argus global markets

Argus Global MarketsWeekly oil price reporting, derivatives and analysis

Market markers•North Sea Dated rises backabove $70/bl

•Feb WTI climbs by around$1.70/bl to $65.60/bl

•Global diesel margins strength-en by $0.70-3.40/bl

•Gasolinemarginsfirmby$1.70-1.80/bl in Europe, US

Ballooning growthWorld economic growth is accelerating. GDP is projected to grow at 3.9pc this year and next, a 0.2 percentage point increase on 2017, the IMF’s latest update to its World Economic Outlook (WEO) report shows. The long-awaited recovery from thefinancialcrisisof2008-09iswellunderwayandisdraggingoildemandrapidly higher, helping to push crude above $70/bl. The oil market is becoming demand-led, fuelled by industrial and manufacturing growth. Such markets can bear higher prices fairly well, but not forever, and not without consequences for the longer-term preservation of demand.

“Trade is again growing faster than global income, driven in part by higher globalinvestment,andcommoditypriceshavemovedup,benefitingthosecountries that depend on commodity exports,” IMF director of research Maurice Obstfeld says. Manufactured goods shipments grew by 10pc last year, compared with drops of 2pc in 2016 and 12pc in 2015, World Trade Organisation data show (see graph). This rise in global trade is a large part of the acceleration in oil demand growth, particularly middle distillates. Higher economic activity means more diesel demand for construction and manufacturing, and more transport to ship manufactured goods to and from ports. Middle distillates accounted for at least half of all demand growth last year, industry sources estimate. OECD middle distillateinventoriesfellbelowthefive-yearaverageinNovemberlastyear,thefirstmajorproductgrouptodoso.Andacoldnorthernhemispherewinterhasprolonged support, keeping diesel margins $2-3/bl higher than a year earlier.

The recent depreciation of the dollar against other major currencies is also underpinning the rise in oil demand in non-dollar economies. Being able to retail productsineurosisahugebenefittoEuropeanrefiners,forinstance.Theyhaveexperienced just a 2pc rise in crude costs in euro terms this year, compared with a6pcincreaseforUSrefinersindollarterms.

IMFGDPchangessuggestthattheIEAmaysoonreviseupoilconsumptionforecasts in its closely watched Oil Market Report. The agency has been more downbeat in its forecasts — its current demand growth outlook for this year is 1.27mn b/d, or 250,000 b/d lower than Opec’s — and it has been putting more emphasisonthepotentiallydemand-erodingeffectsof$70/bloil,comparedwithlast year’s average of less than $55/bl. There are merits to this argument. The amount of miles driven by US motorists rose by just 1.5pc last year, compared with 2.3pc in 2016 and 2015, as retail gasoline prices rose by more than 25¢/USG.

But the global oil market is now a demand-led one, after the supply domi-nance triggered by the shale revolution and Opec’s subsequent laissez-faire production policy reaction in 2014-15. Over 60pc of the change in the price of Brent futures since early October is the result of changes in demand, compared with just 7pc related to changes in supply, according to calculations made by the New York Federal Reserve. Demand-led markets tend to respond more slowly to prices than supply-led ones. Rampant growth in China and other non-OECD economies kept prices on an upward trajectory in 2004-08, and sustained $100/bl oil in 2011-14. Both periods ended in market crashes. Oil inventories may still be high. But with a rejuvenated global economy to fuel, Opec’s dilemma is how long to hang on to the rising balloon before reconsidering its production deal.

Contents

Venezuelan slump could worsen 2High stocks hit Chinese demand 3Market balance ‘may take longer’ 4IMF revises up growth forecasts 5FsU naphtha exports rise 6Baker Hughes posts growth 6Global naphtha demand to rise 7Special report: Americas crude 8-11opec liftings rise 12Prices rebound 14

Wto trade growth

-15

-10

-5

0

5

10

15

2012 2013 2014 2015 2016 2017

%

Year-on-year change in merchandise trade

— WTO

EDITORIAL: Oil price gains are now more demand led than supply driven, posing questions for Opec and its production agreement

Volume XLVIII, 4, 26 January 2018

Copyright © 2018ArgusMediagroup

Argus Global Markets 26 January 2018

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Floundering output could slump furtherVenezuelan crude output declined to its lowest since 1985 at the end of last year, excluding during a 2002-03 oil strike, when it fell temporarily to 1mn b/d.

Production fell to 1.62mn b/d in December, according to data communicated directly to Opec by Venezuela’s energy ministry, nearly 400,000 b/d lower than a year earlier. The loss was concentrated in the fourth quarter, when output declined by around 250,000 b/d.

The outlook for 2018 remains poor, and some inside state-owned PdV expect a fall to as low as 1.2mn b/d in January. “Given Venezuela’s astonishing debt and deteriorating oil network, it is possible that declines this year will be even steeper than the 270,000 b/d drop in 2017, which took annual output of 1.97mn b/d to the lowest in nearly 30 years,” the IEA says.

But a senior PdV executive expects a resurgence to nearly 1.9mn b/d in January thanks to the arrival of imported naphtha, which has allowed the company to recover output at its joint ventures in the Orinoco heavy oil belt. Orinoco crude, with 8-10°API gravity, requires diluent such as naphtha to get it out of the ground and to the coast. Once there, it is upgraded into synthetic lighter crudes or blended with light or medium supplies to produce the 16°API Merey grade for export to India and China. The naphtha is routinely stripped out and piped back to the oil belt for reuse.

But this model is becoming harder for PdV to sustain, given the decline in its light and medium crude output, its difficulties paying for imported crude and chronic breakdowns at its four upgraders. The company is exporting diluted crude oil (DCO) — crude diluted with naphtha — to India and other markets, the PdV ex-ecutive says. “We process part of the DCO and sell the other part. In this scenario of low or moderate prices, the differential between Merey and DCO is not too high,” the executive says.

The DCO sales, which officials say are going to India’s 400,000 b/d Vadinar refinery controlled by Russia’s Rosneft, could help explain the discrepancy in January estimates, even within PdV. The diluent potentially inflates the data if the barrels are not counted at the wellhead.

Any rise that PdV manages to eke out in January will be challenging to main-tain. Average natural decline rates of around 20pc a year, plus a shortage of cash and US financial sanctions, give PdV little room to manoeuvre. Even if it could afford a steady stream of diluent, the company is struggling to retain its skilled workforce, which is roughly half its 120,000-strong payroll. Monthly wages average less than $2 at the current black market exchange rate of over 240,000 bolivars to the dollar, and many of the firm’s skilled workers have joined a growing exodus to neighbouring countries such as Colombia and Chile.

Bleak housePdV’s downstream fortunes are bleaker. The 940,000 b/d CRP refining complex, which includes the 635,000 b/d Amuay and 305,000 b/d Cardon refineries, is barely operating. Fuel shortages are widespread, along with food and medicine. And the seizure this month of a Venezuelan crude cargo in Dutch-controlled Cura-cao — following claims of unpaid debts by PdV — illustrates the growing challenge faced by the state-owned firm in getting its oil to market.

The IMF forecasts a 15pc economic contraction in Venezuela this year, and an-nual inflation of 12,000-13,000pc. Domestic turmoil could escalate as the govern-ment prepares for presidential elections that were moved up to a date no later than 30 April, from December. Critics say there is no chance of a free and fair poll, and President Nicolas Maduro is assured re-election.

Venezuela oil production

1.51.61.71.81.92.02.12.22.32.4

Jan Apr Jul Oct Jan Apr Jul Oct

mn b/d

16 17

US imports of Venezuelan crude

450

500

550

600

650

700

750

800

850

900

2015 2016 2017

’000 b/d

VenezUelan crUde

The EIA expects more bad news for the country’s oil sector, but at least one PdV executive says production will rebound this year

Copyright © 2018 Argus Media group

Issue Ref: 107808

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High stocks pressure consumptionChinese apparent oil demand fell last month as refiners digested high stocks. But demand growth over the whole year was nearly double 2016 levels.

Apparent oil demand — crude production plus net oil imports — fell to 12.04mn b/d in December from nearly 13mn b/d the previous month, averag-ing 12.7mn b/d over the whole of last year. Crude output fell to October levels, which were the lowest since the 2009 financial crisis. PetroChina plans to revive production this year although it is unclear how realistic this will be. Demand last year grew by 6.3pc from 2016, with rising imports more than offsetting the declining domestic production (see table).

December crude imports fell by 900,000 b/d — with Shandong province, centre of the country’s independent refining sector, accounting for 35pc of the decline. Shipments to Liaoning, home to large independent firms Huajin and Panjin Northern Asphalt, also fell in December, with Iraqi and Omani supplies the most affected. And imports to Fujian on the southeast coast fell by a hefty 230,000 b/d as Sinochem carried out maintenance at its 240,000 b/d Quanzhou refinery. The plant reopened this month.

Imports from Iraq registered the most precipitous decline in December, more than halving to 470,000 b/d, although this was from record receipts of more than 1mn b/d a month earlier.

Guangdong province, dominated by state-controlled Sinopec’s refineries, cut imports of heavy sweet grades by around 150,000 b/d month on month, with imports from Angola declining by 100,000 b/d. It increased imports of sour crude by 230,000 b/d. Venezuelan deliveries to Guangdong rose by 90,000 b/d to nearly 500,000 b/d, despite Venezuela’s production problems. Oman supplied more to Guangdong, displacing Kuwaiti imports.

Stock movements Crude stocks held in bonded storage on the Shandong coast, where trading companies hold crude before selling it to independent firms, fell from over 17mn bl in October, when many refiners were close to exhausting their import quotas, to 13.8mn bl last month. Tight diesel supplies and a spike in gasoline margins encouraged crude buying last month.

But port inventories began to tick higher again this month, reflecting lower withdrawals by refiners. Diesel margins are weakening, and gasoline has retreated from recent highs. These factors, as well as the closure of many busi-nesses for the lunar new year public holidays from 15 February, are likely to drive down crude throughputs next month. And that should cause bonded crude stocks to rebuild, with vessel tracking data indicating a substantial increase in January deliveries.

China’s net products imports rose to 410,000 b/d last month, boosted by re-cord mixed aromatics imports. Many gasoline blending companies feared that the government would ban the use of untaxed mixed aromatics in gasoline production from 1 January, and maximised imports last month ahead of the ban. Imports reached comparable levels in April last year, when talk of a ban on mixed aro-matics first surfaced. Beijing has subsequently confirmed that the new gasoline invoicing system will come into effect from 1 March. South China is now awash with mixed aromatics, market participants say.

The high December imports pressured gasoline margins and kept exports high. State-run refiners also exported large amounts of ultra-low sulphur diesel, boost-ing domestic prices. Combined gasoline, diesel and jet fuel exports set a fresh record of 1.2mn b/d in December.

cHineSe demand

Chinese crude production declined to a nine-year low, and attempts to revive the upstream may not be entirely realistic

chinese apparent demand mn b/ddec nov 2017 ± 2016

Net imports 8.33 9.20 8.95 11.13

Crude 7.92 8.85 8.33 9.66

Products 0.41 0.35 0.62 28.19

Production 3.71 3.77 3.78 -3.63

appt. demand 12.04 12.97 12.74 6.34

Refinery runs 11.56 12.03 11.33 5.72



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OECD oil stocks vs 5-year avg

-200

-100

0

100

200

300

400

2010 2012 2014 2016

mn bl

5-year average = 0

—IEA

glObal supply anD DEmanD

markets may not rebalance until 2019: al-FalihOpec and non-Opec oil ministers concede that a full rebalancing of supply and demand may not happen before the start of next year.

“Despite the high level of conformity and commitment to maintain what we have done in 2017 and will do through 2018, [the IEA] predicts a stockbuild. And if that materialises, we have to not only stay the course for 2018, but also consider rolling it into 2019,” Saudi oil minister Khalid al-Falih says.

Al-Falih put compliance by the 24 Opec and non-Opec producers participating in the agreement to cut 1.7mn b/d from supply at 129pc in December, its high-est since the deal came into force. “Regarding the overhang in the market, from 330mn bl of excess OECD reserves, it has declined by two-thirds, with one-third remaining, still to be cleared in 2018,” al-Falih says.

But slower demand in the first and second quarters because of refinery maintenance could mean that inventories fail to draw down at the same speed. “We realise we are going into a soft period… and we have seen data from the IEA indicating that the rebalancing will slow,” al-Falih says.

The minister sees “no reason” to not expect the trend of high conformity among participating countries to continue in 2018. “The overperforming coun-tries continue to do better, and those underperforming countries have improved significantly,” he says. Iraq and Kazakhstan were highlighted as two countries whose compliance was weak in 2017. But al-Falih says he received “very reas-suring responses” from both while on a conference call with them during the 21 January meeting of the Joint Ministerial Monitoring Committee (JMMC), which oversees adherence with the agreement.

Participants in the output restraint deal should start talking about a gradual exit plan in the second half of the year, he adds. “We have to sit down and see what the market needs in terms of inventories, set that target carefully and look at a trajectory in the second half of the year, and start thinking about a gradual smooth exit so we do not choke the market during the low demand season in 2019,” he says.

Ministers also spoke of the possibility of maintaining some form of partner-ship between Opec and non-Opec producers beyond the end of the cuts regime in December this year. Al-Falih says that bringing together 24 Opec and non-Opec producers to cut output “has created such momentum” that it has led him “to drive toward permanency” of this group. “When I talk about permanency, I mean permanency of the framework, of the co-operation and of having mechanisms to call for meetings between Opec and non-Opec to propose solutions to any market imbalances that may emerge after the current one is dealt with.”

needs analysisRussian energy minister Alexander Novak is more cautious. Moscow has faced pressure from some Russian state-owned oil companies to rethink its commit-ment to the production restraints. “As far as co-operating in terms of stabilising the market goes, our experience of the past year has shown this to be a great success, benefiting all participants in the market,” Novak says. “Looking at the future, I believe it could be used, but we will have to analyse with our partners the necessity and need for such action. If need be, this is a mechanism that could be used,” he says.

The JMMC is considering a new metric for measuring the success of the agree-ment, which has focused on bringing inventories in line with the five-year aver-age. Alternative metrics include monitoring days of forward cover or keeping tabs on inventories by region or grade, al-Falih says.

Indications that stocks will rise during the softer demand peri-ods this year could push back market rebalancing



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economic forecasts

imf revises global growth higher The IMF has revised up its forecast for global economic growth, in part because of a projected short-term boost to the US economy.

