utter disdain for our courts,” US-based Aure-lius Capital Management, one of the main hedge funds that has led litigation against Argentina, said today. “These officials are

now 'doubling down' on an illicit and failed approach.”Elliott Management, the other main holdout hedge fund,

was unavailable to comment.Argentina says it cannot fulfill Griesa’s ruling because a

contractual Rights Upon Future Offers (RUFO) clause prevents the country from paying the holdout bondholders more than it paid the restructured bondholders, without also offering them the same deal. Griesa has rejected Argentina’s bid to suspend his sentence until the RUFO clause expires at the end of 2014.

Brazil tender to cover offshore post-saltBrazil’s next upstream tender is likely to cover post-salt offshore blocks in the country’s eastern margin, along the coast from the southern state of Rio Grande do Sul to the northern state of Rio Grande do Norte, according to Brazilian oil regulator ANP.

The agency says it has already completed studies of the vast region, which includes the prolific Campos and Santos offshore basins.

The final decision on which areas will be included in the next bidding round, tentatively planned for the first half of 2015, is up to Brazil’s energy council (CNPE).

The ANP says it is also studying regions that might be in-cluded in the next sub-salt auction planned for 2016.

“We're now looking at an area called Alto Cabo Frio, the boundary of the Campos and Santos basins. We are waiting for new data to see what might be there. We are beginning the study of this area now," ANP director general Magda Chambriard said.

The Santos basin’s Pau Brasil prospect, estimated to be similar to the giant 8bn-12bn bl Libra block awarded during the landmark sub-salt round of October 2013, could also be offered, Brazilian officials have said.



OpiniOn/AnALysis

Mexico zeroes in on 2015 auctionMexican energy reform went into overdrive this week, when President Enrique Pena Nieto signed a package of key sec-ondary laws. Two days later, the first upstream blocks to be licensed in mid-2015 were unveiled.

The reform dismantles the upstream monopoly held by state-owned oil firm Pemex since 1938. The energy ministry completed a "round zero" reverse auction of Pemex assets a month ahead of schedule, allowing the company to retain some of the upstream acreage it wanted and setting aside the rest for auction. The results leave Pemex with enough acreage and reserves to ensure 2.5mn b/d of oil output for 20 years — just above present production.

Upstream regulator CNH will offer a mix of unconventional, deepwater and conventional acreage in the first auction. Winning firms will have to pay royalties and corporate taxes up front, to demonstrate their commitment. The ministry will circulate provisional contracts this year, before an auction of up to 169 blocks — 109 exploration and 60 development — between May and September 2015. There are 28 development blocks in the deepwater Gulf of Mexico, including 11 in the Perdido fold belt, an area sought after by foreign oil firms ac-tive in the deepwater US Gulf.

The Shell-operated Perdido project has been producing in water depths of up to 2,500m on the US side of the belt since 2010. Pemex will retain acreage that holds the Trion, Explora-tus and Maximino prospects, but the majority of the Gulf of Mexico acreage will be auctioned.

The largest number of blocks on offer — 90 — are in the geo-logically complex Chicontepec formation, which holds around 12bn bl of proven, possible and prospective resources. Chicon-tepec has been a headache for Pemex because its large number of small reservoirs rapidly lose pressure. The firm has managed to raise production by only 17,000 b/d since 2009 to 47,000 b/d.

The blocks up for licensing are not finalised and CNH could make adjustments based on industry feedback, which it will receive until November. The reform allows for licences, production and profit-sharing contracts, as well as service contracts. The energy ministry will define contract terms, also by November, while the finance ministry draws up fiscal conditions and bidding terms. CNH will open a data room in February-April and sell data packages.

Separately, Pemex plans to farm out upstream areas awarded under service contracts or earmarked for such

contracts under a 2008 energy reform. It will first convert contracts awarded since 2011 into joint-venture-style arrange-ments. These areas and others that were never awarded will then be opened to farm-outs, potentially providing another entry point for new participants.

Known as performance or incentive contracts, they provide operators with a per-barrel production fee with incentives for beating specific targets. The areas they cover include Chicon-tepec, and mature and marginal fields.

Pemex will retain its existing contract partners, which include a mix of US, UK, Mexican and Chinese companies, but none of the majors. The contractors include UK tight oil specialist Petrofac, leading oil field services firms Halliburton, Schlumberger and Baker Hughes, Mexico's DWF and Construc-tora y Perforadora Latina and the Sinopa joint venture of China's Tianjin Dehua and local firm Avila Petroleum.

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