fn360 q3 2014

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3rd QUARTER

JULY – SEPTEMBER

2 0 1 4

M A R K E T N E W S & I N F O R M A T I O N

Similar to the first two quarters of this year, military conflicts filled the headlines over the last three months. Ukrainian separatists

experienced a brief resurgence with help from Russia, Islamic militia seized Libya’s largest cities, and the Islamic State drew the ire of its

Arab neighbors. But the market didn’t follow headlines this fall. Instead, strong fundamental indicators and weak demand from some of the

world’s leading economic powers encouraged non-commercial traders to abandon record-high long positions for rising equities and promising

foreign investments.

Despite armed conflicts throughout much of the world, production levels remained constant during the third quarter. In fact, domestic crude

oil production rose to their highest levels since the late ‘80s; reigniting the crude export ban debate. European leaders urged President

Obama to reconsider the ban, suggesting America’s isolationism forces global partners to purchase pricey barrels from abroad while we sit

atop our petroleum treasure trove wondering what to do with crude oil poorly suited for domestic refineries.

Weak economic indicators from China and key European economies increased the value of the U.S. dollar against several foreign

currencies— lowering crude oil prices. These same indicators suggest weaker demand for crude oil than initially forecast by several of the

world’s leading energy agencies — also lowering crude oil prices. Finally, non-commercial traders saw the same writing on the wall and

promptly reversed record long bullish bets — overwhelming any positive indicators and ensuring lower crude oil prices in the near term.

Meanwhile, a distinct lack of storm activity amid favorable refining economics resulted in refinery operations well above three-year

averages; though one refiner made headlines despite a strong season — Citgo. Wholly owned by Venezuela’s state-run oil company and

one of America’s oldest and largest refining operations, Citgo assets went up for sale in the third quarter as Venezuelan officials scramble to

replenish dangerously-low cash reserves and fight off economic collapse.

Finally, consumers experienced a significant reduction in retail fuel prices during the third quarter following historically-high prices in June.

Though retail gasoline prices fell roughly 10 percent and diesel came down almost 4 percent, consumers weren’t the only ones enjoying their

fuel savings. Wholesale rack-to-retail spreads on diesel widened from nearly 16 cents a gallon in mid-February to just shy of 34 cents a

gallon in late August.

Q3 2014 Executive Summary

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FUELSNews 360° Quarterly Report Q3 2014

Index

FUELSNews 360°, published four times annually by Mansfield Energy Corp., analyzes and summarizes the prior quarter’s activity

in the oil, natural gas and refined products industries. The purpose of this report is to provide industry market data, trends and

reporting both domestically and globally as well as provide insight into upcoming challenges facing the energy supply chain.

4 Overview

4 July through September, 2014

5 Third Quarter Summary

7 Economic Outlook

7 Global Economic Outlook

8 U.S. Economic Outlook

10 Fundamentals

10 U.S. Export of Crude Oil

12 Venezuela

14 Distillate Inventories

16 Winter Weather Forecast

18 Financials

18 Macroeconomic Influences

19 National Diesel

20 FUELSNews 360° Commentaries

20 Commentaries; Andy, Dan and Evan S.

21 Commentaries; Jessica, Chris and Evan P.

22 Regional View

22 PADD 1A, Northeast

25 PADD 1B & 1C, Central & Lower Atlantic

29 PADD 2, Midwest

31 PADD 3, Gulf Coast

34 PADD 4, Rocky Mountain

36 PADD 5, West Coast, AK and HI

38 Canada

41 Alternative Fuels

41 Renewables 44 Natural Gas

50 Transportation & Logistics

52 Diesel Exhaust Fluid (DEF)

54 FUELSNews 360˚ Supply Team

Military conflicts showed little influence over the crude oil market this summer, producing only marginal price spikes. Instead, thiswas the quarter of the economist. Weakness in the global economy leading to doubts of future crude oil demand prompted non-commercial traders to sell out of record long positions, resulting in overwhelming downward momentum. WTI crude futures nowappear range-bound between $85 and $95 a barrel while Brent bounces between $90 and $100 a barrel.

Overview

July 2014 through September 2014

4 © 2014 Mansfield Energy Corp.

Source: Oil Price Information Service (OPIS)

European Leaders Push for Ending the Crude Oil Ban

Rockets Fired from Eastern Ukraine Destroy

Malaysian Air MH17

Non-CommercialPositions Reach

Record Long

CFTC Reports Non-Commercial Net Long Positions Down 22 Percent

OPEC's Secretary General Suggests Rate Cut

Satellites Photograph Russian Military Deep in Ukrainian Territory

WTI Crude Futures (Dollars per Barrel)

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Pro-Russian rebels drive an armored truck in Donetsk, eastern Ukraine, Sept. 7, 2014

Overview

Third Quarter Summary


2.6958

Summary, Third Quarter 2014

Strong refinery outputs coupled with falling crude oil prices produced a third-quarter decline in RBOB (gasoline) futures, despiteincreased seasonal demand during the peak driving season. Prices fell as much as 51 cents a gallon before regaining 20 cents agallon over the course of two weeks in the latter half of September. Heating oil (diesel) futures steadily declined throughout thequarter for a total loss of 31 cents a gallon.

92.53020

2.7180

Source: Bloomberg Finance L.P.

16945.80

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Despite assertions by China’s prime minister, Li Keqiang, thenation’s industrial output —a chief indicator of China’s crude oilconsumption and economic health —has fallen along withproperty sales, which constitute roughly 15 percent of China’stotal GDP. Unsold homes accounted for two-thirds of all developerassets in September, representing an all-time high and significantthreat to the property sector. Crude oil producers and economistsdread the prospect of a shrinking Chinese economy, but reducedconsumption spells “cheaper fuel” for end users.

Similarly, key European economies struggle to stave off deflationin the midst of an already tenuous economic recovery. TheEuropean Central Bank (ECB) reduced benchmark interest ratesyet again, continuing their less-than-zero rate for banks. Bycharging banks interest on deposits, the ECB hopes to stimulatemore private lending and, consequently, greater consumerspending. However, measures may come “too little, too late” asearly indications suggest Germany —the EU’s financialcornerstone —officially went into recession this quarter. So, whathappens to the group’s economic recovery plan when the kingpincan’t build enough momentum to avoid a recession themselves?

The world’s twelfth-largest crude oil producer and founding memberof the Organization of the Petroleum Exporting Countries (OPEC)—Venezuela— captured headlines this summer as falling crudeoil prices pushed an already desperate administration to slashimports of every-day necessities and replace several key executiveswithin its energy sector. The nation’s central bank even stoppedpublishing monthly inflation updates after its May reportunderscored just how badly the Maduro administration is handlingthe country’s economic hardship.

According to the International Monetary Fund (IMF), weak demandfor goods out of leading economies such as these and ongoingmilitary actions in Eastern Europe resulted in disappointing growththrough the third quarter; casting doubt on the Fund’s 3.6-percentgrowth expectation quoted in April. Looking ahead, the Fund warnslow inflation rates in several advanced economies and slow growthin the world’s emerging markets could hinder an already sluggishglobal recovery.

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Global Economic Outlook


Economic headlines this quarter focused on China’s struggle to maintain long-term growth,Europe’s stagnating economic recovery, and Venezuela’s desperate need for economic reform.

China’s prime minister, Li Keqiang

As the nation’s economy improves, Federal Reserve ChairwomanJanet Yellen foretells of rising interest rates. Already planning toend the Fed’s QE bond purchasing program this October, Yellenpoints to falling unemployment and a soaring stock market asreasons for the more than 5-year-old, zero-percent interest rate toincrease. While bond market investors would suffer losses in theevent of an even slight rate increase, most analysts agree thebond bubble cannot be sustained and should end sooner rather

than later. To a lesser degree, commodityand equity markets should also preparefor losses as higher interest ratesthreaten rapid economic growth anddemand for goods and services.


While key foreign economies struggle, the U.S. steps confidentlyinto the fourth quarter. Consumer Sentiment rose into the mid-80sduring the third quarter, third quarter GDP is estimated to havegrown at 3.2 percent ahead of forecasts, and unemployment flirtswith rates below 6 percent even as wages are expected to rise.