The global economy will grow by 3.9pc this year and a further 3.9pc in 2019, the IMF says in the latest update to its World Economic Outlook (WEO). Both forecasts are 0.2 percentage points higher than in the October WEO (see table). IMF forecasts are widely used in the modelling behind key oil demand projec-tions, including the IEA’s.

The IMF increased growth projections for US GDP to 2.7pc this year, an increase of 0.4 percentage points. Deep cuts to the US corporate tax rate — to 21pc from the previous 35pc — and temporarily allowing US companies to imme-diately write off 100pc of their capital investments will boost growth to 2020, the IMF says. “This short-term growth boost will have positive, albeit short-lived, output spillovers for US trade partners,” IMF director of research Maurice Obstfeld says. But the projected pick-up in growth is likely to strengthen the dollar and widen the trade deficit — an outcome contrary to Washington’s push to curb a substantial trade imbalance.

The growth in the global economy is unusually broad-based. Nearly 120 econo-mies, accounting for three-quarters of world GDP, saw an acceleration in growth last year compared with 2016, the report says. The upward revision in growth af-fects both advanced and emerging economies. The IMF expects China’s economy to grow by 6.6pc this year, slightly higher than in its October report.

But the increase in the pace of growth is expected to be short-lived. “The two biggest national economies driving current and near-term growth are predictably headed for slower growth,” it says. China will eventually cut back the fiscal stimu-lus of the past couple of years and rein in credit growth. “As for the US, whatever output impact its tax cut will have on an economy so close to full employment will be paid back partially later in the form of lower growth.”

renewed callThe recent increase in crude prices translates into better economic prospects for oil exporters, at least in the near term. The IMF expects the Saudi economy to grow by 1.6pc this year, reversing last year’s 0.7pc decline in GDP. But the group renews its call for countries to reduce their reliance on crude exports. “Fuel exporters face especially bleak prospects and must find ways to diversify their economies,” Obstfeld says.

Tax cuts will help boost US growth by more than had been anticipated, although they could have some unwelcome effects

‘The short-term growth boost will have positive, albeit short-lived, output spillovers for US trade partners’

‘Fuel exporters face bleak prospects and must find ways to diversify their economies’

imf GDP growth estimates and forecastsJan 2018 Weo Update % ± oct 2017 Weo*

region 2017 2018 2019 2017 2018 2019

World 3.7 3.9 3.9 0.1 0.2 0.2

US 2.3 2.7 2.5 0.1 0.4 0.6

Eurozone 2.4 2.2 2.0 0.3 0.3 0.3

UK 1.7 1.5 1.5 0.0 0.0 -0.1

China 6.8 6.6 6.4 0.0 0.1 0.1

India 6.7 7.4 7.8 0.0 0.0 0.0

Japan 1.8 1.2 0.9 0.3 0.5 0.1

Russia 1.8 1.7 1.5 0.0 0.1 0.0

LatAm-Caribbs 1.3 1.9 2.6 0.1 0.0 0.2

Mena-Af-Pak† 2.6 3.6 3.5 0.0 0.1 0.0

Crude $/bl‡ 50.28 59.90 56.40 0.00 9.73 na*percentage points †Middle East, north Africa, Afghanistan and Pakistan ‡average of Brent, WTI, Dubai crude, change in $/bl


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Argus Global Markets

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26 January 2018

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fsu products

baker Hughes posts north American growth US firm Baker Hughes boosted its revenues from oil field services in North America by 4pc to $1.1bn in the fourth quarter compared with the third quarter, despite a drop in the rig count. The rig count dipped below 900 in early Novem-ber, having been closer to 940 throughout the third quarter. Revenues from its international operations increased by 6pc in the quarter to $1.7bn, propelled by higher activity in the Middle East, Latin America and Asia, although Europe and sub-Saharan Africa posted declines. “International activity is stabilising”, with customers more confident over operating costs and commodity prices, Baker Hughes says. But the sub-sea market “continues to be challenging” and activity remains low, with prices under pressure, the company says.

barclays raises short-term crude price forecastsUK-based bank Barclays has raised its Brent price forecasts, but remains cautious over the latter part of this year. “Upstream outages, a colder-than-normal winter, Venezuela’s severe production declines, and stronger-than-expected demand growth are giving the oil price rally further ammunition,” the bank says. Brent will average $66/bl in the first quarter, up from a previous forecast of $58/bl, and $62/bl in the second quarter, an increase of $10/bl, the bank says. It has raised the third-quarter figure by $2/bl to $56/bl, and kept the fourth-quarter number steady at $57/bl. The overall figure for 2018 is $60/bl, up from its previous fore-cast of $55/bl, with next year’s average at $57/bl. Barclays cites a “less construc-tive future” of rising stocks for its “bearish stance”.

naphtha exports riseProducts exports from the FSU rose last year as higher naphtha shipments more than offset lower fuel oil exports.

Naphtha shipments were up by more than 6pc year on year to around 545,000 b/d (see table). Exports of Russian naphtha were widely expected to decline in 2017, given the country’s efforts to boost production of higher-value gasoline for the domestic and international markets. But the completion of refinery upgrades — which will boost the country’s catalytic reforming and naphtha hydrotreatment capacity — has taken longer than expected, capping domestic refinery demand.

Exports of dirty products were limited by refinery upgrades and changes in Russia’s taxation system at the start of 2017. Export duties for dirty products rose to 100pc of the crude duty from 66pc previously, while rates for cleaner products such as diesel declined. Reduced fuel oil output in Russia because of refinery upgrades has been partially offset by a decline in consumption in the country, as high prices lead shipowners to buy bunker fuel elsewhere. European fuel oil exports to Asia-Pacific and the Middle East — including material shipped directly from the FSU — rose by more than 12pc year on year.

Diesel exports were little changed. Ultra-low sulphur diesel production rose last year, but domestic demand also firmed. Exports were also affected by a heavy Russian refinery maintenance schedule in the third quarter. The decline in Russian exports was compensated by higher output in Europe.

Russia’s modernisation efforts have had a mixed impact on vacuum gasoil (VGO) exports. While more VGO was produced, demand for the production from the domestic refining sector was stronger as new hydrocracking capacity came on line, including at Taif’s 160,000 b/d Nizhnekamsk plant.

FSU naphtha shipments increased by more than 6pc to around 545,000 b/d last year

fsu product exports ’000 b/ddec nov dec 16 2017 2016

Gasoline 184 193 177 193 189

Naphtha 547 611 490 546 512

Jet 37 26 23 35 40

Gasoil 1,058 837 942 965 967

Fuel oil 1,234 924 1,162 1,018 1,039

VGO 353 292 372 306 303

total 3,414 2,884 3,168 3,064 3,050

*revised



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26 January 2018

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Shipping industry calls for 2020 heavy fuel oil banShipping organisations have called for marine fuels that do not comply with tighter sulphur limits from 2020 to be banned from being loaded on to vessels. The ban would apply to vessels that do not have the necessary abatement technology such as scrubbers, preventing them from burning heavy fuel oil in contravention of the tighter 0.5pc marine sulphur cap that will come into force in 2020. Failure to enforce the cap could lead to market distortions and unfair competition, while a ban would “help ensure robust, simplified and consistent enforcement of the global sulphur cap”, the shipping groups say. New IMO rules will reduce the maximum sulphur content in marine fuels from 3.5pc to 0.5pc from January 2020.

GDP growth to drive global naphtha demandGlobal naphtha demand from the petrochemical sector will rise by a quarter by 2025 and almost double by 2040, ExxonMobil Catalysts and Licensing presi-dent Chris Birdsall says. Global economic growth of 2.9pc will spur demand for chemicals by 3.7pc by 2025, Birdsall says. And demand for cars and plastics will boost naphtha demand from just above 6mn b/d now to 8mn b/d by 2025 and more than 11mn b/d by 2040, the firm says. ExxonMobil expects diesel demand to rise by just 1.1pc by 2025, slightly above gasoline demand growth of 1pc, while fuel oil demand will decline by 0.3pc.

nigerian liquids output above 2mn b/d in DecemberNigerian crude and condensate production climbed to 2.06mn b/d in December, up by 1pc from November, the oil ministry says. This put crude and conden-sate output at 2.05mn b/d in the second half of last year. Nigeria has pledged informally to cap its crude production at 1.8mn b/d under the Opec/non-Opec output agreement. Its exports last month were scheduled at 2.04mn b/d, up from 1.86mn b/d a month earlier, but around 345,000 b/d of the total was Agbami and Akpo, which Abuja classes as condensate. This indicates that the country’s crude output remained beneath the agreed level last month, because crude runs at Nigeria’s refineries are negligible.

Canada’s Alberta crude inventories hit all-time highAlberta crude stocks rose to a new high of 64mn bl in November because of pipeline constraints. Stocks rose by 13pc, or 7.6mn bl, from October, the larg-est monthly gain on record, Alberta Energy Regulator data show. TransCanada’s 590,000 b/d Keystone pipeline went off stream on 16 November following a leak, leaving large amounts of crude stranded. The line resumed operations at the end of the month but only at 80pc of flows. The lower Keystone throughputs and rationing on other lines mean that crude continues to build up at Albertan hubs. The previous inventory record of 62mn bl was set in February last year, before problems at a major oil sands producer temporarily drew down stocks.

north Sea forties output decline to accelerate in May North Sea Forties crude output will fall further in May, Forties Pipeline System operator Ineos says. Production will drop below 435,000 b/d, down by 2.9pc from April’s revised figure. Forecasts for February, March and April have been revised up — to 465,000 b/d, 453,000 b/d and 447,000 b/d, respectively — but are still 3-11pc lower than those a year earlier. May’s forecast is 13pc lower than the May 2017 fig-ure. The decline will be driven by the Buzzard field — the largest single component of the Forties stream — where output will slow to 134,000 b/d in May, the lowest forecast for the field since it underwent maintenance in October 2016.

fSU crude exports ’000 b/dDec nov 2017 ± 2016

Black Sea 508 729 606 7

Baltic 1,305 1,371 1,515 -76

Druzhba 987 982 1,009 -60

China Overland 555 548 536 61

Kozmino 623 668 646 -1

Total Transneft 3,978 4,298 4,311 -69

Russian 3,582 3,863 3,923 -64

Kazakh/Turkmen 324 363 324 -13

Azeri 40 41 32 7

Belarus 32 32 32 0

russian rail 41 43 40 -17

Russian 41 43 40 -14

Kazakh 0 0 0 -4

Far east 344 310 343 -5

Sakhalin Energy 141 148 127 9

De Kastri (Sokol) 203 162 216 -14

Varandey 145 143 170 11

Other Arctic 212 168 165 68

Kaliningrad 13 19 13 -2

CPC 1,324 1,317 1,196 237

bTC 729 795 707 30

Kenkiyak-Alashankou 242 312 258 60

Russian transit* 208 223 204 64

Kazakh exports 34 89 54 -4

Caspian 99 123 90 -33

Supsa (AIOC) 82 101 72 -8

Batumi 8 9 11 -31

Iran 9 13 6 6

fSU total 6,880 7,263 7,058 236

Russian 4,338 4,547 4,654 -4

*included in Transneft China Overland figure above

fSU exports rise in 2017


26 January 2018Argus Global Markets

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Permian basinEl Paso

Cushing

Wichita Falls

Longview

Houston

Corpus Christi

Beaumont/Port Arthur

Midland

Cactus

Cactus 2, Gray Oak,

Epic, South Texas

Gateway, Magellan,

NuStar

Delta, Wink to Crane, Delaware Express

Roadrunner, Bobcat, State Line, Advantage, Permian Crude System, Rio, Alpha Crude Connector, Delaware Basin Extension

BridgeTex expansion, Enterprise conversion

Mid-Valley, Permian Longview

and Louisiana Extension

TexNew Mex

Wink

WA LineLine 80

West Texas

Basin

, Cen

turio

n

Plains

expa

nsion

Midland to Sealy, Amdel,

West Texas Gulf, Longhorn,

BridgeTex, Permian Express system

Existing pipelinesProposed pipelinesRefiningCities

Permian production

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2007 2009 2011 2013 2015 2017

mn b/d

— EIA Drilling Productivity Report

sPecial rePort: americas crude summit

The Permian basin is underpin-ning US production gains, but growth could be constrained by insufficient pipeline capacity

Permian bottleneck looms Growing US Permian basin crude production will create a bottleneck in the com-ing years because of pipeline constraints, midstream firms say.

Rising Permian production is driving US output gains, with the country’s production expected to increase by 1mn b/d this year. Output from the Permian, which straddles Texas and New Mexico, is expected to reach nearly 2.9mn b/d in February, up by around 620,000 b/d on a year earlier (see graph). Production will climb to 3.6mn b/d by the end of 2019, the EIA says. And output could gain even further given the potential for a large increase in drilling activity spurred by US marker WTI’s rise to more than $60/bl this year.

Permian basin producers have benefited from the start-up of nearly 800,000 b/d of crude pipeline capacity, mostly to the Gulf coast, with a further 2.7mn b/d planned from the basin (see table).

Capacity is sufficient for now but Permian output is growing rapidly and there is “going to be a day of reckoning” at some point if producers maintain their ag-gressive drilling plans, Enterprise Products Partners senior vice-president Brent Secrest says. The bottleneck is likely to be felt in late 2019 or 2020, Magellan Midstream Partners head of commercial crude Robert Barnes says. “You are go-ing to run into another wall for infrastructure capacity,” he says. Others, such as midstream firm ARB chief executive Adam Bedard, say problems with Permian takeaway capacity could emerge later this year.

export interestMost of the proposed Permian pipelines aim to ship crude to the Gulf coast, where interest in exporting US crude is high. Exports were 1.6mn b/d in the fourth quarter, up by more than 1mn b/d compared with a year earlier (see graph). US exports are expected to grow by 500,000 b/d this year, Energy As-pects chief analyst and co-founder Amrita Sen says.

Houston and Corpus Christi are being targeted as outlets for the higher US supply. Enterprise’s Secrest favours Houston, where the company has mul-tiple pipelines and terminals, giving it plenty of options for its oil. Enterprise is

Permian crude pipelines



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special report: americas crude summit

increasing shipments through a 450,000 b/d pipeline that runs from its Midland terminal to its Sealy storage facility west of Houston, which is connected to the company’s dock facilities. The line, which started up in November, will be able to ship crude in batches, including sour WTS, light WTI, higher-gravity grades and condensate, and is expected to hit capacity in the second quarter. It is moving WTI quality crude only at present, Secrest says.

Magellan plans to build a 250,000 b/d crude and condensate pipeline from Wink to Crane, the start point of its 275,000 b/d Longhorn pipeline, which carries Permian crude to Houston. Magellan is also considering a new project to move Permian and Eagle Ford crude from Crane to near Three Rivers, to con-necting lines to Houston and Corpus Christi. The system would have an initial capacity of at least 350,000 b/d with the ability to expand to 600,000 b/d for each destination. Energy Transfer Partners is gauging interest in more capacity on its recently opened 100,000 b/d Permian Express 3 development connecting west Texas and its hub at Nederland.

open water tooOthers aim to ship crude to Corpus Christi because of the shorter distance, less-congested port and its proximity to open water. Plains All American will build its 585,000 b/d Cactus 2 line — a combination of existing pipelines and two new lines — to Corpus Christi. Cactus 2 will serve Occidental’s 300,000 b/d export terminal at Ingleside, which opened in October 2016.

Buckeye Partners is seeking feedback on its proposed 600,000 b/d South Texas Gateway pipeline from Wink and Midland to Corpus Christi and Ingleside as well as Houston. And pipeline developer Epic is moving ahead with a plan to build a 590,000 b/d line connecting Orla in the Permian to Corpus Christi. US independent Noble Energy will act as shipper and is also a potential investor in the line, which is planned for completion next year.

The port of Corpus Christi aims to start loading 2mn bl very large crude carriers (VLCCs) at some point. A VLCC docked at the Ingleside terminal in May last year as part of a test, but the port will have to dredge to 74ft (22m) to accommodate fully laden VLCCs. It has received approval to dredge to 54ft from 47ft, so that it can handle laden Suezmaxes, but has yet to receive federal money for the work.

permian crude pipeline additions ’000 b/dcompany pipeline destination date capacity

Magellan/Plains BridgeTex Houston online 100

Plains Cactus Gardendale, Texas Nov 17 140

Enterprise Midland to Sealy Sealy, Texas online 450

Energy Transfer Partners Permian Express 3 Nederland, Texas online 100

total 790

proposedMagellan/Plains BridgeTex Houston Oct 19 40Plains Cactus 2 Corpus Christi 2019 575Epic Epic Corpus Christi 2019 590

Enbridge/Phillips 66 Gray Oak Corpus Christi/Freeport/Houston late-2019 385

Energy Transfer Partners Permian Express 3 Nederland tbd tbd

Buckeye Partners South Texas Gateway Corpus Christi/Houston 2019 600

Magellan Unnamed Corpus Christi/Houston tbd 350

NuStar Energy Unnamed Corpus Christi tbd tbd

Enterprise NGL line conversion Houston 2020 200

total 2,740

us crude exports

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jan Apr Jul Oct Jan Apr Jul Oct

mn b/dCanadaAsia-PacificEuropeOther AmericasOther

16 17



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asian buyers eye Wti Houston as benchmarkAsia-Pacific oil firms increasingly expect WTI Houston to become a global bench-mark as pipeline links to the Gulf coast improve and exports rise.

Refiners in Asia-Pacific are looking at alternatives to Mideast Gulf and Afri-can supplies such as US Gulf coast exports, Unipec president Chen Bo said at the Argus Americas Crude Summit in Houston. US crudes are likely to displace Africa as the second-largest supplier of crude to Asia-Pacific by 2020, only surpassed by the Mideast Gulf, Chen says. The US exported 220,000 b/d of crude to China last year, up from 20,000 b/d in 2016, US Census Bureau data show. China is now the second-biggest importer of US crude behind Canada (see table). Overall Asia-Pacific imports from the US rose to a high of 650,000 b/d in October.

The Gulf coast, and Houston in particular, will become the world’s most ac-tive physical and pricing centre, Chen says. Growing liquidity supports WTI Hous-ton becoming a crude benchmark for the Americas and internationally. “Houston is the pricing point, fob,” for US crude, Chen says. Argus assessments are the benchmarks for US spot crude trade.

Asia-Pacific will add 4mn b/d of refining capacity in 2017-20, with 3mn b/d of that in China, pushing the country’s total capacity to 16mn b/d. Most of the new capacity will be geared towards light or medium crudes, as integration with the petrochemicals sector gains traction.

India will add about 700,000 b/d of new refining capacity by 2020, prompt-ing Reliance head of oil trading J Rajaraman to consider importing more US crude. US exports to India rose to 20,000 b/d last year from nothing a year earlier. Indian refiners IOC, HPCL and BPCL have been among the buyers. North American grades such as western Canadian WCS, Mars, Bakken and light sweet LLS have the potential to displace grades that India currently buys from Africa and the Mideast Gulf. But some obstacles remain. “You want to get what you’re paying for,” Rajaraman says, with the predictability of quality an issue that Reli-ance and other buyers want assurances on.

Asian buyers are also keen to see fob pricing for US crude. Current prices are terminal prices, representing crude at the end of a pipeline. A fob price would reflect the additional transport costs involved in getting the crude to a port, but these costs are less transparent and this market is illiquid, making it hard to reach a consensus on a fob price.

Body of waterExports to Asia-Pacific would be aided by the ability of US shippers to export crude on 2mn bl very large crude carriers (VLCCs). Some midstream companies are looking to expand their docks around Corpus Christi so that they can handle bigger tankers, but these plans are likely to be many years in the offing, given is-sues around receiving federal funding. The ability to handle fully laden VLCCs will also depend on the port of Corpus Christi being dredged to more than 70ft (21m) from the current 47ft.

The Louisiana Offshore Oil Port (Loop) could start handling VLCCs sooner. The port is seeking shippers that want to export crude on the larger tankers from its facilities. The service, which could start this year, would involve connecting logistics infrastructure from Loop’s hub at Clovelly to its deepwater port, 27km offshore Port Fourchon. Loop can already offload VLCCs and 3mn bl ultra-large crude carriers (ULCCs) and would use the port’s existing configuration — with minor modifications — to operate bidirectionally. But using a bidirectional system rather than building standalone infrastructure to handle exports is likely to limit the amount of shipments that the port handles.

40

45

50

55

60

65

70

Jan Apr Jul Oct Jan

$/bl

WTI CushingWTI Houston

17 18

Wti cushing and Houston

us crude importers ’000 b/d2017 2016

Canada 316 359

China 220 22

UK 92 15

Netherlands 79 43

South Korea 55 11

Italy 41 20

France 31 8

Japan 29 8

Singapore 29 11

Colombia 22 10

India 21 0

Others 145 84

total 1,081 591

WTI Houston is well-positioned to become an international crude benchmark, as pipeline capacity to the Gulf coast grows



of 36


seaborne oil markets just emergingVivek Srivastava, the director of tanker research at SSY Consultancy and Research, spoke to Argus about global freight rates and shipping economics for US oil ex-ports. Edited highlights follow:

europe has been emerging as a key destination for us crude, but primarily for smaller tankers. What are you seeing with that?A lot of [last year’s] exports were going to Asia, and refining margins out there were strong. We have seen refining margins in Asia come down a bit since the start of this year, so Asian refiners are not that desperate to pull a lot of crude at the moment. European refiners have been shipping a lot of middle distillates to the US east coast, and refining economics in Europe have been good. And Euro-pean refiners want crude right now, so they have had an incentive to import.

The longer distance you transport the oil, the more cost effective it is to use a larger tanker. So if the oil is going all the way to Asia — across two oceans — it makes a lot more sense to use a VLCC. If it is only going to Europe you don’t nec-essarily need a VLCC. You can go on a Suezmax or even Aframax.

is it more economical now to co-load in the Gulf coast and mexico compared with carrying out ship-to-ship (STS) transfers offshore the Gulf coast?When VLCC exports first started, it was in the wake of the hurricanes that started around September. At that time, it was very cheap to charter a bunch of Afra-maxes to do STS transfers in the US Gulf. As the year progressed, it became [more expensive]. People started experimenting with co-loading at the east coast of Mexico — some of them found that they could make the economics work. The first of those is definitely dependent on Aframax rates as well as VLCC rates. And the two of those trend together — if crude is expected to load on a VLCC, it is expected to do so by STS transfer.

Where does the Wti-Brent spread need to be for Vlcc exports to work?At $4/bl. That’s down. It’s cheaper to charter a VLCC than it was two years ago.

How have rising US crude exports affected tanker markets from places such as west africa or latin america?Nigeria has had massive civil unrest, which has interrupted its crude loading. Angola had a few years of underinvestment during the previous regime. The overall total production and total exports have fallen off, but they have kind of prioritised exports to the east — to Chinese refiners and South Korean refiners, even Indian, Taiwanese and Japanese refiners. They have maintained exports at a level to those destinations, and flows on those routes actually recovered a bit in 2017 versus 2016. It is the westbound routes that have taken the big hit. They are sending very little crude to Europe, particularly, at the moment. I think west Af-rica to the US as a route was very popular in the early 2000s. It died a bit shortly after the financial crisis and dwindled to nothing at one point. It has come back slightly, but it is still not that voluminous or relevant.

do you think any Vlccs would be ballasted back to the mideast Gulf without crude aboard?It does happen in very bad markets, but — given all the predictions we have seen over the course of this conference for US cargo growth — I think there is going to be enough supply for US cargoes. East coast Mexico and Venezuelan cargoes are a bit more problematic.

‘The longer distance you trans-port the oil, the more cost effec-tive it is to use a larger tanker’

‘It is the westbound routes that have taken the big hit’

Very large crude carrier (VLCC) exports need Brent to hold a premium of $4/bl to WTI, SSY Consultancy and Research says



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Stocks at sea mn blJan 18 Dec 17 Nov 17 Oct 17 Sep 17 Jan 17

Total 655 664 642 655 597 673

Opec 481 490 469 470 443 506

of which:

ME Gulf eastbound 245 246 233 233 214 256

ME Gulf westbound 140 144 144 136 141 148

Non-Opec 174 174 173 185 154 167

Liftings mn b/dJan 18 Dec 17 Nov 17 Oct 17 Sep 17 Jan 17

Total 37.97 38.21 38.88 35.46 38.26 35.66

Opec 25.00 25.24 24.44 23.69 23.97 24.60

of which:

Middle East eastbound 13.42 13.46 13.18 12.79 13.07 13.70

Middle East westbound 4.40 3.89 4.19 3.51 3.86 3.77

West Africa eastbound 1.70 2.53 1.98 2.41 2.15 2.37

Non-Opec 12.97 12.98 14.44 11.77 14.30 11.06

Opec liftings rise at end of 2017Opec liftings climbed sharply in November-December, led by an increase in Mid-east Gulf shipments and higher Nigerian exports.

Liftings of just over 25mn b/d last month were the highest since February but still well down on a pre-production agreement peak of 28mn b/d in November 2016. Preliminary estimates suggest a dip in long-haul sailings in early February, consultancy Oil Movements says. US refineries have already begun shutting for maintenance, while turnarounds and weakening products margins are capping Chinese crude demand.

Most of the extra crude shipped towards the end of last year went east to meet soaring demand from Asia-Pacific refiners. Throughputs in the region were almost 1mn b/d higher in the fourth quarter than a year earlier — Chinese runs reached record highs and refineries in India and South Korea ran at more than 100pc of nameplate capacity. Eastbound liftings from the Mideast Gulf rose by 300,000 b/d in December to 13.4mn b/d, and have remained at this level for most of January. Iraq accounted for a large share of eastbound shipments last month, while Saudi exports to Asia-Pacific eased, Oil Movements says. Saudi Arabia has led the way on Opec supply cuts, reducing output by 500,000 b/d and exports by 650,000 b/d in 2017. But the country has maintained its market share with its main Asia-Pacific customers, opting instead to cut supplies to the US, where refin-ers have access to increasing amounts of domestic crudes.

Premium flows Exports of Atlantic basin crudes to Asia-Pacific hit new highs in the fourth quarter, encouraged by Ice Brent’s relatively low premium to Dubai swaps. Strong demand from China and India boosted eastbound west African liftings to a record 2.5mn b/d in December, while US shipments to Asia-Pacific climbed to 650,000 b/d in October. But rising Brent prices have boosted its premium to Dubai over the past two months, making Atlantic basin crudes that price against North Sea Dated less attractive to refiners in Asia-Pacific. Eastbound sales of

FuNDameNTaLS

Most of the extra crude shipped towards the end of last year went east to meet soaring de-mand from Asia-Pacific refiners

Opec liftings

22

23

24

25

26

27

28

29

Jan Apr Jul Oct Jan

2015 2016 2017

mn b/d

Stocks at sea

550

600

650

700

750

Jan Apr Jul Oct Jan

2015 2016 2017

mn bl



of 36

Arrivals mn b/dJan 18 Dec 17 Nov 17 Oct 17 Sep 17 Jan 17

Total 35.92 36.81 35.88 36.11 36.01 36.54

West of Suez 20.82 21.48 20.72 20.47 20.44 20.96

of which:

North America 9.58 9.56 8.98 8.94 8.87 9.92

Europe 9.00 9.69 9.33 9.39 9.54 8.79

East of Suez 15.10 15.33 15.16 15.64 15.57 15.58

Weekly US data mn bl19 Jan 18 12 Jan 18 ± 20 Jan 17 ± 17/16

Crude 411.6 412.7 -1.1 488.3 -76.7

Total products 791.4 793.2 -1.8 853.9 -62.5

Gasoline 244.0 240.9 +3.1 253.2 -9.2

Distillate 139.8 139.2 +0.6 169.1 -29.3

Crude runs* (mn b/d) 17.07 17.30 -0.23 16.58 +0.49

Deliveries* (mn b/d) 20.51 20.54 -0.04 18.97 +1.54

*four-week average — EIA

west African and North Sea crudes are expected to fall sharply this month, ac-cording to Oil Movements.

The increase in long-haul liftings at the end of last year boosted stocks of crude in transit by almost 70mn bl in the fourth quarter, a rise of around 750,000 b/d. This offset a large draw in reported onshore stocks and in offshore storage, prompted by the mid-year switch to backwardation in the North Sea and Dubai crude markets — prompt premiums to forward values. A major driver of the re-cent build in transit stocks was the surge in cargoes moving east from the Atlantic basin, including the US Gulf coast. Stocks of non-Opec and non-Mideast Gulf Opec crudes rose by 350,000 b/d in the fourth quarter, Oil Movements data show.