While a slowing global economy could threaten exports, the U.S.supplies a broad range of foreign nations, limiting risk exposure.Furthermore, exports account for only 13 percent of the nation’sGDP. Consequently, experts suggest a stronger U.S. economyshould bolster global economic growth in the 3-percent rangewhile foreign nations rehabilitate ailing economies, leading to 3.5-percent global growth in the coming year.

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U.S. Economic Outlook

Consumer Sentiment Index

Source: University of Michigan

Headline Producer Price Index (PPI) Month-to-Month ChangeJuly August September

0.15% -0.30% -0.40%

Headline Consumer Price Index (CPI) Month-to-Month ChangeJuly August September*

-0.04% -0.17% 0.48%

Consumer Sentiment IndexJuly August September81.8 82.5 84.6 Federal Reserve Chairwoman Janet Yellen

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The Producer Price Index (PPI), a measure of change in producers’ sellingprices, proved to be a mixed bag in the third quarter. Core prices remainedflat while the more volatile headline prices declined nearly a full percent.Prices for unprocessed good fell while prices for services advanced slightly.Core producer prices tend to follow behind the more volatile energy index,so the next quarter may show more evidence of falling fuel prices.


0.15% -0.30% -0.40%


-0.04% -0.17% 0.48%

Consumer Sentiment IndexJuly August September81.8 82.5 84.6

Headline vs. Core Producer Price Index(Year-over-year Percent Change, Seasonally Adjusted)

Source: U.S. Bureau of Labor Statistics

U.S. Economic Outlook


0.15% -0.30% -0.40%


-0.04% -0.17% 0.48%

Consumer Sentiment IndexJuly August September81.8 82.5 84.6

The Consumer Price Index (CPI), a measure of change in prices paid byurban consumers, waned steadily in the third quarter partially due todeclining gasoline prices. Prices for new vehicles and alcoholic beveragesincreased, but they couldn’t offset declines in airline fares, apparel, andrecreation. With discussion on Capitol Hill pointing towards an end of theFed’s near-zero interest rate policy, consumers can expect to see prices risealong with inflation.

Headline vs. Core Consumer Price Index(Year-over-year Percent Change, Seasonally Adjusted)

Source: U.S. Bureau of Labor Statistics

*Projection

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Fundamentals

Now, legislators are under pressure to repeal the legislation entirely,allowing cheaper crude oil to flow freely throughout the internationalcommunity. Foreign allies recently questioned the ban’s legalityunder international trade laws. More importantly, leaders suggestedthe nation’s soaring production no longer supports such an isolatedapproach to the global marketplace and requested the Obamaadministration’s aid in ending the nation’s antiquated policy.

So, how would the domestic outlook change without the crude oilban in place? While the cost per barrel of crude would not skyrocket

Debating the Fate of a Nearly 40-Year-Old BanSouth Korea received the first unrestricted barrel of U.S. crude oil in nearly forty years this quarter after the Obama administration grantedtwo permits for the export of ultra-light crude stocks. Subsequently, crude oil exports increased by a staggering 231 percent, easily outpacingall crude oil exports reported since the implementation of the infamous crude oil ban in the mid-‘70s.

Source: Energy Information Administration (EIA)

Balancing Domestic Production with Consumption and Exports

U.S. Exports of Crude Oil (Thousand Barrels Per Day)

without the ban —after all, Brent crude currently trades at only a$5 premium to WTI futures—refiners believe it’s a question ofcompetitive edge. Delta fuel executive Graeme Burnett spoke beforea Senate Energy Committee in late September, suggesting toremove the 40-year-old ban without first addressing the 90-year-oldJones Act restrictions, which roughly triple waterborne transportationcosts between U.S. markets and favor crude imports, would placeNortheastern refineries at a severe disadvantage to Europeancompetition. Consequently, domestic refineries could shut theirdoors, endangering the nation’s pursuit of energy independence.

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“ Subsequently, crude oil exports increased by a staggering 231 percent, easily outpacing all crude oil exports reported since the implementation of the infamous crude oil ban in the mid-‘70s.”


Fundamentals

Economic Troubles Threaten America’s Fourth-LargestCrude Oil Supplier and Eight-Largest Refiner

As the world’s twelfth-largest crude oil producer and fifth-largest inthe Western Hemisphere, Venezuela’s highly influential in theglobal crude oil market. Last year, Venezuela produced 2.2 millionbarrels of crude oil each day, exporting roughly one-third to U.Sports and making it our fourth-largest source of foreign oil behindMexico, Canada, and Saudi Arabia. Now, the nation’s socialistgovernment, dependent on crude oil exports for nearly half ofbudget revenues, struggles to provide basic necessities asinternational crude prices fall to their lowest in over a year.

Despite Venezuela’s ranking as a top oil producer/exporter andextraordinary proven reserves, their economy strains under theweight of unsustainable export commitments —repaying debtwith crude— and crippling government subsidies. The VenezuelanCentral Bank’s last published report indicated the inflation ratetopped 61 percent and, according to World Bank estimates,

Venezuela suffers the slowest economic growth among SouthAmerican nations this year. Imports have been slashed due todwindling cash reserves and recent policy reforms resulted inrationing of everyday goods such as milk, meat, corn, and toiletpaper.

In an effort to boost cash reserves and float their flounderingeconomy, Petroleos de Venezuela S.A. (PDVSA) announced inAugust it would consider offers for the purchase of its Houston-based subsidiary, Citgo Petroleum Corp. —the eighth-largestrefiner in the United States. The package includes three U.S.refineries with a combined capacity of 750,000 barrels a day,significant line space on the nation’s premier pipelines, and ahealthy network of storage terminals. All this can be yours for amere $10 billion.

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,

Citgo’s Lake Charles, LA Refinery

Exxon Mobile 1,855,700

Marathon 1,714,000

Phillips 66 1,590,600

Chevron 943,271

Tesoro 834,000

Citgo 762,845

Koch Industries 689,535

BP 649,000

Note: Data as of January 1; ranking does not include

PdVSA’s joint venture Chalmette, LA refinery with Exxon.

*Joint venture of Royal Dutch Shell and Aramco.

Citgo is one of the largest refiners in the US, with plants in Texas, Louisiana and Illinois. Refining capacity in barrels per day:

Venezuela Saudi Arabia Canada Iran Iraq

350

300

250

200

150

100

50

0

Proven Oil Reserves by Selected Countries (Billion Barrels)Critics claim the $10-billion price tag is a bit high, citingMarathon’s 2012 purchase of BP’s 475,000-bpd TexasCity refinery, which sold for $2.4 billion. Conversely,supporters say its midstream storage terminals anddocks —both eligible for tax advantages—justify thehigher price. The company’s two Gulf Coast refineriesboth run heavy crude oil from Venezuela while itsLemont, IL refinery consumes cheaper Canadian stocks.The Lemont facility has been referred to as the “gemof the portfolio” while the other two —saddled withlong-term purchase agreements for expensiveVenezuelan crude— are viewed with less excitement.

Analysts attribute the sale to Venezuela’s flounderingeconomic position coupled with significant debt toChina. Burdened with ongoing civil unrest, internationalscrutiny, and widespread product shortages, theVenezuelan economy is failing. An extra $10 billionwould help sustain the government while possiblyfreeing up barrels previously destined for the GulfCoast, which could then be used to repay their debt toChina. Former Minister of Energy Rafael Ramirezdenied the claims, citing poor fuel economics, instead,and stressing shipments to the U.S. would remainsteady.

For more than 20 years, Venezuela has importedrefined products at an average rate of 500,000 bbl/d,largely supplied by Citgo. If PDVSA finds a buyer fortheir U.S. assets, it’s possible these Citgo productswould instead find their way into domestic markets,improving fuel prices. At the very least, it could ensureall domestic refiners were operating with only theindustry’s economics at heart rather than those of theirparent country, as well. In a worst-case scenario,PDVSA is unable to find a single buyer for their networkand we see the end of a more than 100-year legacy asit’s sold piecemeal and absorbed by the competition.