Provincial lifeChinese crude imports in December were 900,000 b/d lower than the previous month as arrivals fell in Shandong province, where independent refining capacity is clustered. Stocks were high last month after an increase in November imports, dampening demand for extra crude supplies. But net crude imports last year as a whole were 780,000 b/d higher than in 2016, reflecting the increase in refinery throughputs and a continuing decline in domestic crude output. All the extra crude came from producers in the Atlantic basin and the FSU, pushing their com-bined share of Chinese imports to 52pc, up from 46pc in 2016. Mideast Gulf pro-ducers kept supplies at 2016 levels, but their share of the market shrank to 43pc, the lowest in over a decade. Small increases from Saudi Arabia, Iraq, Kuwait and Yemen were offset by an 80,000 b/d fall in imports from Oman.

The US is now exporting well over 1mn b/d of crude, cutting net imports in the fourth quarter to a 25-year low of 6.2mn b/d. Most of this crude is going to Europe and Asia-Pacific, filling shortfalls in Mideast Gulf supplies. Saudi ship-ments to the US in July-December were just 720,000 b/d, down from 1.2mn b/d in the first half of the year, as the country sustained supplies to its Asia-Pacific customers. And declining production in Venezuela and Mexico cut Latin American imports by over 200,000 b/d last year.

FUNDAmeNTAlS

China crude imports

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2015 2016 2017

Mideast Gulf

Atlantic basin

mn b/d

US crude trade

0.0

0.5

1.0

1.5

2.0

7.0

7.5

8.0

8.5

9.0

2015 2016 2017

Imports (left-hand scale)

Exports (right-hand scale)

mn b/d mn b/d



of 36

Europe25 Jan 18 Jan ±

Brent 70.62 69.49 +1.13Dated 70.52 69.34 +1.18Urals cif Med 69.42 69.29 +0.13

USFeb 25 Jan 18 Jan ±WTI 65.62 63.95 +1.67LLS 67.87 68.49 -0.62Mars 64.67 64.90 -0.23

West Africa25 Jan 18 Jan ±

Bonny Light 71.52 70.34 +1.18Forcados 71.62 70.44 +1.18

Mideast GulfMar 25 Jan 18 Jan ±Dubai (Lon) 67.50 66.47 +1.03Oman (Sing) 68.20 66.74 +1.46

Asia-Pacifi c25 Jan 18 Jan ±

Tapis 72.82 71.79 +1.03Minas 62.71 60.84 +1.87ESPO 72.06 71.02 +1.04

Crude prices reboundCrude prices rose back to near three-year highs on expectations of fi rm demand and falling inventories.

Atlantic basin benchmark North Sea Dated rose by $1.18/bl to $70.52/bl in the week to 25 January, not far from a three-year high of $70.67/bl recorded on 11 January. US marker WTI fi rmed by $1.67/bl to $65.62/bl, marginally down from a three-year high of $65.73/bl on 24 January.

Stronger economic growth forecasts are underpinning higher oil prices. The IMF raised its 2018 forecast for global GDP growth to 3.9pc in its latest World Economic Outlook on 22 January, up from 3.7pc previously. IMF forecasts are widely used in the modelling behind key oil demand projections.

US inventories fell further amid rising exports, further underpinning values. US crude stocks fell by 1.1mn bl in the week to 19 January, representing a tenth straight week of declines, EIA data show. And US crude exports rose by 160,000 b/d to about 1.4mn b/d during the same week. But US exports could dip because WTI’s narrowing discount to North Sea Dated has made the various export arbitrages less workable. WTI’s discount to North Sea Dated has fi rmed to less than $5/bl for the fi rst time since November.

Mars retractsThe deteriorating arbitrage pushed Gulf coast light sweet LLS and off shore medium sour Mars to their lowest values to WTI since July last year. LLS fell by nearly $2.30/bl against the benchmark, while Mars fell by $1.90/bl. February WTI Houston’s premium to WTI priced at the Midland hub in west Texas fell to its lowest since February last year, as some Gulf coast crude values came under pressure from the unattractive export arbitrages.

But the prospect of heavy sour supply tightness because of pipeline conges-tion in Canada boosted Canadian heavy sour WCS crude priced in the Houston market. Colombian heavy sour Castilla Blend’s discount to Ice Brent futures narrowed as demand rose for grades to fi ll the shortfall left by the restricted Canadian fl ows to the Gulf coast.

Global crude prices at a glance $/bl

OVERVIEW

Oil surpluses could be shifting from crude supplies to the prod-ucts markets, and inventories may be starting to rise



of 36

Cif Rotterdam$/t $/bl ± 18 Jan

Gasoline 679.00 81.50 +24.25 +2.91Gasoil 623.50 83.76 +15.50 +2.08Naphtha 599.00 67.30 +3.00 +0.34Jet-kero 672.00 85.30 +15.00 +1.90HSFO 369.75 59.08 +1.75 +0.28Fob USGC

$/t $/bl ± 18 JanGasoline 699.08 81.28 +10.08 +1.17Gasoil 625.00 87.06 +23.77 +3.17Jet-kero 665.66 85.33 +25.97 +3.31HSFO 352.17 55.99 +0.29 +0.05

Asian refi ners are still taking US cargoes, although they probably bought them when the arbitrages were more workable. Abu Dhabi’s Adnoc bought Eagle Ford in a tender seeking condensate for March delivery to Ruwais. And Taiwan’s CPC took 2mn bl of WTI in its latest tender — the fourth straight month that it has taken the grade. CPC has shunned west African crude in favour of WTI recently.

North Sea Dated-linked Atlantic basin crude has become more expensive for Asia-Pacifi c buyers because of a widening Brent-Dubai exchange of futures for swaps (EFS) — or Ice Brent’s premium to Dubai swaps. The EFS hit a 22-month high of over $3.90/bl on 25 January, which could curb Asia-Pacifi c refi ners’ appetite for North Sea Dated-related west African and North Sea grades.

Demand for North Sea crude is faltering. The Bukha loaded 2mn bl of Forties on 12 January, but has been waiting off shore Southwold in England since then. The Gene loaded 2mn bl of Forties in early January, but halted its trip to South Korea off shore the Canary Islands. And the Sea Amber set off recently for Canada carrying January Oseberg before turning around in the middle of the Atlantic, and has yet to declare a destination.

Light sweet crude values in Europe may receive a boost from fi rmer jet fuel margins amid tighter supply from the Mideast Gulf because of refi nery mainte-nance. Some Mideast Gulf and Asia-Pacifi c jet shipments destined for northwest Europe were diverted to the US because of a shortfall in the country.

Jet-kerosine margins in Asia-Pacifi c were supported by fi rm north Asian winter demand. Japan — usually an exporter of middle distillates — bought jet-kerosine for heating amid unusually cold weather. Gasoil margins in Asia-Pacifi c fi rmed on demand from Indonesia and Sri Lanka. US Gulf coast heating oil and jet prices rose to three-year highs, spurred by cold weather.

Late winter Late winter demand and refi nery maintenance have underpinned products prices and kept margins fi rm, but rising crude values could start to erode refi ners’ profi ts. US gasoline and distillate stocks rose in the week to 19 January, indicating that the stockbuild may be shifting to products.

Global product prices at a glance 25 Jan

OVERVIEW

Fob Singapore $/t $/bl ± 18 Jan

Gasoline 686.35 80.75 +16.15 +1.90Gasoil 615.82 82.55 +19.77 +2.65Naphtha 599.18 66.58 -2.25 -0.25Jet-kero 656.24 83.30 +19.70 +2.50HSFO 394.00 62.08 +10.50 +1.65



of 36

Crude Markets

Crude marker grade price assessments $/bl25 Jan ± 18 Jan 25 Jan ± 18 Jan

Forward North Sea (London close) WTI Cushing (Houston close)

Feb 71.15 +1.34 65.62 +1.67

Mar 70.71 +1.33 65.51 +1.62

Apr 70.27 +1.26 65.37 +1.66

May 69.88 +1.21 65.10 +1.61

Dubai (London close) LLS (Houston close)

Feb - - 67.87 -0.63

Mar 67.50 +1.03 68.41 +0.10

Apr 67.08 +1.04 - -

May 66.76 +0.91 - -

Marker grades differentials $/blWtI/N sea N sea/dubai LLs/WtI

(London close) (London close) (Houston close)

25 Jan ± 18 Jan 25 Jan ± 18 Jan 25 Jan ± 18 Jan

Feb - - - - +2.25 -2.30

Mar -4.82 +0.65 +3.21 +0.30 +2.90 -1.53

Apr -4.56 +0.73 +3.19 +0.22 - -

-8

-6

-4

-2

0

2

Apr Jul Oct Jan Apr Jul Oct Jan

$/bl

16 17 18

WTI differential to North Sea

North Sea premium to Dubai

1

2

3

4

5


$/bl

16 17 18

Global prices find support• Global crude prices rose, supported by another fall in US crude inventories.Further impetus came from suggestions that talks could take place in the sec-ond half of this year about a gradual exit plan from the Opec/non-Opec produc-tion deal. Atlantic basin benchmark North Sea Dated gained $1.18/bl to $70.52/bl, while US marker WTI was up by $1.67/bl at $65.62/bl.

• March-loading Banoco Arab Medium fell to a discount of around 30¢/bl to theSaudi Arab Medium official formula price. This was its widest discount in aboutsix months, under pressure from weak fuel oil margins and high official pricing.

• March-loading medium sour Qatar Marine traded at a discount of around 30¢/blto QP’s official selling price (OSP), the deepest Qatar Marine discount to the OSPsince March 2017.

• Iraqi medium sour Basrah Light discounts to North Sea Dated widened by 15¢/bl to $3.80/bl on slim demand and thin trade since Turkish refiner Tupras boughttwo cargoes of the grade in a previous tender.

• Russian medium sour Urals fell by $1.05/bl to a discount of $1.10/bl to NorthSea Dated in the Mediterranean, under pressure from weaker fuel oil margins.In northwest Europe, Urals firmed by 30¢/bl to a 45¢/bl discount to North SeaDated, on keen buying interest in early February supplies from Norway’s Statoil.

• Western Canadian WCS priced at Cushing firmed to a $7/bl discount to Nymexcalendar-month average (CMA) WTI, up by 15¢/bl. Support came from a possibleshortage of heavy sour crude in the US Gulf coast and midcontinent.

• Colombian heavy sour Castilla Blend discounts to Ice May Brent narrowed byaround 90¢/bl to $7/bl on concerns over restricted flows of alternative Canadiancrude to the US Gulf coast in the first quarter.

Prices gained following another US stockdraw, and WTI made up some of the ground it has lost to North Sea Dated



of 36

Crude Markets

Front-month North sea

35

40

45

50

55

60

65

70

75


$/bl

North Sea first month minus second month

-1.5

-1.0

-0.5

0.0

0.5

1.0

Apr Jul Oct Jan Apr Jul Oct Jan16

North Sea first month minus second month

16 17

17 18

18

North sea crudes under pressure• North Sea crudes came under pressure, with prompt February cargoes soughtat weaker differentials than supply for the second half of the month. FebruaryEkofisk loadings are scheduled to reach a five-month high of nearly 260,000 b/d.

• Algerian light sweet Saharan Blend fell by 10¢/bl to an 80¢/bl discount to NorthSea Dated, under pressure from plentiful availabilities of competing crude sup-plies in the Mediterranean region.

• Caspian CPC Blend rose to a 40¢/bl premium to North Sea Dated, with supplyloading in the first half of February sold out. Azeri BTC Blend firmed by 30¢/bl toa $2/bl premium to North Sea Dated, on stronger light distillate margins.

• Nigeria’s state-owned NNPC raised its official formula prices for the country’smain grades, despite a lack of buying interest. Heavy sweet Antan gained themost, firming by 55¢/bl from January.

• Angolan oil marketer Sonangol allocated 11 March-loading cargoes to termbuyers, with China’s Sinochem and Unipec securing nine cargoes between them.Medium sweet Girassol and Kissanje gained about 10¢/bl each to 60¢/bl and 10¢/bl premiums to North Sea Dated, respectively.

• US deepwater light sweet LLS lost nearly $2.30/bl against WTI to reach a $2.25/bl premium. A narrowing arbitrage to export US crude as WTI made gains relativeto Ice Brent pressured the grade.

• March-loading Vietnamese Ruby traded at a premium of $3.00-3.50/bl to NorthSea Dated, higher than the $2.50/bl premium achieved for February deals. Firmmiddle distillate margins and tighter Vietnamese supply provided support.

North Sea crudes came under pressure, and Algerian light sweet Saharan Blend fell



of 36

FRANCE

RUSSIALATVIA

ESTONIASWEDEN

SLOVAKIA

BELARUS

CZECH REPUBLIC

POLAND

UKRAINE

HUNGARY

ITALY

UK

LITHUANIA

NETHERLANDS

GERMANY

Russian Urals crude prices (25 Jan) $/bl

CRUde MaRkets

Crude price assessments $/blDifferential

25 Jan ± 18 Jan Basis 25 Jan ± 18 Jan

North Sea (London close)Dated 70.52 +1.18 Apr N Sea +0.25 naBrent 70.62 +1.13 Dtd +0.10 -0.05Forties 70.79 +1.10 Dtd +0.27 -0.08Flotta Gold 70.22 +1.18 Dtd -0.30 ncEkofisk 71.22 +0.84 Dtd +0.70 -0.34Oseberg 71.82 +1.18 Dtd +1.30 ncStatfjord 71.02 +1.18 Dtd +0.50 ncNorth Sea Reference Price 71.03 +1.16FSU (London close)Urals NWE 70.07 +1.48 Dtd -0.45 +0.30Urals cif Mediterranean 69.42 +0.13 Dtd -1.10 -1.05Siberian Light cif Med 71.07 +1.18 Dtd +0.55 ncCPC Blend cif Med 70.92 +1.21 Dtd +0.40 +0.02BTC 72.52 +1.48 Dtd +2.00 +0.30Mediterranean (London close)Es Sider 69.92 +1.48 Dtd -0.60 +0.30Iran Heavy Sidi Kerir 66.75 +0.13 Dtd -3.77 -1.05Iran Light Sidi Kerir 69.05 +0.13 Dtd -1.47 -1.05Suez Blend 67.72 +0.13 Dtd -2.80 -1.05Saharan Blend 71.32 +1.08 Dtd +0.80 -0.10Kirkuk 66.32 +1.18 Dtd -4.20 ncWest Africa (London close)Bonny Light 71.52 +1.18 Dtd +1.00 ncEscravos 71.32 +1.18 Dtd +0.80 ncBrass River 71.52 +1.18 Dtd +1.00 ncForcados 71.62 +1.18 Dtd +1.10 ncQua Iboe 71.52 +1.18 Dtd +1.00 ncCabinda 70.62 +1.18 Dtd +0.10 ncGirassol 71.12 +1.28 Dtd +0.60 +0.10Zafiro 70.52 +1.18 Dtd even ncHungo 69.82 +1.18 Dtd -0.70 ncMideast Gulf (Singapore close)Dubai Mar 67.99 +1.53Murban Mar 70.72 +1.41 Adnoc +0.22 ncDas Mar 70.37 +1.41 Adnoc +0.22 ncOman Mar 68.20 +1.46 Dubai swaps +0.95 +0.05Qatar Land Mar 70.05 +1.36 QP +0.05 -0.05Qatar Marine Mar 68.00 +1.11 QP -0.30 -0.30

Urals: NWE diff to Mediterranean

-2.0

-1.5

-1.0

-0.5

0.0

0.5


$/bl5-day averageMediterranean = 0

16 17 18

Augusta 69.42

Novorossiysk 68.11

To Slovakia 62.59

Primorsk 68.98

To Germany 62.79

To Poland 62.89

Rotterdam 70.07

To Hungary 62.59

Ust-Luga 68.97

Seaborne Urals prices are spot market assessments. Druzhba pipeline prices change once a month and are retrospectively calculated in the first week after the delivery month



of 36

Chicago

Patoka

Cushing

HoumaClovelly

St JamesEmpire

Midland

Houston

Crude Markets

Crude price assessments $/blDifferential

25 Jan ± 18 Jan Basis 25 Jan ± 18 Jan

Asia-Pacific (Singapore close)ESPO Blend 72.06 +1.04 Dubai swaps +4.81 -0.37Minas 62.71 +1.87 ICP +1.00 ncDuri 59.71 +1.87 ICP +1.00 ncCinta 63.21 +1.87 ICP +0.30 ncWiduri 63.41 +1.87 ICP +0.30 ncArdjuna 62.86 +1.87 ICP even ncBelida 64.61 +1.87 ICP +1.00 ncBach Ho 73.42 +1.18 Dtd +2.90 ncTapis 72.82 +1.03 Dtd +2.30 -0.15Cossack 72.52 +1.18 Dtd +2.00 ncKutubu 72.72 +1.18 Dtd +2.20 ncNW Shelf 73.27 +1.18 Dtd +2.75 ncDar Blend 67.52 +1.18 Dtd -3.00 ncAmericas seaborne (Houston close)ANS USWC Mar 70.15 +1.00 Mar WTI +4.87 -0.64Castilla Blend Dtd 62.60 +1.56 May WTI -2.50 naVasconia Dtd 66.25 +1.08 May WTI +1.15 naEscalante Dtd 66.50 +1.08 May WTI +1.40 naUS/Canada pipeline (Houston close)Bakken month Dtd 65.21 +1.52 Mar WTI -0.08 -0.13Line 63 Feb 69.80 +1.19 Postings -0.66WTI Midland Feb 66.71 +1.58 Feb WTI +1.09 -0.09WTI Houston Feb 68.12 +0.37 Feb WTI +2.50 -1.30LLS St James Feb 67.87 -0.62 Feb WTI +2.25 -2.29HLS Empire Feb 67.55 -1.00 Feb WTI +1.93 -2.67Mars Clovelly Feb 64.67 -0.23 Feb WTI -0.95 -1.90Poseidon Houma Feb 64.37 -0.18 Feb WTI -1.25 -1.85WTS Midland Feb 65.17 +1.37 Feb WTI -0.45 -0.30WCS Hardisty Mar 37.10 -2.06 Mar WTI -28.18 -3.70ASCI Feb 64.64 -0.16 Feb WTI -0.98 -1.83

LLS diff to North Sea Dated

-3-2-101234


$/bl

5-day averageNorth Sea Dated = 0

16 17 18

WTI Cushing 65.62

LLS St James 67.87

WTI Midland 66.71

WTS Midland 65.17

Mars Clovelly 64.67

WCS Cushing 58.47

us pipeline crude prices (25 Jan) $/bl

WTI Houston 68.12



of 36

EuropEan products MarkEts

straight-run 0.5% fuel oil vs Brent

-4

-3

-2

-1

0

1

2

Nov Dec Jan

$/bl

Brent futures = 0

European product price assessments $/tnorthwest Europe cif Mediterranean cif

cif 25 Jan ± 18 Jan 25 Jan ± 18 Jan

Gasoline and blendstocks

Gasoline 95 Ron 679.00 +24.25 683.75 +28.75

MTBE* 764.25 +47.25 - -

Middle distillates

Jet† 672.00 +15.00 653.75 +14.50

French diesel 628.25 +16.00 633.25 +16.25

French heating oil 623.50 +15.50 626.25 +15.00

Cracked fuel oil

– 1% sulphur 383.75 +1.50 391.50 +1.25

– 3.5% sulphur 369.75 +1.75 374.00 +1.75

LPG and feedstocks

Propane 488.00 -46.00 496.00 -45.00

Butane 503.00 +8.50 530.00 +9.00

Naphtha 65% para 599.00 +3.00 590.00 +3.00

Vacuum gasoil 0.5% sulphur† 530.25 +7.50 525.12 +9.12

Vacuum gasoil 1.6% sulphur 514.25 +7.25 - -

Straight-run fuel oil 0.5% sulphur $/bl‡ -0.50 -1.50 - -

*Rotterdam barges †fob Mediterranean price replaced by cif price from 5 January ‡differential to Brent crude futures

naphtha loses appeal for petrochemical buyers • Feedstock margins weakened, with naphtha reaching its highest premium torival petrochemical feedstock propane since 2016. Demand from west Africaand Latin America supported gasoline’s premium to crude. Tighter supply amidlower imports supported middle distillate refining margins and plentiful suppliesweighed on fuel oil.

• West African and Latin American demand pushed Eurobob oxy gasoline’spremium to North Sea Dated up by nearly $1.70/bl to above $8.10/bl. Refineryturnarounds in the US Gulf coast — a major supplier of gasoline to Latin America— encouraged European exports to Brazil and Mexico. US demand remained slim,with gasoline inventories at a 10-month high in the week to 19 January.

• Lower imports from the Mideast Gulf pushed northwest European diesel andjet fuel cargo premiums to North Sea Dated crude to four-week highs of $13.70/bl and $14.76/bl, respectively. Slow demand and exports from Baltic ports couldpressure diesel margins in the coming weeks. Shipping is currently restricted onmajor waterways in Germany and storage depots along the Rhine river may closebecause of flooding.

• Naphtha’s premium to rival petrochemical feedstock propane reached its high-est since late 2016 at $111/t, weighing on buying interest from steam crackeroperators. But a wider discount to North Sea Dated crude helped stoke demandfrom gasoline blenders and US Atlantic coast buyers.

• Imports from Baltic ports and a reduction in cargo loadings at Rotterdam areweighing on cracked high-sulphur fuel oil values. Low-sulphur straight-run fuel oilvalues have returned to a discount to underlying Ice April Brent, partially trackinga weaker low-sulphur VGO market (see graph).

Gasoline was supported by de-mand from west Africa and Latin America, while tighter supplies supported middle distillates



of 36

EuropEan products MarkEts

300

350

400

450

500

550

600

650

700

Apr

Gasoline 95 Ron

Naphtha

French heating oil

$/t

100

150

200

250

300

350

400


Low-sulphur fuel oil

High-sulphur fuel oil

16 17 18

northwest Europe cif cargoes

Gasoline and gasoil derivatives $/tGasoline barge swaps Ice gasoil futures settlement

fob nWE 25 Jan ± 18 Jan 25 Jan ± 18 Jan

Feb 667.50 +19.50 Feb 627.25 +15.50

Mar 667.50 +17.00 Mar 627.75 +15.00

Apr 688.50 +13.00 Apr 625.25 +14.25

river rhine barge price assessments (25 Jan)rotterdam ruhr Basel

barges tank wagons barges

$/t $/t €/t $/t

Heating oil 626.30 638.30 513.70 674.70

Gasoline Eurobob oxy 664.50 676.50 544.50 717.60

Diesel 10ppm 626.30 - - -

Fuel oil derivatives $/tLow-sulphur cargo swaps High-sulphur barge swaps

fob nWE 25 Jan ± 18 Jan 25 Jan ± 18 Jan

Feb 377.75 +3.00 371.75 +3.50

Mar 379.00 +3.25 372.50 +3.50

Apr 379.25 +3.50 372.25 +3.25



of 36

US prodUctS MarketS

USac gasoline, diesel vs Gulf coast

0

2

4

6

8

10

12

Dec Jan

Gasoline

Diesel

¢/USG

USGC = 0

Colonial tariff= 0

east coast and US Gulf cargo price assessments ¢/USGUS Gulf fob NY Harbor cif

25 Jan ± 18 Jan 25 Jan ± 18 Jan

Gasoline and blendstocks

Conventional 93 205.14 +0.66 209.79 +4.94

Conventional 87 193.52 +2.79 198.04 +4.19

Rbob 83.7 - - 194.02 +2.74

Ethanol - - 145.50 +1.75

Middle distillates

Jet 203.42 +8.00 230.04 +5.37

Diesel (ULSD) 207.29 +7.54 211.79 +6.37

Heating oil 194.29 +9.62 200.79 +4.12

Fuel oil $/bl

1.0% sulphur - - 59.55 -1.15

3.0% sulphur 55.99 +0.05 58.76 +0.01

LPG and Feedstocks

Propane* 84.31 -9.19 - -

Butane* 84.12 -10.50 - -

Naphtha differential‡ -20.00 -1.50 - -

Vacuum gasoil 0.5% sulphur differential† -0.28 -1.72 - -

Vacuum gasoil 1.6% sulphur differential‡ -3.84 -1.72 - -

*Mont Belvieu †barges, vs 70:30 conventional gasoline 87/heating oil ‡vs conventional gasoline

Margins make gains• Strong demand led to firmer Gulf coast diesel and gasoline margins. But thefirmer levels undermined domestic arbitrage shipments. Slow buying interest andplentiful supply weighed on fuel oil.

• Gulf coast arbitrage opportunities to send gasoline and diesel to New York Har-bor narrowed. The Atlantic coast diesel premium to the Gulf coast has collapsedas Gulf coast prices hit three-year highs on cold weather. Gasoline in New Yorkmanaged to outpace gains in the Houston market, allowing the arbitrage to ap-pear slightly open (see graph).

• Fuel oil came under pressure from low demand coupled with improving avail-abilities in the Gulf coast. This weighed on prices, putting pressure on refiningmargins. The arbitrage for imports of feedstock to the Gulf coast was open.

• High gasoline values boosted Gulf coast naphtha prices, effectively closing spotarbitrage opportunities to export supplies.

• Vacuum gasoil (VGO) prices rose amid firmer crude values in the US and Europe,which bolstered demand for alternative feedstocks. The strong VGO pricing wasalso attributed to an extensive refinery turnaround season scheduled in Europeand the US in February.

• Los Angeles gasoline strengthened on firm buying interest, offsetting a rise instate inventories to 7.7mn bl, their highest in 19 years. A vessel carrying 50,000tof dirty products was scheduled for export from the west coast of Mexico on 31January for the US west coast. The cargo is likely to be residual fuel oil to be soldfor the bunker fuel market in Los Angeles.

Gulf coast diesel and gasoline refining margins were boosted by strong demand



of 36

US prodUctS MarketS

New York Harbor cif cargoes

80

100

120

140

160

180

200

220

240


Gasoline Conventional 87

Heating oil

¢/USG

20

30

40

50

60

70


Fuel oil 0.3%

Fuel oil 3.0%

$/bl

16 17 18

products derivatives25 Jan ± 18 Jan 25 Jan ± 18 Jan

Nymex close ¢/USG Rbob gasoline Heating oil

Feb 191.54 +3.19 211.54 +5.37

Mar 190.89 +2.12 211.04 +5.18

Apr 207.69 +2.60 209.14 +4.60

Fuel oil swaps $/bl 1% sul NY Harbor High sul US Gulf

Jan 60.05 -0.10 57.45 nc

Feb 59.85 +0.25 57.60 +0.15

Mar 59.40 +0.25 - -

West coast price assessments25 Jan ± 18 Jan 25 Jan ± 18 Jan

Pipeline ¢/USG Los Angeles San Francisco

Carbob 84 200.89 +12.04 190.89 +7.04

Carb diesel 208.04 +3.18 204.54 +10.87

Jet 207.54 +5.62 206.04 +5.62

Bunkers $/t Los Angeles Seattle

HSFO 380 398.50 +7.50 400.00 +11.50



of 36

AsiA-PAcific Products MArkets

Asia-Pacific gasoil vs Dubai crude

9

10

11

12

13

14

15

16

17

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

$/bl

Dubai swaps = 0

Singapore and Japan price assessments $/blFob Singapore C+F Japan

25 Jan ± 18 Jan 25 Jan ± 18 Jan

Light distillates*Gasoline 95 Ron 80.75 +1.90 - -Gasoline 92 Ron 78.75 +1.75 - -Naphtha 66.58 -0.25 608.00 +1.00Middle distillatesJet-kerosine 83.30 +2.50 84.85 +2.50Gasoil 50ppm sulphur 84.15 +2.30 85.10 +2.90Gasoil 0.5% sulphur 82.55 +2.65 - -Fuel oilLSWR (fob Indonesia) 61.72 +1.51 - -HSFO 180cst 394.00 +10.50 402.30 +10.95HSFO 380cst 389.25 +9.50 - -*Japan $/t

Singapore swaps25 Jan ± 18 Jan 25 Jan ± 18 Jan

Gasoil $/bl Jet $/blFeb 83.90 +2.30 83.20 +2.30Mar 83.50 +2.15 82.85 +2.20Apr 83.10 +2.05 82.40 +2.10

Naphtha $/bl HSFO $/tFeb 65.70 -0.20 393.50 +9.25Mar 65.30 +0.05 393.25 +8.50Apr 64.95 +0.15 393.00 +8.50

Middle distillate margins firm • Middle distillate margins rose on firm demand. Naphtha margins weakened onunplanned cracker shutdowns, while fuel oil margins fell on potentially more arbi-trage arrivals. Strong buying interest lent some support to gasoline.

• Regional demand and lower exports from China supported gasoil margins (seegraph). Indonesia and Sri Lanka bought medium-sulphur gasoil cargoes, while ex-pectations of firming seasonal demand for gasoil in the domestic market limitedexports from China.

• Jet fuel refining margins rose on seasonal support. Japan, a major middledistillate exporter outside the winter months, bought kerosine and jet fuel amidunusually low temperatures.