Fundamentals

Source: Energy Information Administration (EIA), Oil and Gas Journal

Citgo is one of the largest refiners in the U.S., with plants in Texas, Louisiana, and Illinois. Refining capacity in barrels a day:

Exxon Mobile 1,855,700

Marathon 1,714,000

Phillips 66 1,590,600

Chevron 943,271

Tesoro 834,000

Citgo 762,845

Koch Industries 689,535

BP 649,000

Note: Data as of January 1; ranking does not include

PdVSA’s joint venture Chalmette, LA refinery with Exxon.

*Joint venture of Royal Dutch Shell and Aramco.

Citgo is one of the largest refiners in the US, with plants in Texas, Louisiana and Illinois. Refining capacity in barrels per day:

Venezuela Saudi Arabia Canada Iran Iraq

350

300

250

200

150

100

50

0

Source: Wall Street Journal


Average days of distillate supply rose nicely late in the third quarter, adding 3.8 days of supplyin just a few weeks’ time. However, supplies remain 3.4 days below the 3-year average aswe prepare for colder temperatures and fall refinery maintenance.

Distillate Inventories Remain Low for the Third Quarter of the YearDespite steady production and limited disruptions this season, distillate inventories remainedsignificantly lower than those witnessed over the past five years. However, distillate imports fellto their lowest in nearly two years during July while exports of refined distillates increased byalmost 250 percent since January of 2010. Distillate inventories remain comparable tohistorical norms, keeping in mind inventories were unusually high between 2009 and 2011.

Fundamentals


Distillate Inventories (Million Barrels)

Distillate Days of Supply (Million Barrels)



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“ Despite steady production and limited disruptions this season, distillate inventories remained significantly lower than those witnessed over the past five years.”

Fundamentals


Early Winter Weather Forecast

Pro: Warmer than average Pacific Ocean temperatures create shear eastern winds across the Gulf of Mexico which suppress the formation of hurricanes.

Con: The same warm water phenomena leads to colder, wetter winters for southern states and East Coast residents.

So, while the moderate El Niño pattern currently swirling in the PacificOcean can be thanked for a slower-than-average start to the 2014hurricane season, we may be cursing its name come January.

The National Oceanic and Atmospheric Administration (NOAA) reports astrong El Niño pattern can disrupt average winter highs in the Southeastby as much as 25 degrees Fahrenheit and add several inches ofprecipitation. Northeast markets often receive the worst of it, however, asthe two jet streams collide with arctic winds from Canada, producing slow-moving storms and heavy snows. In addition to the cold, wet weatherEast Coast markets generally experience during El Niño years, the NOAAexpects cooler ocean temperatures northwest of Hawaii this winter.

El Niño’s Impact on Winter Jet Streams and Resulting Weather Patterns

Source: Accuweather.com

-3 -2 -1 -0.5 -0.25 0.25 0.5 1 2 3

Fundamentals


-3 -2 -1 -0.5 -0.25 0.25 0.5 1 2 3

According to meteorologist Matt Rogers, the low pressurecreated by these cooler waters intensify effects of El Niñopatterns, leading to “Modoki” versions which generatecolder temperatures and heavier snowfall than your averageEl Niño year. In 2002 and again in 2009, the same patternappeared during a moderate El Niño event (map A) and theD.C. area received as much as 56 inches of snow. Comparethis to similar El Niño events in 2004 and 2006 (map B)during which snowfall totaled less than 13 inches.

While initial forecasts can vary widely, the NOAA predictsthe Midwest, will likely experience a milder winter as thejetstream delivers warmer temperatures and drier air to theregion. Consequently, Energy Information Administration(EIA) estimates suggest home owners will spend as muchas $800 less to heat their homes this winter; particularlythose using propane.

Meanwhile, homeowners along the East Coast andNortheast should prepare for colder temperatures and aboveaverage snowfall. No.1 diesel (kerosene) currently trades ata higher than normal premium to its more widely used No.2counterpart and we’ve noticed these premiums growing inrecent years. Couple this with stricter heating oil regulationsin the region’s northernmost states and consumers canexpect to pay significantly more for their home heat andcold weather diesel despite warmer forecasts.

To reduce your fleet’s dependence on costly kerosene blendsthis winter, consider implementing a cold weather additiveprogram to protect fuel from the harsh elements. Certainadditives discourage paraffin wax in No.2 diesel fromcongealing under extreme temperatures, protecting yourengine from clogged fuel filters and costly downtime. Whileadditives do not eliminate the need for kerosene, they domake the kerosene you add more effective; allowing forlower blending ratios, fewer product related failures, andsignificant savings.

Cold and Snowy

2002-20032009-2010

Cooler Temperatures in the Gulf of Alaska Historically Produce Colder, Snowier Winters

Source: National Oceanic and Atmospheric Administration (NOAA)

A

Source: Matt Rogers via Washington Post

Warmer and Drier

2004-20052006-2007

-5 -4.26 -3.5 -3 -2.25 -1.75 -1 -0.25 0.25 1 1.75 2.25 3 3.5 4.25 5

-5 -4.26 -3.5 -3 -2.25 -1.75 -1 -0.25 0.25 1 1.75 2.25 3 3.5 4.25 5

B


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FinancialsUnderstanding Macroeconomic Influences and their EffectsA Third of Non-Commercial Traders Lose Faith in the Value of CrudeTraders and speculators began the third quarter by reduced bullish bets and didn’t slow until late September, according to the CommodityFutures Trading Commission (CFTC). Shedding more than a third of their record long positions set in late June, non-commercial traderscontributed to a nearly 15-percent drop in WTI crude future values over the same timeframe.

Non-Commercial Net Long Posi�ons

36%

CFTC Long Positions vs. WTI Crude

Source: CFTC Commitment of Traders and Energy Information Administration

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Conversely, weak demand overseas, astrong U.S. dollar, booming North Americancrude production, and discord between OPECnations all contribute to lower long-termcrude oil prices. Until both China and Europejumpstart their economies —resulting inincreased demand— we can expect lowercrude oil prices to pervade. Refined productprices will likely follow. With technicaltraders and automated transactionstriggering frequent downward movements,refiners could be the only means of supportas 3:2:1 crack spreads continue to narrow.Regardless of whether we’ve seen thebottom of this market or not, this is a greattime to hedge future fuel expenses.

As WTI crude futures sank lower, refined product prices followed. However, the recent dropin crude oil prices pressured Heating Oil futures (diesel) below their historic lower range of$2.85 a gallon, creating conflicting upward pressure. As seen at right, heating oil futuresrarely remain below their preferred range for very long, suggesting prices could rebound inthe very near future.

Diesel Futures (Dollars per Gallon)


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While falling product prices resulted in consumer savings of16.5 cents a gallon at the pump this quarter, retailersenjoyed greater savings at the wholesale rack as the nationalaverage for wholesale diesel shed more than 23 cents agallon. As seen below, rack-to-retail spreads demonstrate awidening trend since cold weather drove retail values to theirpeak in early February.

Notice the sharp decline in wholesale prices since February, yet adefinitively gentler trajectory on the retail side. This has many companiesevaluating the benefits of installing bulk tanks to replace retail fuelpurchases. Since wider rack-to-retail spreads significantly shorten thetime it takes to recoup initial investments (typically less than one year),businesses optimize the fuel spend between retail and bulk, generatingimmediate savings to the bottom line.

National Diesel – Wholesale vs. DOE Retail


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Falling Retail Prices Make Even Stronger Case for Bulk Tank Storage

Andy’s Answer

FUELSNews 360˚ Commentaries


Despite an already steep drop throughout the third quarter, crude oil will continue to fall through the end of theyear due to ample supply; dragging refined products with it. In the U.S., production averaged 8.6 million bpd inAugust, a level not achieved since July 1986. Globally, OPEC output increased last month, despite Saudi Arabiacutting production by 400,000 bpd. Looking forward, Libyan shipments are expected to increase by 240,000bpd as the country works to restore production.