• Gasoline’s premium to naphtha reached a four-month high on firmer demandfrom Kuwait, which bought more than 18,000 b/d of gasoline for February-Aprildelivery amid turnarounds at its refineries.

• Naphtha margins fell further with unplanned shutdowns at South Korean naph-tha crackers in Ulsan owing to cold weather. Naphtha prices were already underpressure from falling prices for competing feedstock LPG.

• Fuel oil refining margins fell amid higher Singapore inventories and potentiallymore arbitrage arrivals in February. The viscosity spread between 180cst and380cst high-sulphur fuel oil (HSFO) moved to its widest in six months at $6/t onfirmer prices for lower-viscosity product.

Middle distillate margins rose, supported by regional demand and lower exports from China



of 36

AsiA-PAcific Products MArkets

singapore fob cargoes

35

40

45

50

55

60

65

70

75

80

85Gasoline 95 RonNaphthaGasoil 0.5%

$/bl

150

200

250

300

350

400


High-sulphur fuel oil 180cst

$/t

16 17 18

east of suez LPG $/tc+f Japan fob Mideast Gulf

25 Jan ± 18 Jan 25 Jan ± 18 Jan

Propane* +10.00 /+13.50 +1.00 -20.00 /-10.00 nc

Butane* +3.00 /+6.50 -6.00 -20.00 /-10.00 nc

*differentials to Saudi Aramco selling price

Mideast Gulf cargo price assessments $/bl

25 Jan ± 18 Jan Premium to Platts* 25 Jan

Light distillates

Gasoline 95 Ron 79.05 +1.85 +1.90

Naphtha ($/t) 589.50 +0.60 +13.00

Middle distillates

Kerosine 81.85 +2.45 +1.40

Gasoil 0.2% sulphur 80.95 +2.25 -0.90

Gasoil 0.5% sulphur 80.35 +2.25 -1.50

Fuel oil ($/t)

HSFO 180cst 383.15 +10.15 nc

HSFO 380cst 378.40 +9.20 +2.50

*Platts mean of Mideast Gulf assessment



of 36

Netbacks

brent northwest europe

0

2

4

6

8

10

12


$/bl

16 17 18

esPO blend singapore

-5

0

5

10

15


$/bl

16 17 18

basrah Light singapore

-10

-5

0

5

10

15


$/bl

16 17 18

LLs Us Gulf

02468

101214161820


$/bl

16 17 18

Netback values (19-25 Jan) $/blRefinery gate value Freight Netback value crude Netback margin

simple ± complex ± simple complex spot simple ± complex ± yield 12-18

Janyield 12-18

Janyield yield Price yield 12-18

Janyield 12-18

Jan

Northwest EuropeBrent 73.99 +0.51 76.08 +0.94 0.85 73.14 75.24 69.87 +3.27 +0.73 +5.37 +1.17Forties 73.80 +0.56 75.30 +0.95 0.82 72.99 74.48 69.94 +3.05 +0.71 +4.54 +1.10Arab Light 72.22 +0.41 73.93 +0.79 0.54 71.67 73.38Arab Heavy 70.09 +0.44 71.85 +0.68 0.56 69.53 71.29Urals NWE* 72.83 +0.38 74.76 +0.77 - 72.83 74.76 69.13 +3.71 +0.31 +5.63 +0.69Bonny Light 75.03 +0.51 75.94 +0.89 0.92 74.11 75.03 70.70 +3.42 +0.53 +4.33 +0.91BTC 74.49 +0.41 77.60 +0.88 1.25 73.24 76.34 70.72 +2.52 +0.41 +5.62 +0.88Basrah Light 67.37 +0.47 72.15 +0.77 0.55 66.82 71.60 65.93 +0.89 +0.51 +5.67 +0.80US GulfMars* 71.91 +1.09 76.94 +1.85 - 71.91 76.94 64.52 +7.39 +1.54 +12.42 +2.30Basrah Light 69.39 +0.78 76.12 +1.77 0.80 68.59 75.32 65.93 +2.66 +0.82 +9.39 +1.81LLS* 76.07 +1.66 80.68 +2.29 - 76.07 80.68 68.16 +7.91 +2.18 +12.52 +2.81Bonny Light 75.66 +1.67 79.46 +2.19 1.08 74.58 78.38 70.70 +3.89 +1.75 +7.68 +2.26Arab Light 73.60 +1.37 78.25 +2.07 0.78 72.81 77.47Arab Medium 72.40 +1.11 77.09 +1.84 0.78 71.62 76.31Maya 67.11 +0.56 75.08 +1.76 1.13 65.99 73.96 60.10 +5.89 +0.48 +13.86 +1.67WTI 75.63 +1.56 79.40 +2.08 4.43 71.20 74.97 64.55 +6.66 +1.01 +10.43 +1.53SingaporeOman 66.80 +0.46 75.68 +0.52 1.06 65.74 74.62 66.91 -1.16 +0.45 +7.71 +0.50Basrah Light 63.35 +0.49 74.66 +0.47 1.08 62.27 73.58 65.93 -3.66 +0.49 +7.65 +0.47Minas 65.43 +0.45 77.10 +0.49 0.52 64.91 76.58 61.06 +3.85 +0.65 +15.51 +0.68ESPO Blend 68.46 +0.45 76.75 +0.49 0.61 67.85 76.15 70.97 -3.11 +0.45 +5.18 +0.49Arab Light 68.06 +0.43 76.31 +0.40 1.06 67.00 75.25Arab Heavy 66.10 +0.48 74.12 +0.52 1.09 65.01 73.03Murban 69.20 +0.45 77.20 +0.46 1.01 68.19 76.19 69.42 -1.24 +0.37 +6.77 +0.39*quotes are FIP, and therefore freight is implicit in the spot price

Visit www.argusmedia.com/netbacks for details of the Argus Netback Model

-10

-5

0

5

10

15

Jan Apr Jul Oct Jan

Complex Simple

13 14


http://www.argusmedia.com/netbacks


of 36

Futures markets

Nymex WtI forward prices

50

52

54

56

58

60

62

64

66

68

1M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y

25 Jan 18 Jan

Month ago Year ago

$/bl

Nymex heating oil first month

100

125

150

175

200

225


¢/USG

16 17 18

Nymex WTI first month

30

40

50

60

70


$/bl

16 17 18

WtI 1st month minus 2nd month

-2

-1

0

1


$/bl

16 17 18

Futures: volumes and open interest '000 lotsProvisional volume Open interest

Thousand lots

Nymex: 19-25 Jan 12-18 Jan 24 Jan 17 Jan

Sweet crude 6,609.46 5,533.52 2,655.00 2,602.00

Heating oil 1,078.37 831.84 479.00 480.00

Rbob 991.54 816.79 469.00 457.00

Ice:

Brent 4,789.41 3,843.74 2,609.00 2,528.00

Gasoil 1,587.29 1,410.80 975.00 945.00

settlement pricesFirst month second month

Nymex: 25 Jan ± 18 Jan

Week high

Week low 25 Jan ± 18

JanWeek high

Week low

Sweet crude ($/bl) 65.51 +1.62 65.61 63.37 65.37 +1.66 65.37 63.31

Heating oil (¢/USG) 211.54 +5.37 211.54 205.69 211.04 +5.18 211.04 205.41

Rbob (¢/USG) 191.54 +3.19 191.64 186.36 190.89 +2.12 191.22 186.47

Ice:

Brent ($/bl) 70.42 +1.11 70.53 68.61 69.97 +1.05 70.02 68.24

Brent weighted avg ($/bl) 70.80 +1.58 70.32 +1.50

Gasoil ($/t) 627.25 +15.50 627.25 608.00 627.75 +15.00 627.75 608.50

Net long positions: futures only '000 contracts or mn blProducer-merchant-refiner-user swaps dealers Non-commercial*

16 Jan 9 Jan 16 Jan 9 Jan 16 Jan 9 Jan

Nymex light sweet crude -79 -68 -653 -606 708 658

Ice WTI 44 43 -130 -124 79 75

Ice Brent -767 -794 340 349 424 435

Nymex heating oil -145 -150 60 61 61 64

Nymex Rbob -134 -136 37 37 88 88

Ice gasoil† -147 -145 92 97 49 39

total -1,227 -1,250 -254 -185 1,407 1,359

*combined 'managed money' and 'other reportables' categories

†Positions converted to mn bl equivalent — CFTC, Ice



of 36

Crude Spot MarketS

Crude marker grade spot prices $/bl

date is date of assessment 1Q17 2Q17 3Q17 4Q17 Sep 17 oct Nov dec 8-12 Jan

15-19 Jan

22-25 Jan

Forward North Sea (London close)

First month 54.43 50.43 52.33 61.61 55.86 57.87 63.00 64.34 69.50 69.75 70.49

Second month 54.74 50.75 52.23 61.26 55.54 57.50 62.73 63.91 68.93 69.33 70.08

Third month 55.09 51.10 52.18 60.97 55.30 57.28 62.50 63.49 68.46 68.95 69.69

WTI (Houston close)

First month 51.70 48.11 48.16 55.23 49.83 51.57 56.54 57.94 63.27 63.76 64.84

Second month 52.30 48.43 48.44 55.39 50.25 51.84 56.71 57.98 63.18 63.70 64.79

Third month 52.81 48.70 48.68 55.49 50.60 52.04 56.81 57.97 63.00 63.53 64.62

Dubai (London close)

First month 52.90 49.40 50.62 59.19 54.00 55.59 60.72 61.41 66.10 66.42 67.12

Second month 52.99 49.75 50.72 58.80 53.93 55.36 60.25 60.94 65.66 65.98 66.70

Third month 53.15 49.96 50.74 58.54 53.75 55.09 59.99 60.67 65.42 65.76 66.45

Crude spot prices $/bl


15-19 Jan

22-25 Jan

North Sea (London close)

Dated 53.66 49.58 52.06 61.22 56.07 57.28 62.63 64.14 69.62 69.35 70.00

Brent 53.39 49.27 52.51 61.49 56.99 57.29 62.94 64.66 70.47 69.65 70.18

Ice Brent weighted average 54.71 50.81 52.06 61.18 55.31 57.44 62.65 63.80 68.76 69.27 69.54

Forties 53.46 49.29 52.46 61.46 56.88 57.30 62.90 64.59 70.29 69.72 70.22

Flotta 52.11 48.46 51.30 60.70 55.47 56.73 62.12 63.64 69.29 69.05 69.70

Ekofisk 53.67 49.61 52.69 61.90 57.15 57.85 63.28 64.98 70.63 70.40 70.89

Oseberg 54.28 50.14 53.21 62.42 57.68 58.43 63.81 65.44 70.92 70.65 71.30

Statfjord 53.34 49.44 52.32 61.21 56.47 57.53 62.48 63.99 69.73 69.85 70.50

Russia (London close)

Urals NWE 51.52 48.06 51.05 60.33 54.37 55.91 61.76 63.80 69.04 68.72 69.47

Urals Mediterranean 52.25 48.46 51.34 60.90 54.89 56.81 62.53 63.74 69.63 69.18 69.01

Siberian Light 53.53 49.45 52.48 61.46 56.59 57.04 63.09 64.68 70.17 69.90 70.55

BTC Blend 55.31 51.11 54.27 63.28 58.65 58.94 64.71 66.65 71.71 71.26 71.85

CPC Blend 52.50 48.45 51.75 61.22 55.96 56.84 62.94 64.29 69.85 69.65 70.39

Mediterranean (London close)

Es Sider 52.18 48.16 51.15 60.27 55.36 56.46 61.61 63.14 68.72 68.51 69.40

Iran Heavy Sidi Kerir 49.41 45.12 48.94 58.17 52.60 54.04 59.81 61.07 66.96 66.51 66.34

Iran Light Sidi Kerir 51.19 46.87 50.78 60.45 54.45 56.25 62.12 63.37 69.26 68.81 68.64

Kirkuk 48.62 44.68 48.02 57.03 52.07 53.11 58.43 59.94 65.42 65.15 65.80

Suez Blend 50.55 46.76 49.64 59.20 53.19 55.11 60.83 62.04 67.93 67.48 67.31

Saharan Blend 53.35 49.00 52.23 61.62 56.56 57.47 63.03 64.79 70.34 70.25 70.82



of 36

Crude Spot MarketS

Crude spot prices $/bl


15-19 Jan

22-25 Jan

West Africa (London close)

Bonny Light 54.14 50.14 53.00 62.27 57.49 58.45 63.50 65.26 70.78 70.35 71.00

Escravos 54.04 50.06 53.01 62.13 57.27 58.35 63.39 65.06 70.58 70.15 70.80

Brass River 53.90 49.75 52.89 62.27 57.36 58.45 63.50 65.26 70.78 70.35 71.00

Forcados 53.17 49.26 53.33 62.43 57.76 58.70 63.64 65.36 70.88 70.45 71.10

Qua Iboe 54.29 50.15 53.18 62.30 57.51 58.56 63.50 65.26 70.78 70.35 71.00

Cabinda 53.42 49.39 52.66 61.64 57.07 57.98 62.83 64.51 69.90 69.51 70.10

Girassol 53.75 49.59 52.62 61.79 56.83 57.88 62.97 64.96 70.30 69.91 70.55

Zafiro 53.35 49.05 52.12 61.48 56.57 57.73 62.75 64.34 69.82 69.47 70.00

Mideast Gulf (Singapore close)

Murban 54.97 51.34 51.83 61.30 55.15 57.36 62.76 63.84 68.50 69.32 69.62

Das 54.31 50.74 51.34 60.85 54.64 56.85 62.34 63.41 68.15 68.97 69.26

Oman 53.51 49.94 50.66 59.35 54.17 55.60 60.84 61.63 66.22 66.82 67.10

Qatar Land 54.15 50.59 51.00 60.58 54.16 56.54 61.99 63.26 67.96 68.72 68.95

Qatar Marine 52.72 49.61 50.04 59.03 53.12 55.11 60.47 61.54 66.24 66.88 66.92

Asia-Pacific (Singapore close)

ESPO Blend 55.95 51.31 52.77 62.23 56.19 58.11 63.53 65.14 70.12 70.93 71.15

Minas 49.96 45.53 46.37 54.30 49.42 50.51 55.50 56.95 60.96 61.07 61.29

Duri 44.56 43.06 43.80 52.23 46.67 48.39 53.87 54.48 57.76 57.90 58.29

Cinta 47.91 44.15 44.89 53.58 48.22 49.77 54.92 56.11 60.66 61.40 61.79

Widuri 48.09 44.35 45.09 53.78 48.42 49.97 55.12 56.31 60.86 61.60 61.99

Bach Ho 56.62 51.56 54.33 64.68 58.60 60.72 66.13 67.23 72.52 72.25 72.90

Tapis 55.80 51.74 54.13 63.68 58.45 59.82 65.00 66.28 72.07 71.80 72.37

Cossack 54.54 50.36 52.82 63.68 57.57 59.51 65.03 66.58 71.70 71.35 72.00

Kutubu 55.32 50.78 53.48 63.81 58.13 59.46 65.12 66.95 72.17 71.76 72.20

NW Shelf 54.52 51.23 53.95 64.21 58.40 60.07 65.56 67.08 72.57 72.10 72.75

Americas seaborne (Houston close)

ANS USWC 53.73 50.54 52.18 61.40 55.52 57.71 63.02 63.85 68.68 68.98 69.70

Vasconia 49.97 47.49 49.42 57.59 52.44 54.14 58.95 60.03 64.76 64.99 65.80

US pipeline (Houston close)

Bakken Clearbrook 51.64 48.17 49.18 56.88 52.00 54.54 58.67 57.68 62.64 63.22 64.13

WTI Midland 51.72 47.29 47.37 55.47 48.97 51.58 56.89 58.32 64.54 65.00 65.93

WTI Houston 53.27 49.77 50.84 59.84 53.63 56.11 61.40 62.39 67.44 67.64 67.85

LLS St James 53.39 50.18 51.62 60.94 54.84 57.46 62.38 63.32 67.92 68.33 68.28

HLS Empire 52.72 50.01 51.11 60.69 54.08 57.01 62.32 63.12 67.51 68.30 67.86

WTS Midland 50.28 47.05 47.19 54.81 48.55 50.84 56.17 57.80 63.07 63.58 64.66

Mars 49.59 46.92 48.41 57.69 51.58 53.99 59.29 60.15 64.39 64.66 64.67

Line 63 51.33 48.07 50.12 59.96 53.51 55.95 61.45 62.90 68.23 68.46 69.29

WCS 38.81 38.55 38.09 38.88 38.89 40.27 41.66 34.42 37.91 40.03 36.81



of 36

Official crude Price fOrmulas

formula pricing $/blmar 17 apr may Jun Jul aug sep Oct Nov dec Jan 18 feb

Saudi Arabia fob Ras Tanura to US: ASCI

Berri (Extra Light) +2.40 +2.10 +2.70 +2.90 +3.00 +2.90 +2.80 +3.30 +3.50 +3.20 +2.90 +2.60

Arab Light +0.40 +0.20 +0.50 +0.60 +1.10 +1.10 +1.20 +1.30 +1.10 +1.20 +1.00 +0.90

Arab Medium -0.90 -1.00 -0.70 -0.60 -0.10 -0.10 0.00 0.00 -0.30 -0.30 -0.50 -0.60

Arab Heavy -2.20 -2.30 -2.00 -1.90 -1.60 -1.60 -1.50 -1.30 -1.65 -1.55 -1.75 -1.85

Saudi Arabia delivered USGC: ASCI

Arab Light +1.75 +1.55 +1.85 +1.95 +2.45 +2.45 +2.55 +2.65 +2.45 +2.55 +2.35 +2.25

Arab Medium +0.45 +0.35 +0.65 +0.75 +1.25 +1.25 +1.35 +1.35 +1.05 +1.05 +0.85 +0.75

Arab Heavy -0.85 -0.95 -0.65 -0.55 -0.25 -0.25 -0.15 +0.05 -0.30 -0.20 -0.40 -0.50

Saudi Arabia to NW Europe: Ice Bwave

Berri (Extra Light) -1.55 -2.15 -2.85 -2.35 -2.15 -1.90 -1.10 -0.45 -0.85 0.00 +0.55 +0.65

Arab Light -3.45 -3.90 -4.35 -3.45 -3.10 -2.55 -2.05 -2.15 -2.70 -1.80 -1.20 -1.20

Arab Medium -4.55 -5.00 -5.40 -4.55 -4.10 -3.40 -3.00 -3.10 -3.95 -3.15 -2.70 -2.55

Arab Heavy -6.05 -6.55 -7.05 -6.10 -5.40 -4.40 -4.10 -4.40 -5.60 -4.85 -4.45 -4.20

Saudi Arabia to Mediterranean: Ice Bwave

Berri (Extra Light) -1.30 -1.70 -2.75 -2.15 -2.55 -2.35 -1.35 -0.40 -0.10 +0.50 +0.75 +1.15

Arab Light -3.55 -3.65 -4.35 -3.45 -3.45 -3.00 -2.40 -2.10 -1.90 -1.35 -1.25 -0.95

Arab Medium -4.50 -4.50 -5.15 -4.25 -4.25 -3.80 -3.40 -3.20 -3.30 -2.70 -2.70 -2.35

Arab Heavy -5.90 -5.75 -6.25 -5.30 -5.00 -4.30 -4.20 -4.15 -4.35 -3.75 -3.75 -3.40

Saudi Arabia to Asia-Pacific: average Oman/Dubai

Arab Super Light +4.45 +3.95 +3.75 +3.05 +3.40 +2.50 +3.30 +4.00 +4.10 +4.55 +5.75 +5.95

Berri (Extra Light) +1.70 +0.95 +0.60 0.00 +0.40 0.00 +0.60 +1.40 +1.80 +2.45 +3.05 +3.15

Arab Light +0.15 -0.15 -0.45 -0.85 -0.25 -0.45 -0.25 +0.30 +0.60 +1.25 +1.65 +1.65

Arab Medium -0.55 -0.85 -0.85 -1.30 -0.65 -0.90 -0.90 -0.55 -0.65 0.00 +0.25 +0.05

Arab Heavy -2.60 -2.60 -2.60 -2.80 -1.85 -1.75 -1.95 -1.65 -1.80 -1.15 -1.05 -1.25

Iran fob Sidi Kerir to Mediterranean: Ice Bwave

Iranian Light -2.70 -2.70 -3.40 -2.55 -2.50 -2.00 -1.25 -1.05 -0.90 -0.35 -0.40 -0.25

Iranian Heavy -4.55 -4.45 -5.15 -4.45 -4.35 -3.85 -3.30 -3.20 -3.25 -2.65 -2.80 -2.65

Foroozan Blend -4.35 -4.25 -4.95 -4.25 -4.15 -3.65 -3.10 -2.95 -3.00 -2.40 -2.55 -2.40

Iran fob Kharg Island to Mediterranean: Ice Bwave

Iranian Light -4.55 -4.60 -5.25 -4.35 -4.30 -3.85 -3.15 -2.95 -2.75 -2.20 -2.20 -1.95

Iranian Heavy -6.40 -6.35 -7.00 -6.25 -6.15 -5.70 -5.20 -5.10 -5.10 -4.50 -4.60 -4.35

Foroozan Blend -6.20 -6.15 -6.80 -6.05 -5.95 -5.50 -5.00 -4.85 -4.85 -4.25 -4.35 -4.10

Soroush -9.90 -9.75 -10.25 -9.30 -9.00 -8.35 -8.20 -8.10 -8.15 -7.40 -7.30 -7.10

Nowruz -9.90 -9.75 -10.25 -9.30 -9.00 -8.35 -8.20 -8.10 -8.15 -7.40 -7.30 -7.10

Iran fob Kharg Island to NWE: Ice Bwave

Iranian Light -3.50 -3.90 -4.30 -3.45 -3.10 -2.55 -2.05 -2.30 -2.65 -1.75 -1.25 -1.35

Iranian Heavy -5.40 -5.80 -6.15 -5.40 -5.05 -4.35 -3.95 -4.20 -4.80 -3.95 -3.65 -3.65

Foroozan Blend -5.20 -5.60 -5.95 -5.20 -4.85 -4.15 -3.75 -3.95 -4.55 -3.70 -3.40 -3.40

Iran fob Kharg Island: average Oman/Dubai

Iranian Light +0.35 +0.10 -0.20 -0.60 +0.02 -0.18 +0.02 +0.50 +0.80 +1.40 +1.85 +1.80

Iranian Heavy -0.84 -1.10 -1.10 -1.55 -0.92 -1.17 -1.17 -0.99 -1.09 -0.49 -0.24 -0.50

Foroozan Blend -0.64 -0.90 -0.90 -1.35 -0.72 -0.97 -0.97 -0.74 -0.84 -0.24 +0.01 -0.25

Soroush -6.75 -6.60 -6.60 -6.80 -5.72 -5.57 -5.75 -5.45 -5.50 -4.85 -4.85 -5.05

Nowruz -6.75 -6.60 -6.60 -6.80 -5.72 -5.57 -5.75 -5.45 -5.50 -4.85 -4.85 -5.05



of 36

Official crude Price fOrmulas

formula pricing $/blmar 17 apr may Jun Jul aug sep Oct Nov dec Jan 18 feb

Iraq to Europe: Dated Brent

Kirkuk (Ceyhan) -4.15 -4.20 -4.45 -3.70 -3.55 -3.15 -2.75 -2.95 -2.85 -2.75 -2.95 -2.80

Basrah Light (Basrah oil terminal) -3.70 -3.80 -4.20 -3.35 -3.30 -2.85 -2.55 -2.75 -3.05 -2.80 -3.05 -3.15

Basrah Heavy (Basrah oil terminal) -7.55 -7.55 -7.95 -6.90 -6.65 -5.90 -5.80 -5.90 -6.30 -5.85 -6.05 -6.20

Iraq to US: ASCI

Kirkuk (Ceyhan) +0.50 +0.40 +0.70 +0.70 +0.70 +1.10 +1.10 +1.10 +1.10 +0.85 +0.65 +0.55

Basrah Light (Basrah oil terminal) -0.40 -0.50 -0.30 0.00 +0.05 +0.35 +0.35 +0.35 +0.35 +0.20 -0.15 -0.50


Iraq to Asia-Pacific: average Oman/Dubai

Basrah Light (Basrah oil terminal) -0.50 -0.75 -0.75 -1.15 -0.55 -0.65 -0.65 -0.25 -0.25 +0.10 +0.25 -0.05


Kuwait fob Mina al-Ahmadi destination Asia: average Oman/Dubai

Kuwait -1.10 -1.35 -1.45 -1.85 -1.25 -1.45 -1.40 -1.05 -1.10 -0.50 -0.30 -0.55

Dubai: fob Dubai: Oman MOG OSP

Dubai na na -0.30 -0.20 -0.20 -0.05 -0.05 +0.05 +0.05 -0.15 0.00 +0.15

Libya: to Dated Brent

Es Sider -1.60 -1.55 -1.55 -1.55 -1.55 -1.35 -1.00 -0.80 -1.05 -1.05 -0.90 -0.80

Bu Atiffel +0.80 +0.80 +0.70 +0.60 +0.20 +0.30 +0.45 +0.70 +0.55 +0.55 +0.55 +0.55

Sirtica -2.00 -2.00 -2.00 -2.00 -2.00 -2.00 -2.00 -1.90 -2.00 -2.00 -1.90 -1.80

Zueitina -0.45 -0.45 -0.55 -0.55 -0.75 -0.65 -0.60 -0.45 -0.55 -0.55 -0.45 -1.00

Brega -0.20 -0.40 -0.60 -0.65 -0.90 -0.90 -0.70 -0.50 -0.65 -0.60 -0.45 -0.20

Sarir -3.35 -3.45 -3.45 -3.15 -3.30 -3.05 -2.65 -2.60 -2.70 -2.70 -2.70 -2.80

Amna -1.30 -1.25 -1.30 -1.25 -1.30 -1.10 -0.85 -0.70 -0.90 -1.00 -0.95 -0.80

Esharara -0.40 -0.65 -0.75 -0.60 -0.85 -0.55 -0.30 0.00 -0.15 -0.15 +0.20 +0.45

Libya: spot Urals cif Augusta

Bouri -3.25 -3.15 -2.95 -2.75 -2.65 -2.55 -2.45 -2.35 -2.45 -2.20 -2.20 -2.05

Al-Jurf -1.15 -1.05 -0.95 -0.75 -0.65 -0.65 -0.60 -0.60 -0.60 -0.40 -0.40 -0.30

Algeria: Dated Brent

Saharan Blend* -0.20 -0.75 -0.65 -0.35 -0.55 -0.35 +0.25 +0.60 +0.60 +0.60 +0.80 +0.85

*middle of contract price range

Nigeria: Dated Brent

Bonny Light +0.31 +0.43 +0.32 +0.50 +0.15 +0.03 +0.48 +0.69 +0.66 +0.50 +0.79 +0.86

Brass River +0.01 +0.18 +0.22 +0.36 +0.06 -0.03 +0.53 +0.76 +0.74 +0.60 +0.59 +0.72

Amenam -0.64 -0.39 -0.42 -0.30 -0.23 -0.43 -0.17 +0.03 +0.50 +0.09 +0.06 +0.12

Qua Iboe +0.36 +0.60 +0.41 +0.67 +0.39 +0.13 +0.82 +0.90 +1.02 +0.71 +0.75 +0.92

Pennington -0.41 -0.15 -0.37 -0.29 -0.21 -0.10 +0.51 +0.51 +0.56 +0.02 +0.04 +0.17

Forcados -0.80 -0.78 -0.80 -0.85 -0.87 -0.24 +0.84 +1.06 +0.78 +0.68 +0.83 +0.92

Escravos -0.02 +0.35 +0.36 +0.52 +0.29 +0.17 +0.65 +0.82 +0.75 +0.63 +0.74 +0.81

Premium for deferred pricing +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07 +0.07

Mexico to US: Mexican formula

Olmeca +2.65 +2.65 +2.90 +2.90 +3.70 +3.70 +3.50 +3.50 +3.50 +3.50 +3.50 na

Isthmus +2.15 +2.15 +2.40 +2.40 +3.20 +3.20 +2.75 +1.30 +1.30 +1.30 +1.80 na

Maya -4.20 -3.45 -1.60 -1.60 -1.30 -1.30 -1.20 -2.15 -2.25 -2.25 -2.15 na



of 36

Official crude Prices

Basrah light vs Banoco arab Medium

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0


$/bl5-day averageBanoco Arab Medium = 0

16 17 18

Murban: Spot differential to Adnoc price

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6


$/bl

5-day averageAdnoc official price = 0

16 17 18

Official crude prices at a glance $/blfeb 17 Mar apr May Jun Jul aug sep Oct Nov dec Jan 18