Meanwhile, global demand remains tepid. China’s economy struggles with pronounced weakness in industrialproduction. Accordingly, the EIA pared its 2014 non-OECD crude demand forecast by 90,000 bpd with 70,000bpd attributed specifically to China.

Dan’s Dissertation

After accurately predicting a bearish third quarter, several key factors support my bullish prediction for Q4. I’m afirm believer in the Farmer’s Almanac, which predicts another brutally cold winter. This suggests higher productprices towards the end of the fourth quarter. Looking overseas, my focus turns to the ongoing Russia/Ukraineconflict. Russia remains unfazed by Western sanctions, which finally impacted the nation’s energy sector at theend of the third quarter. So, I’m not ruling out escalating violence, which could boost oil prices. Finally, RBOB,heating oil, and WTI prompt futures all tend to spike near the end of the year. So, I’m betting on cold weather,political tension, and product seasonality to lead this bull’s charge into the New Year.

Evan’s Estimation

BEAR BEARBULL BULL

Three months ago, my usual bullish sentiment turned bearish for the third quarter. It’s hard being right all thetime! I guess the $4.99 Magic 8-Ball on my desk really does come in handy! (Literally you can see it my picture)Sorry Chris Carter, but the bear’s won last quarter.

All this bearish sentiment comes on the heels of a stronger dollar, higher domestic production, and long-termlimitations on exports. If any of those key items change, we’ll likely see upward movement. Additionally, theexodus of financial traders affects market volatility. The average traded volume on WTI is already downconsiderably versus prior years.

These factors represent major changes in the marketplace and the added volatility in the market has me peeling away from my typically bullish stance. Don’t get mewrong. The market’s already fallen considerably and futures could correct higher temporarily just to maintain the seasonal curve into next year.

So, everyone’s dying to know my position on the market. Drum roll, please ...

My call is for ULSD futures to bounce higher in the fourth quarter; mostly on winter fears, continued exports, and expectations for seasonal demand. Gasoline maycontinue to lag and I expect WTI crude to stay range bound between $85 a nd $95 a barrel. However, I’ll be watching the political debate on condensate anddomestic crude. Nevertheless, I could be wrong. It wouldn’t be the first or last time. Just look at my fantasy football team!

BEAR BEARBULL BULL

BEAR BEARBULL BULL

BEAR BEARBULL BULL

not convinced we will see another large decrease in prices, as we’re already at bargain prices for traders, but product prices will have difficulty gaining upwardmomentum until the dollar weakens or traders decide to get back in the game.

“Slow progress is better than no progress.” That’s the most optimistic position I can take when referring togovernment policy-making. By the looks of the RIN marketplace, along with multiple statements from EPAadministrator Gina McCarthy, obligated parties are prepared for an increase in the 2014 Renewable FuelStandard (RFS), due for publication sometime next quarter. However, if the signs are wrong, we could seea surge in demand as parties rush to fulfill obligations by the end of the year.

Complicating matters, biodiesel plants nationwide are reportedly tight on product in Q4 – many of whichare sold out for the quarter and one or two are already contracted up through the first quarter of next year.


Jessica’s Judgment

Chris’s ConceptLast quarter, I was the only one betting on a bullish third quarter. Several subscribers have taken great pleasurein calling me out on this. I admit I missed the mark. As it turns out, we didn’t see the strong geopoliticalinfluences I anticipated. The world’s conflict with Russia failed to impact prices, Libyan production reboundednicely despite rapid militia advances, and Sunni insurgents made no attempt to disrupt outputs from Iraq’ssouthern producing region. The dollar steadily gained strength and lower demand in China and Europe pushedthe market down.

With production rates soaring and global demand down, expect OPEC leaders to adjust their output in an effort toboost prices, as we’ve already seen from Saudi Arabia. For the last quarter of 2014, I’m neutral to bearish. I’m

Evan’s Expression The third quarter’s downward momentum —rooted in steady production, weak international economies, and non-commercial traders abandoning bullish bets— will come to an end in the fourth quarter. In the last three months,crude oil production increased while demand in key markets declined. Rumors concerning China’s economic well-beinghave been swirling since the start of the year, but officials have been quietly providing stimulus and I don’t foresee thegreat recession some would suggest. Europe, on the other hand, remains a wild card. I’ll boldly predict the repeal ofthe Crude Oil ban following November elections, which could potentially breathe new life into European refineries,providing a much-needed spark to reignite industrial activity in the region.

At home, cold weather and restrictive regulatory changes will drive distillate prices higher, unless we successfully avoid the disruptions experienced last winter. Thereturn of the one-dollar blender’s credit on biodiesel (fingers crossed) should ease the price burden as well, particularly with the introduction of bioheat blendingmandates in New England. While blend ratios remain low, every little bit helps!

Finally, I can’t believe non-commercial traders will stay away for long. Sure, the dollar is strong against foreign currencies for the moment, encouraging greaterinvestment in equities and foreign debt, but a small amount of renewed interest could go a very long way! Bull, bull, bull.

BEAR BEARBULL BULL

BEAR BEARBULL BULL

Ethanol plants are holding strong with increased production rates only interrupted by maintenance-related downtime. Q4 quotes for both products are coming in cheaper than Q3 although, with the supply constraints, the numbers are not quite as cost effective as initially expected.

Finally, winter weather is right around the corner, as many northern states already feel a brisk chill. The cool air is a reminder of last year’s harsh winter, rifewith product quality concerns and transportation induced migraines. Between product constraints at biodiesel plants and potentially increasing demand followingthe EPA’s, we’re likely to see renewable product prices rally as we approach the end of the year. Producers, distributors, and consumers all remain cautious. I, however, can be found in Houston, where winter is the one time of year the temperature is favorable

FUELSNews 360˚ Commentaries


According to the Biodiesel Heating Oil Act of 2013, all heating oilsold within the state of Rhode Island after July 1st, 2014 mustcontain at least a small amount of biodiesel; 2 percent currently,but increasing to 5 percent after July 1st, 2017. This piece oflegislature is intended to lead the way for other states to convert tobiodiesel blends.

As residents of neighboring bio-mandated states can already attest,citizens of Rhode Island may face crippling logistical issues inexchange for their environmental conscientiousness. While

PADD 1 East CoastPADD 1A Northeast

PADD stands forPetroleum Administration for Defense Districts

During World War II, the United States was divided into five PADDs to organize theallocation of fuels derived from petroleum products, including gasoline and diesel.The purpose was to spread the nation’s oil supply among the regions, therebyeliminating the possibility of a single strike wiping out the country’s oilinfrastructure and resources.

PADD 5:West Coast,

AK, HI

PADD 4:Rocky

Mountain

PADD 3: Gulf Coast

PADD 2: Midwest

PADD 1:East Coast

Regional View?

Did You Know?

biodiesel blends produce cleaner emissions, their cold-weatherproperties leave something to be desired; raising both theproduct’s cloud point and cold filter plug point (CFPP). Additionally,the state’s capacity for biodiesel production (appx. 1.5 milliongallons a year) falls short of the 2 percent mandate set out. Ifheating oil consumption remains constant, residents should burn alittle more than 2 million gallons of biodiesel in the first yearbefore increasing to over 5 million in 2017. With no pipelines orrailcar terminals to offload additional supplies, consumers arevulnerable to price spikes.

Rhode Island Adopts Greener Heat

PADD 1A Diesel Wholesale vs. DOE Retail

Source: Energy Information Administration (EIA)FN360o

On the upside, the state of Rhode Island neither produces norrefines petroleum. Instead, products arrive through the state’sdeepwater port in the capital city of Providence. So, even whensupply conditions are favorable, heating oil prices easily exceednatural gas prices. Therefore, consumers enjoy a slight costreduction when blending cheaper biodiesel in with heating oil.

When conditions are less favorable, consumers already findthemselves vulnerable to price spikes in heating oil, which oftenoutstrips biodiesel; in which case, blending biodiesel with heatingoil still offers consumers a reprieve from higher fuel costs whilehelping the state achieve its goals of significantly lowering theregion’s greenhouse gas emissions.