Abu Dhabi

Murban 56.10 52.60 53.40 51.45 47.30 48.60 51.60 55.70 58.10 63.65 64.85 na

Das 55.45 51.95 52.75 50.85 46.75 48.15 51.20 55.35 57.75 63.30 64.50 na

Upper Zakum 54.00 50.65 51.45 50.00 45.90 47.05 50.05 53.90 56.20 61.75 62.50 na

Oman

Oman na na 55.12 51.71 52.82 50.55 46.52 47.63 50.39 54.02 55.59 60.79

Qatar

Dukhan/Land 55.20 51.70 52.55 50.65 46.50 47.80 50.90 54.85 57.40 63.00 64.35 na

Premium to Dubai 0.76 0.50 0.26 0.11 0.03 0.23 0.68 1.18 1.85 2.18 2.75 na

Marine 54.00 50.55 51.45 50.05 45.85 46.95 49.95 53.60 55.80 61.45 62.65 na

Premium to Dubai -0.44 -0.65 -0.84 -0.49 -0.62 -0.62 -0.27 -0.07 0.25 0.63 1.05 na

Indonesia

Minas 53.36 49.62 50.51 48.08 44.71 46.35 49.17 53.17 54.71 59.83 61.19 na

Duri 50.33 46.65 47.54 45.27 42.62 44.09 46.86 50.71 52.40 57.62 58.77 na

Widuri 51.80 48.29 49.16 46.84 43.66 45.17 48.10 52.19 53.63 58.77 59.85 na

Belida 54.94 50.80 51.61 48.93 45.20 47.76 50.71 54.82 56.35 61.52 63.24 na

Attaka 53.88 50.18 51.15 48.69 44.91 47.19 50.23 54.51 56.11 61.28 63.10 na

Ardjuna 52.24 48.81 49.91 47.42 43.81 45.98 48.82 52.71 53.91 59.08 60.91 na

Cinta 51.65 48.13 48.99 46.66 43.48 45.00 47.93 52.01 53.45 58.60 59.68 na

Senipah 54.03 50.14 51.44 49.16 45.82 47.28 50.47 54.72 56.76 62.24 64.18 na

Malaysia

Tapis 57.71 54.16 54.43 52.03 47.50 49.56 52.99 57.75 59.71 65.52 66.94 na

Tapis "Alpha" premium* 4.20 4.20 3.50 3.20 2.58 2.60 2.95 3.30 3.95 4.50 4.35 na

Labuan 59.31 55.76 56.03 53.63 49.10 51.16 54.59 59.35 61.31 67.12 68.54 na

Miri 59.31 55.76 56.03 53.63 49.10 51.16 54.49 59.35 61.31 67.12 68.54 na

Bintulu 57.71 54.16 54.43 52.03 47.50 49.56 52.99 57.75 59.71 65.52 66.94 na

* to North Sea Dated

Brunei

Seria Lt 57.71 54.16 54.43 52.03 47.53 49.59 53.02 57.78 59.74 65.52 na na

Opec Basket † 53.37 50.32 51.34 49.20 45.21 46.93 49.61 53.44 55.36 60.74 62.06 na

†Saharan Blend, Iranian Heavy, Basrah Light, Kuwait Export Blend, Es Sider, Bonny Light, Qatar Marine, Arab Light, Murban, Merey, Girassol and Oriente



of 36

Product SPot PriceS

Product cargo spot prices


15-19 Jan

22-25 Jan

Northwest Europe $/t (cif)

Propane 424.44 358.16 437.51 544.46 501.48 520.61 560.09 553.97 529.10 534.80 497.00

Butane 442.70 338.90 431.75 517.39 499.86 506.82 535.66 508.47 511.90 492.50 500.00

Gasoline 95 Ron unleaded 550.16 540.97 560.59 602.60 598.16 571.92 627.43 609.38 646.55 654.05 667.75

Naphtha (65% paraffin) 484.75 432.30 462.95 555.08 504.40 519.06 572.93 576.13 593.60 592.95 595.56

Jet 512.00 482.51 520.28 590.69 556.39 557.22 605.99 611.74 653.85 657.05 664.06

French diesel 485.70 456.27 492.21 556.12 533.79 535.28 563.58 571.62 612.85 613.90 620.44

French heating oil 478.32 445.78 476.89 544.76 519.29 516.98 554.16 566.05 607.15 609.35 616.19

Vacuum gasoil

– 0.5% sulphur 386.41 371.14 386.20 445.53 416.03 430.81 447.24 460.58 512.53 521.63 522.44

– 2% sulphur 370.31 354.85 372.43 427.13 400.13 410.42 430.18 442.95 496.75 505.73 506.62

cracked fuel oil

– 1% sulphur 320.25 298.75 305.59 348.96 322.62 330.42 359.95 357.70 379.90 379.30 380.81

– 3.5% sulphur 286.18 274.25 296.06 336.29 313.61 318.33 347.16 344.49 364.00 365.20 367.38

Straight-run fuel oil

– North Sea 0.5% sulphur‡ ($/bl) -4.48 -2.52 -1.55 -2.76 -0.46 -2.12 -3.50 -2.64 -0.15 0.95 -0.50

M-100 297.86 285.75 304.50 346.99 323.36 328.15 356.91 357.32 378.25 380.45 384.12

‡fob, premium to Ice Brent futures

Mediterranean $/t (cif)

Propane 440.21 371.30 453.99 556.95 519.93 537.64 571.05 563.00 537.20 542.20 505.00

Butane 476.97 389.39 463.76 542.02 532.57 535.14 556.77 532.89 538.40 519.00 526.75


Naphtha (65% paraffin) 477.19 425.66 457.09 548.08 497.52 512.27 566.66 568.04 584.05 584.00 586.62

Jet* 496.08 468.62 507.93 576.00 541.81 543.11 592.95 594.43 634.55 639.30 646.06

French diesel 488.92 459.00 494.98 559.08 534.69 536.59 567.44 575.43 613.40 618.05 625.94

French heating oil 481.48 448.09 477.76 546.98 518.36 518.84 554.39 571.00 611.60 613.35 618.94

Vacuum gasoil

Vacuum gasoil (0.5% sulphur)* na na na 449.68 na 436.67 452.73 461.20 507.70 516.78 520.75

Vacuum gasoil (2% sulphur)* na na na 432.68 na 420.81 435.81 442.78 491.98 495.85 499.81

cracked fuel oil

– 1% sulphur 324.72 306.09 309.96 355.83 327.39 336.99 367.25 364.42 387.65 387.15 388.62

– 3.5% sulphur 295.18 283.25 300.78 340.50 317.86 322.65 351.25 348.74 368.25 369.45 371.62

*fob VGO prices have been replaced by cif prices from 5 January

New York Harbor ¢/USG (cif)

Gasoline conventional 93 167.58 170.56 184.91 188.38 206.97 183.67 197.29 184.66 196.50 201.48 207.89


Gasoline Rbob 83.7 151.32 156.71 171.13 175.00 184.19 169.69 182.02 173.83 184.21 188.62 193.48

Ethanol 158.10 158.94 161.65 146.04 162.81 148.70 149.71 139.42 141.45 144.42 144.66

Diesel (ULSD) 158.49 149.90 164.82 188.21 179.55 179.73 191.54 194.20 206.68 205.72 209.18

Jet 164.11 152.66 170.50 191.22 188.46 179.75 193.59 201.46 220.86 224.07 227.61

Heating oil 149.68 139.14 149.39 175.17 163.79 162.51 179.36 184.91 198.08 197.00 199.24

No 6 fuel $/bl

1% sulphur 48.67 44.32 47.61 54.28 49.96 50.87 56.49 55.83 59.97 60.20 58.96

3% sulphur 46.67 43.86 46.72 53.44 48.81 50.31 55.65 54.69 58.41 58.25 58.12



of 36

Product sPot Prices

Product cargo spot prices

1Q17 2Q17 3Q17 4Q17 sep 17 oct Nov dec 8-12 Jan

15-19 Jan

22-25 Jan

US Gulf ¢/USG (fob)

Propane* 70.93 62.76 76.58 95.92 88.70 93.84 98.25 95.89 91.79 92.83 85.58

Butane* 91.43 68.66 85.43 102.11 98.55 103.34 101.75 101.12 89.43 95.47 86.62



Ethanol 153.96 157.42 159.01 141.05 160.69 146.47 143.20 132.94 136.98 135.09 136.00

Jet 151.93 141.30 160.09 175.75 176.10 167.05 177.51 183.56 195.30 195.22 200.25

Diesel (ULSD)† 157.47 148.22 163.29 183.25 163.29 na na 183.25 198.46 199.41 204.52

Heating oil 145.66 134.02 144.95 167.53 157.97 157.39 171.00 175.22 184.18 184.75 193.61

No 6 fuel $/bl

3% sulphur 44.58 42.50 45.40 51.71 47.56 48.32 54.14 53.02 55.61 55.44 55.34

*Mont Belvieu †Diesel ULSD 61 has been replaced by Diesel ULSD 62 from 23 September

West coast ¢/USG

Los Angeles (pipeline)

Carbob 88.5 195.64 191.34 198.49 194.83 204.70 198.16 201.05 184.95 205.54 209.22 218.50

Carb diesel 163.14 154.43 172.89 191.08 191.48 186.05 196.76 190.92 202.28 204.01 207.69

Jet 156.73 149.23 165.64 181.28 178.87 173.69 184.93 185.98 200.28 201.53 204.83

Bunkers $/t

HSFO 380cst 316.74 304.83 313.46 361.71 330.75 336.61 371.78 379.25 387.40 387.25 391.25

Singapore $/bl (fob)


Jet-kerosine 64.33 60.47 63.57 72.59 68.08 68.36 74.02 75.45 80.23 81.15 81.71

Gasoil 50ppm sulphur (high pour) 65.33 61.57 64.90 73.19 69.25 69.95 73.96 75.75 81.00 81.87 82.50

Gasoil 0.5% sulphur (high pour) 64.18 60.09 62.63 70.91 66.58 66.96 71.77 74.12 78.96 79.92 80.80

LSWR Indonesia (V-500) 53.59 49.84 49.98 56.41 52.55 53.59 58.03 57.59 59.37 59.93 60.67

Naphtha 54.20 48.53 50.50 62.55 55.20 57.79 64.67 65.21 66.71 66.68 65.98

HSFO 180cst $/t 316.66 304.29 311.73 357.33 329.65 337.54 368.33 366.01 380.10 382.15 387.06

HSFO 380cst $/t 311.27 296.32 307.53 353.91 326.04 333.60 365.51 362.49 376.95 378.95 382.75

Japan $/bl (c+F)

Jet-kerosine 65.94 61.87 65.23 74.42 70.03 70.19 75.89 77.26 81.83 82.68 83.26

Gasoil 50ppm (low pour) 66.61 62.63 66.23 74.70 70.98 71.18 75.43 77.60 81.17 82.19 83.29

$/t

Naphtha 497.34 445.23 467.63 570.38 511.09 530.03 588.75 592.54 606.65 605.40 602.03

HSFO 180cst 325.78 312.03 319.03 365.95 338.04 346.55 377.10 374.07 388.39 390.04 395.35

Mideast Gulf $/bl (fob)


Jet-kerosine 62.70 59.06 61.91 70.91 66.24 66.71 72.35 73.74 78.82 79.75 80.26

Gasoil 0.5% sulphur 62.21 58.55 61.52 68.48 65.48 64.73 69.37 71.45 77.04 78.03 78.64

$/t

Naphtha 476.01 426.55 445.53 548.24 486.82 508.43 566.69 569.75 588.31 587.24 583.41

HSFO 180cst 304.94 293.74 302.57 345.71 319.84 325.28 356.61 355.17 369.27 371.48 376.32

HSFO 380cst 299.54 285.76 298.37 342.30 316.23 321.34 353.80 351.65 366.10 368.21 372.01



of 36

Freight rates and arbitrage

hsFO swaps: nWe mth 1 minus singapore mth 2

-40

-30

-20

-10


5-day averageSingapore month 2 = 0

$/t

16 17 18

diesel: UsgC minus nWe

-5

0

5

10

15

20


¢/USG5-day averageNWE = 0

16 17 18

Mideast gulf westbound VLCC rates

0.5

1.0

1.5

2.0

2.5

3.0


$/bl

16 17 18

UK continent to Us atlantic coast clean rates

5

10

15

20

25

30


$/t

16 17 18

Forties minus Murban

-4

-3

-2

-1

0

1

2

3


$/bl

5-day averageMurban = 0

16 17 18

UsaC: bonny Light minus bakken

-10

-8

-6

-4

-2

0

2

4


Delivered costs to USAC5-day averageBakken = 0

$/bl

16 17 18

route rates 25 JanClean dirty $/t

30,000-38,000t 70,000-80,000t clean/dirty

Ws ± 18 Jan Ws ± 18

Jan

Med-UK continent 190.0 +5.0 102.5 +20.0 9.96/9.81Med-US Atlantic 157.5 +7.5 97.5 +17.5 13.31/17.03Med-US Gulf 157.5 +7.5 97.5 +17.5 13.31/17.03Cross Med 180.0 +5.0 107.5 +17.5 5.63/5.95UK-UK continent 150.0 +10.0 102.5 -2.5 5.00/6.21UK-US Atlantic 157.5 +7.5 85.0 -5.0 12.38/12.41UK-US Gulf 157.5 +7.5 85.0 -5.0 12.38/12.41S'pore-Asia-Pacific 130.0 nc 90.0 +5.0 9.16/10.84Black Sea-Med 190.0 +5.0 107.5 +20.0 8.65/7.78Baltic-UKC 150.0 +10.0 87.5 -2.5 8.04/8.10Carib-UK continent 92.5 -35.0 72.5 -22.5 13.27/13.28Carib-USAC 125.0 -35.0 92.5 -27.5 8.04/7.31

130,000-135,000tW Africa-UK continent – – 52.5 -5.0 12.68W Africa-US Gulf – – 47.5 -7.5 16.23UK cont-US Atlantic – – 42.5 -12.5 16.13

50,000-55,000t 260,000tUK-US Gulf – – 55.0 nc 16.13Mideast Gulf-US Gulf – – 19.0 -3.0 28.09Mideast Gulf-UKC/Med – – 19.5 -3.0 18.95Mideast Gulf-Asia-Pacific 90.0 +2.0 43.5 -6.0 17.94/16.69

Routes to the US exclude oil pollution liability insurance premium

*Indonesia-Japan †Primorsk-UK continent 100,000t


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