The Philadelphia Mayor signed an ordinance requiring all heatingoil delivered within the city limits to contain no more than 15ppmsulfur starting July 1st, 2015. The city currently allows consumersup to 2,000ppm, but city council members hope to improve airquality and reduce related respiratory hospitalizations whileadvancing the Northeast’s shift towards a single, lower sulfurmandate.

While city council members have taken an enormous step towardsa greener and healthier city, suppliers warn of product shortagesamid logistical pitfalls, limited line space on the Colonial pipeline,and a local refinery network incapable of satisfying the increaseddemand. Additionally, consumers can expect to pay between 5 and10 cents more for each gallon of heating oil due to diesel’spremium over high-sulfur products. Finally, heating oil containingonly 15ppm sulfur runs a greater risk of gelling than high-sulfurblends because sulfur adds lubricity to heating oil. Without sulfur,producers must introduce paraffin wax to maintain lubricity

standards and paraffin wax congeals in cold weather situations,clogging fuel filters and leading to major headaches.

While city leaders and state legislators should be commended forimproving the quality of life for all residents, it’s difficult to take theplunge and risk the monetary discomfort. Suppliers may cringewhen thinking of maintaining multiple tanks meeting various fuelstandards and consumers may dislike the added cost, but this willlikely be the direction more municipalities take in the future asgrowing populations raise more concerns for air quality.

Philadelphia’s City Council Fights for Cleaner Heating Oil



PADD 1 East CoastPADD 1A Northeast

Refinery and Pipeline Issues Plague NortheastThe third quarter proved troublesome for the Laurel pipeline. This being the first year without theSunoco Logistics pipeline carrying refined products through Pennsylvania, the Laurel pipelinestruggled with increased demand. Currently the sole refined products pipeline running from EastCoast refineries west to Pittsburgh, the Laurel pipeline remained allocated for months and, attimes, fell behind schedule; causing supply disruptions across central and western Pennsylvania.Demand will only increase as winter weather worsens. Consumers should be wary of pipelinedisruptions along this route and brace for higher product prices.

At the same time, Northeast refiners suffered several disruptions in the third quarter. MonroeEnergy, owner of the 190,000-bpd Trainer, PA refinery, shut down its fluid catalytic cracker (FCC)for a week in early July, forcing the producer to make a rare purchase of RBOB to cover previouscommitments. Shortly thereafter, the facility’s crude distillation unit (CDU) was also taken offline;extending the refinery’s shutdown further.

Philadelphia Energy Solutions (PES) suffered their own battle with Murphy’s Law as three units—a reformer, naptha hydrotreater, and vacuum gasoil hydrotreater— were taken offline shortlyinto the quarter. A single ULSD hydrotreater continued operating during this time, but at reducedrates.

Finally, Irving Oil’s 300,000-bpd facility in St. John, New Brunswick lost one crude distillation unitto extended maintenance while a catalytic cracker went offline unexpectedly in July just to befollowed by a Residue Fluid Catalytic Cracking Unit (RFCCU) in September. The cascade ofmisfortune slowed Irving’s production to the lowest levels experienced in years. The Canadianrefiner plays a significant role in the Northeast’s overall supply chain.

“Consumers should be wary of pipeline disruptions along this route and brace for higher product prices.”

Irving Oil’s Refinery in St. John, New Brunswick


PADD 1 East CoastPADD 1B & 1C Central & Lower Atlantic

PADD 1B Diesel Wholesale vs. DOE Retail


PADD 1C Diesel Wholesale vs. DOE Retail


There are approximately 20different boutique gasolineproducts sold across the countryduring the Low RVP season. Onthe East Coast alone, there arefour different variations ofsummer grade fuel sold betweenJune 1st and September 15th.This often results in higher fuelcosts and greater threat ofsupply disruption.

?Did You Know?

Kinder Morgan stocks earned a boost atthe start of August following the launchof a binding open season solicitingcommitments for their proposed refinedproduct pipeline. Connecting severaltraditionally barge-fed markets in theSoutheast to the Plantation Pipeline, the

Palmetto Project would carry gasoline, diesel, and ethanol to marketsthroughout Georgia, Florida, and South Carolina.

The proposal comes in response to a long-standing shortage of Jones Act vessels needed to transport refined product from Gulf Coastrefineries to coastal cities in the Southeast. The shortage creates


PADD 1 East CoastPADD 1B & 1C Central & Lower Atlantic

Plantation Pipeline Leak Causes Product Shortages On August 21st Plantation Pipeline halted all product shipments after discovering a small leak inHelena, AL. The unscheduled repairs took just over three days to complete, resulting in productshortages throughout the Southeast. Markets supplied solely by the Planation Pipeline —Columbus,GA and Montgomery, AL, for instance— naturally proved most sensitive to the interruption.

Supply in larger markets also proved difficult, despite the availability of alternate sources. For example,Atlanta’s gasoline market suffered widespread allocations toward the end of August withoutPlantation’s additional throughput. Major suppliers, such as Marathon, Valero, and Motiva, shut downtheir unbranded gas racks for three days while Atlanta’s low-sulfur requirement prevented nearbymarkets from coming to the rescue. Frequent shortages of specialty or “boutique” fuels supportopposition to city ordinances which ultimately threaten the market’s security of supply. Luckily, reliefarrived a few days before the Labor Day weekend when the pipeline resumed deliveries.

“ If Kinder Morgan chooses to pursue the pipeline project, it could fundamentally change the pricing and security of supply within the region.”

Kinder Morgan Seeks Shippers for East Coast Palmetto Pipelinedemand for foreign imports despite a surplus of domestic refinedproduct and Kinder Morgan hopes to capitalize on the opportunityby July of 2017.

The $1-billion project would carry 167,000 barrels a day via anexpansion leased from Plantation Pipe Line Company betweenBaton Rouge, LA and Belton, SC. Additionally, a new 360-milepipeline would connect Belton to Jacksonville, FL.

If Kinder Morgan chooses to pursue the pipeline project, it couldfundamentally change the pricing and security of supply within theregion. The binding open season ended September 30th, but nodevelopments had been made public at the time of writing.


HOVENSA to Sell St. Croix Refinery to Unnamed Buyer

Poor economics were blamed for the 2012 closure of HOVENSA’s500,000-bpd refinery located on St. Croix’s South Shore, but anunnamed startup hopes to revitalize the shuttered facility,according to the Governor John deJongh Jr. Government approvalwould be required before the sale is executed, but Gov. deJohghtold senators a proposal should be ready for vote by the end ofthe year.

The facility’s Caribbean home offers considerable advantagesgiven its proximity to Southeastern markets and exemption fromJones Act requirements. Since the plant closed in December of2012, the need for Jones Act vessels sky rocketed, propellingtransportation rates higher and increasing product pricesthroughout Florida and other markets along the Southeast Coast.

Markets such as Charleston and Jacksonville actually transitionedto New York Harbor product, fundamentally changing the way inwhich these markets are priced.

If this mystery buyer succeeds, coastal markets throughout theSoutheast could experience greater security of supply along withreduced transportation costs, regardless of whether barrelsoriginated from the Caribbean plant. Barrels shipped by Northeastbarges and Southeast pipelines, which have been stretched tocover the missing production from HOVENSA, will return to theirnormal markets, providing relief. Additionally, several Jones Actvessels should be freed up to carry other products, reducingtransportation costs for all waterborne deliveries in the region.

H

St. Croix RefineryU.S. Virgin Islands

“ Various refinery hiccups and maintenance in the central swath of the country lead to elevated Midwest gasoline prices throughout the third quarter.”


Unplanned Midwest Refinery Maintenance Results in Tight Gasoline SuppliesVarious refinery hiccups and maintenance in the central swath of the country lead to elevated Midwestgasoline prices throughout the third quarter. In July, CVR Energy’s 125,000-bpd Coffeyville, KS refinerysuffered a fire in their isomerization unit. Traders left short by the lost production bid up Group 3 gasolinebasis by 3 cents per gallon on the day. Over the next eight trading days, basis for the sub-octane fuelincreased more than 20 cents per gallon. With the refinery down for over a month, Gulf Coast gasolineeventually found its way into the area and eased the short supply.

Unfortunately for Chicago area gas buyers, the region suffered its own refinery troubles. On August 27th, BP halted operations at their410,000-bpd Whiting, IN refinery when a compressor exploded during the night, resulting in a small fire. A spokesman for the company saidproduction was minimally affected, but Chicago RBOB jumped 12.5 cents a gallon on the day and CBOB increased roughly 4.5 cents agallon, much higher than an otherwise flat futures market.

Not to be left out, both P66’s 365,000-bpd Wood River refinery and ExxonMobil’s 248,000-bpd Joliet refinery faced small hiccupsthroughout August and September, exacerbating Midwest gasoline premiums.


PADD 2 Midwest

PADD 2 Diesel Wholesale vs. DOE Retail


Midwest Gasoline Basis (Dollars per Gallon)


FN360o

“Traders left short by the lost production bid up Group 3 gasoline basis by 3 cents per gallon on the day. Over the next eight trading days, basis for the sub-octane fuel increased more than 20 cents per gallon.”

Ohio River Oil Spill Hampers River Traffic Ahead of RegionalRefinery MaintenanceA fuel oil spill in late August closed 15 miles of the Ohio River just north of Cincinnati, slowingbarge traffic and driving fuel prices higher in river-supplied markets. The Coast Guard estimatesabout 5,000 gallons of fuel were released from Duke Energy’s W.C. Beckjord power station,leaving a sheen and requiring traffic in the area to receive Coast Guard clearance and maintainreduced speeds.

The price disruption caused by the spill came ahead of Marathon taking 83,000 bpd offline attheir 261,000-bpd Catlettsburg, KY refinery for maintenance of the crude unit, which isexpected to last from early September to mid-October.

As illustrated above, fuel prices in petroleum markets fed by Ohio River barges increased inrelation to the Chicago Platts cash market, suggesting slower river traffic hindered distributionto terminals prior to the refinery maintenance.

Catlettsburg supplies many terminals along the Ohio River via barge and several Cincinnatiterminals rely solely on supply via water. While Louisville also receives product via pipeline,waterborne supply remains an integral source. Rack prices continue to reflect a higher premiumto the Chicago wholesale cash market and fuel buyers may see premiums through the end ofthe refinery maintenance in October.

PADD 2 Midwest

Ohio River Markets Less Chicago Wholesale

FN360o


“Rack prices continue to reflect a higher premium to the Chicago wholesale cash market and fuel buyers may see premiums through the end of the refinery maintenance in October.”


29 © 2014 Mansfield Energy Corp.31 © 2013 Mansfield Energy Corp.

PADD 3 Diesel Wholesale vs. DOE Retail PADD 3 Gulf Coast

Refinery Maintenance Propels Gulf Coast Gasoline Basis HigherSeveral key Gulf Coast refineries began maintenance in September, causing regional gasoline prices to jump in the last few weeks of thequarter. Shell’s 340,000-bpd Deer Park refinery (6th largest in the nation), Delek’s 60,000-bpd Tyler refinery (regionally significant), andExxon’s 573,000-bpd Baytown facility (largest in the nation) as well as its 365,000-bpd Beaumont refinery (5th largest in the nation)


FN360o

all initiated turnaround work on their fluidcatalytic crackers (FCCs), diminishing gasolinesupply in the area. An FCC unit converts heavierpetroleum molecules into more valuableproducts, such as gasoline.

As a result, Colonial Pipeline’s schedulingdeadline for cycle 53 prompted the biggest one-day jump in Gulf Coast cash gasoline pricesthroughout the quarter. On September 17th,Gulf Coast 11.5-lb CBOB increased nearly 10cents per gallon as traders looked for gallons tomeet commitments prior to Colonial Pipelineceasing acceptance of nominations. Meanwhile,RBOB contracts on the NYMEX fell 4.5 cents agallon in the most active month. Adding tonegative news on the day were rumors of anFCC failure at Pasadena Refining’s 100,000-bpdfacility on the Houston Shipping Channel andflooding in Texas City, a home to manyimportant refineries.

Gulf Coast premium to NYMEX (Dollars per Gallon)


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Delek’s Tyler refinery

ExxonMobil Rumored to ExpandBeaumont F acility, Seizing Title of Top U.S. RefineryProcessing more than 600,000 barrels a day, Motiva’s Port Arthur refinery holds the title oflargest refinery in the nation; though it wasn’t until Motiva Enterprises LLC, a Royal DutchShell and Saudi Aramco joint venture, more than doubled the facility’s 285,000-bpd capacitythrough a $10 billion expansion in 2012. Now, Port Arthur faces a contender for the top spot.

At the end of July, ExxonMobil announced plans to add a third crude distillation unit (CDU) at its 365,000-bpd Beaumont, TX refinery, which would roughly double its daily capacity andseize the No.1 spot from Motiva’s Port Arthur refinery by 2020. As part of the facility’sexpansion, four coking unit drums would be replaced next year followed with two new drums in 2017.

So, why is Exxon pumping billions into refinery expansions with domestic diesel demand flatand gasoline consumption on the decline? The rumored expansion illustrates the refiningcommunity’s eagerness to leverage cost-advantaged crude from the nation’s booming oil fields against favorable refined product prices abroad. In the last five years alone, refinedproduct exports nearly doubled and, so long as federal legislation prevents the export of crude oil, refiners along the coast will continue increasing production capacity in the pursuit of substantial profits.

U.S. Finished Petroleum Product Exports (Million Barrels a Day)


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PADD 3 Gulf Coast

31 © 2014 Mansfield Energy Corp.33 © 2013 Mansfield Energy Corp.

“The rumored expansion illustrates the refining community’s eagerness to leverage cost-advantaged crude from the nation’s booming oil fields against favorable refined product prices abroad.”

PADD 4 RockyMountain

Long Lines in DenverJuly and August proved challenging for consumers in the Rockies. First, operational disruptionssuffered by Sinclair, Holly, and Suncor limited gasoline supplies. Then, the Magellan pipeline leadingsouth from Denver into the Fountain/Colorado Springs area shut down; causing intermittent localsupply issues and abnormally long lines at the terminals in Denver as a secondary supply source.Carriers reported lines with wait times ranging from 2 to 6 hour long for several weeks until pipelineoperations were fully restored.

PADD 4 Refinery Yields Changing?Refiners often tweak units and crude slates to produce greater volumes of more profitable products.For instance, the Department of Energy reports a 4.5-percent increase in refiners’ distillate yieldsover the last 8 years while sacrificing small percentages of gasoline (1.2%), jet fuel (0.3%), andother petroleum products (2.6%). So, it’s interesting to note refiners in Padd 4 produced a higheryield of distillates in the third quarter —up as much as 5 percent on a 12-month rolling averagesince 2007— . yet, the price for retail distillate products in Padd 4 increased more than 43 percentin the last seven years while the national average increased by only 36 percent.




“Carriers reported lines with wait times ranging from 2 to 6 hour long for several weeks until pipeline operations were fully restored.”


“ Refiners often tweak units and crude slates to produce greater volumes of more profitable products.”


PADD 5 West Coast,AK, HI



California Cap-and-Trade UpdateNot often do you witness the implementation of a tax-like regulation capable of dramaticallyaffecting both the short and long-term supplybalance within a region, but California is about todo just that with the upcoming changes to theirhighly-debated Cap-and-Trade program.

In short, regulatory changes will require theredemption of carbon allowances to offset on-road consumption of gas and diesel products.Based on regulatory guidance provided by theCalifornia Air Resources Board (CARB), state-runauctions for carbon allowances promise to addbetween 10 and 40 cents to each gallon ofrefined product sold across the state’s wholesaleracks. The addition will either be hidden in thecost per gallon or appear as a separate line itemon customer invoices. Wholesalers in Californiacould potentially remain divided on the issue;adding confusion to index pricing. Ultimately, thestate’s regulatory changes could impact indexspreads, government contracts, and the balanceof supply all the way down to the end user.

Since both imported and domestically-producedproducts sold across California racks will be onthe Cap-and-Trade hook, lawmakers haveactually incentivized California refiners toproduce EPA-spec products for sale outside of thestate. How is this? Since the obligation appliesto transactions at the wholesale rack and not therefinery gate, producers may circumvent the feeby exporting refined products to less-disadvantaged markets.

So, the question becomes “how much regulationwill refiners suffer before the California market isconsidered too high maintenance for theirmargins?” This question could lead to a dramatic2015 for consumers in the state. Visitfuelsnews.com for updates as we will continue tomonitor and update our readers throughout theimplementation process.

“Ultimately, the state’s regulatory changes could impact index spreads, government contracts, and the balance of supply all the way down to theend user.”

PADD 5 West Coast,AK, HIConsumers in the Pacific Northwest witnesseddramatic price spikes in late August due toproduct shortages and refinery issues. While adiesel price increase at this time of year is notunheard of, prices seen in the latter half of thequarter far exceeded any seasonal shift asbasis peaked above 40 cents a gallon in thefirst week of September.

Prices in the region had been elevated sincemid-August after Shell’s 100,000-bpd refineryin Scotford, Alberta suffered an operational


Diesel Prices Spike throughout the Pacific Northwest

Pacific Northwest Diesel Basis (Dollars per Gallon)

Source: Oil Price Information Services (OPIS)FN360o

disruption and Northwest product was redirected to alleviate product outages. Less than a month later, Shell’s 149,000-bpd Puget Soundrefinery in Anacortes, WA experienced issues of its own, halting operations, tightening supply further, and resulting in the highest productprices in the nation for nearly three weeks. By mid-September, Shell had restarted the Washington refinery and prices returned to theirregularly scheduled basis.

Shell’s Puget Sound refinery in Anacortes, WA

Canada


Canadian Airlines Gear up to Combat Higher Taxes

Airline operators in Ontario spoke out this quarter against aproposed tax rate hike which, when fully implemented in2017, will cost consumers millions of dollars each year andarguably divert business away from the region’s growingairports. Ben Smith of Air Canada calls the increase“punitive” in nature, claiming his company would pay morethan C$50 million each year at the tax’s 6.7-cent per literheight. Until now, the 2.7-cent per liter tax was enduredwhile other provinces, such as British Columbia, NewBrunswick, Alberta, Quebec, and Saskatchewan, eliminatedtheir fuel taxes entirely.

Other airlines have already announced their decision tooperate flights out of cheaper American terminals. Sunwing,for instance, claims at least two of its flights will shift fromOntario airports to Buffalo, NY if the budget goes through.Legislators can’t blame them, however, since they’d befollowing their clients rather than leading them. Accordingto the National Airlines Council of Canada, between292,700 and 407,800 travelers will choose airports acrossthe border in an effort to control costs; taking with themnearly 3,000 full-time jobs.

Sousie Heath, a spokesman for Finance Minister CharlesSousa, suggests the 148-percent rate increase is modest,costing consumers as little as a few dollars, whilegenerating significant revenues towards improvinginfrastructure. Sousa’s office also points out the current 2.7-cent rate has remained unchanged for 22 years, implyingthe rate is out of touch with today’s economy. Voters willultimately cast their ballots on the matter as they reach fortheir wallets and decide how far they’ll go to save a buck.

More crude from Alberta’s oil sands region is expected to moveinto the Midwest before the end of September. Enbridge Inc.,Canada’s largest pipeline company, will increase its shipments intothe region while avoiding an administrative review —similar tothose surrounding the Keystone XL— by switching pipelinesbefore deliveries cross the U.S. border. The State Departmentconfirmed Enbridge could construct a link between the AlbertaClipper line and the adjacent Line 3 under existing permits.


CanadaEnbridge Skirts Administrative Review WhileIncreasing Deliveries to Midwest Refiners

The company hopes to boost production from its existing450,000-bpd Alberta Clipper line to more than 570,000 bpdwith the temporary Line 3 solution. The plan proposes crude betransitioned into the Line 3 pipeline in Gretna, Manitoba —1.5miles north of the U.S. border— before returning to the AlbertaClipper line 16 miles south of the border.

A U.S. presidential permit would not be required since thecombined volume of the two lines remain within limits set bycurrently existing permits. An additional expansion project, whichis still under review by the State Department, wouldsubsequently increase the flow of crude via the Alberta Clipperpipeline to more 800,000 bpd.


“With several projects under construction and two more slated to begin operations in the fourth quarter of this year, supporters of the cellulosic biofuel industry still hope to meet the EPA’s goal of generating 17 million gallons of cellulosic fuel before the end of 2014.”

Plant-based fuels have been at the center of a food-versus-fueldebate since Time Magazine reported in 2007 approximately aquarter of all corn harvested wound up in fuel tanks as ethanol.Technological breakthroughs, however, now pave the way toprocessing unwanted corn waste into transportation fuel, sparingthe delicious parts for you and your family.

Early this September, POET-DSM hosted the grand opening of“Project LIBERTY,” the first commercial cellulosic ethanol plant inthe state of Iowa, which will produce 20 million gallons ofcellulosic ethanol annually while consuming an estimated 770tons of corn cobs, leaves, husks, and stalks each day.Strategically located in the heart of the Corn Belt, Project LIBERTYreceives its feed stocks from local farmers at an average price of$70 per dry ton.


Alternative FuelsRenewables

Courtesy of POET-DSM, Project Liberty

Ears of EnergyQuad County Corn Processors also held an official grand openingfor its cellulosic ethanol plant in Galva, Iowa this quarter afteroperations at the two-million-gallon-a-year facility began in July. With several projects under construction and two more slated tobegin operations in the fourth quarter of this year, supporters ofthe cellulosic biofuel industry still hope to meet the EPA’s goal ofgenerating 17 million gallons of cellulosic fuel before the end of2014.

While the industry currently sports several financial flops, thoseplants often rely on woody biomass and struggle to compete withfood-based biofuels. Examples include KiOR’s failing Columbus, MSplant which, despite significant financial backing, halted operationsat the start of the year. Other plants processing agricultural wastemay have proven successful, but high transportation costs offeedstocks and challenges with storage often eat into profitability.

So, it’s no surprise cellulosic plants are cropping up in the CornBelt as agricultural waste in the region can be found in abundanceand at significant discounts. Crop prices have also fallen to four-year lows as the industry prepares for record-high yields this yearand farmers are eager to supplement their income.


Renewables Update: Renewable Fuel Standard (RFS)Toward the end of last year, the Environmental Protection Agency (EPA) released a proposedamendment to the 2014 Renewable Fuel Standard (RFS), reducing Renewable Volume Obligations(RVOs) and sending renewable fuels advocates into a frenzy. The ensuing public outcry along withendless responses, letters to President Obama, and marketing campaigns showed overwhelmingsupport for the industry. In the end, EPA Administrator Gina McCarthy announced the final 2014 targetswill differ from the initial proposal, but left industry participants and supporters with no clear guidance.

The Office of Management and Budget (OMB) received the EPA’s final targets in late August andmeetings between the OMB, EPA, DOE, and USDA have since begun. The OMB also held discussionswith renewable fuels stakeholders and petroleum interests. While the wheels are in motion, manysuggest the final rule will be held until after the November elections. Based on the EPA’s initial proposaland current production rates, there will be an excess of 2014 RINs in the marketplace at the end of thisyear. Analysts suggest obligated parties are encouraging RIN generation beyond the EPA’s proposal inanticipation of an increase in the ruling.

The severe delay in the 2014 RFS will likely postpone the release of the 2015 proposal. Legislationdictates that the EPA produce the following year’s final RFS targets by November 30th of the previousyear, but 2014 clearly missed the mark. Considering the EPA expects to publish the 2015 RFS proposalin February 2015, next year’s final rule will likely prove equally overdue.

As a result, consumers should expect a sharp rise in biodiesel prices following the EPA’s final ruling inthe fourth quarter; particularly if the $1 blenders’ credit returns. The chart below illustrates a similareffect as the 2013 RFS and blenders’ credit expired with the start of 2014. On January 1st, themarket should return to what we’d consider “normal” pricing by this year’s standard as the RFS expiresand we start the waiting game all over again.

Source: Oil Price Information Services (OPIS)

Wholesale BioDiesel Values (Dollars per Gallon)

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“ In the end, EPA Administrator Gina McCarthy announced the final 2014 targets will differ from the initial proposal, but left industry participants and supporters with no clear guidance.”

EPA’s Gina McCarthy


Renewables

Source: Oil Price Information Services (OPIS)

2014 RIN Values (Dollars in RIN Gallon)

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RINformationEarlier this year, the Environmental Protection Agency (EPA) released the final rule for a QualityAssurance Program (QAP), ensuring the validity of Renewable Identification Numbers (RINs) underthe Renewable Fuel Standard (RFS). Although voluntary, the rigorous auditing process andresulting designation as a QAP-certified RIN should encourage all legitimate suppliers to participate;providing buyers a yet-unseen level of security amidst a string of fraud allegations. Initially, theprogram named two tiers of QAP RINs: QAP-A and QAP-B, with B acting as a less controlled RIN.However, starting January 1st, 2015, there will be only one QAP option: Q-RINs.

With the adoption of the quality program, the EPA recently announced an updated version of theEPA Moderated Transaction System, known as EMTS version 3.2, will be released at the start ofthe fourth quarter for the generation of Q-RINs. Version 3.2 permits QAP auditors to label andidentify Q-RINs; yet another method for RIN buyers to authenticate a producer’s RINs. Expertsexpect Q-RINs to trade at a premium to “unverified RINs,” but consumers should expect addedvolatility during the launch.

In July and August, RIN values ranged between 50 and 60 cents per RIN, with prices tapering atthe start of September. Despite the weaker RIN market, biodiesel RINs retained a 3 to 4-centpremium over ethanol RINs in the third quarter. 2015 biodiesel RINs experienced light trading aswell, holding close to 2014 values.

A Renewable IdentificationNumber (or RIN) is a serialnumber assigned to a batch ofbiofuel for the purpose oftracking its production, use, andtrading as required by theUnited States EnvironmentalProtection Agency's RenewableFuel Standard (RFS)implemented according to theEnergy Policy Act of 2005.

?What is a RIN?


Natural Gas

Domestic Natural Gas SupplyThe Energy Information Administration (EIA) expects natural gas production to grow at an annual rateof 5.3 percent in 2014 and 2.1 percent in 2015. The Marcellus shale contributes a heavily to currentgrowth and resulting net flow of gas out of the Northeast. Unfortunately, the increasing volume ofnatural gas far surpasses current infrastructure in many of the nation’s most populated regions.However, several pipeline operators expressed interest to expand or improve these networks in thethird quarter. Eventual expansions should result in the “debottlenecking” of valuable natural resourcesand alleviate some of the price discrepancies we currently see across regional markets.

Imports are expected to decline as domestic production supplants more expensive products fromCanada. Further, LNG imports proved negligible in recent years as only New England’s most extremewinter pricing could compete with Europe and Asia for such molecules. Conversely, the first of severalplanned U.S. LNG export terminals, Sabine Pass, is expected to come online in late 2015 or early2016. Cheniere’s Sabine Pass, located in Louisiana, was originally completed in 2008 as an LNGimport terminal, but construction is currently underway to enable it to export up to 2.76 billion cubicfeet per day (bcf/d) once fully operational.

U.S. Natural Gas Production and Imports (Billion cubic feet per day)

Source: Energy Information Administration (EIA) Short-Term Energy Outlook, Sept. 2014

-2-101234567

2012 2013 2014 201560626466687072747678

U.S. Natural Gas Production and Imports

(Bcf/d)

Federal Gulf of Mexico production (right axis) U.S. non-Gulf of Mexico production (right axis)U.S. net imports (right axis) Total marketed production (left axis)Marketed production forecast (left axis)

annual change (Bcf/d)

Source: Short-Term Energy Outlook, September 2014.

Forecast

-60%-40%-20%0%20%40%60%80%100%120%

-4,000-3,000-2,000-1,000

01,0002,0003,0004,0005,000

Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015

U.S. Working Natural Gas in Storagebillion cubic feet

Deviation from averageStorage level

deviation from average


Note: Colored band around storage levels represents the range between the minimum and maximum from Jan. 2009 - Dec. 2013.

-120-90-60-300306090120150180

2012 2013 2014 20150

102030405060708090

100

U.S. Coal Consumptionmillion short tons (MMst)

Electric power (right axis) Retail and general industry (right axis)Coke plants (right axis) Total consumption (left axis)Consumption forecast (left axis)

annual change (MMst)


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“Unfortunately, the increasing volume of natural gas far surpasses current infrastructure in many of the nation’s most populated regions.”

Natural Gas

Domestic NaturalGas DemandThe EIA expects U.S. natural gas consumption to average 72.6bcf/d in 2014, a 1.8-percent increase over 2013 figures, while2015 presents a modest 0.2-percent growth rate as lowerresidential and commercial demand offset increases in industrial andelectric demand, as shown below. Most significantly, power sectordemand should increase to an average of 22.8 bcf/d in 2015 asgas-fired generation replaces aging coal and nuclear plants.

U.S. Natural Gas Consumption (Billion cubic feet per day)

-3-2-1012345678

2012 2013 2014 20150

102030405060708090

100110(Bcf/d)

Electric power (right axis) Residential and comm. (right axis)Industrial (right axis) Other (right axis)Total consumption (left axis) Consumption forecast (left axis)

annual change (Bcf/d)



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Consumers in the Northeast should be particularly wary of this shift asmany of the retiring facilities contribute heavily to the Northeasternpower grid. Making matters worse, the existing distribution networkfailed to adequately support the region’s demand this past winter andpipeline operators are having a difficult time gaining approval for newconstruction or expansion of existing pipeline projects. Without thenecessary improvements, how can the industry hope to support theincreased demand of new power plants without leading to pricingspikes, as they did in February?



Natural Gas

Domestic Natural Gas InventoriesThe EIA estimates working gas in storage at 2,801 bcf, as of September 5, 2014, which is 463 bcf below the 5-year average for thistime of year. While seemingly significant, the shortfall is less than half the storage deficit experienced in March of this year, illustratedbelow. Luckily, a mild summer translated to greater-than-normal inventory builds, since more than a quarter of the nation’s electricitystarts as natural gas and consumption for electric power generation fell nearly 8 percent since the third quarter of last year. As a result,the EIA reported a record nine weeks of 100+ bcf builds this injection season.

Working Gas in Underground Storage Compared with the 5-Year Maximum and Minimum (Billion cubic feet)


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(Bcf/d)

Lower 485-year maximum - minimum range 5-year average

“Luckily, a mild summer translated to greater-than-normal inventory builds, since more than a quarter of the nation’s electricity starts as natural gas and consumption for electric power generation fell nearly 8 percent since the third quarter of last year.”

Natural GasDomestic Natural Gas PricesAs shown below, natural gas prices fell precipitously in the third quarter. The NYMEX promptcontract found support around $3.80 per million British thermal units (mmBtu) toward the endof July and has since remained range-bound. The October 2014 NYMEX contract currently tradesat $3.96/mmBtu after bouncing off support and meeting resistance just above $4.00/mmBtu.

Henry Hub Natural Gas Price

0

2

4

6

8

10

12

Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015

Henry Hub Natural Gas Price

dollars per million Btu

Historical spot priceSTEO forecast priceNYMEX futures price95% NYMEX futures upper confidence interval95% NYMEX futures lower confidence interval

Note: Confidence interval derived from options market information for the 5 trading days ending Sept. 4, 2014. Intervals not calculated for months with sparse trading in near-the-money options contracts.

FN360o


Meteorologists are beginning to share their winter 2014/15 forecasts and the “trend is your friend” mentality has been the rule, not theexception. Although no one wants to boldly predict anything close to last winter’s polar vortex, the majority of prognosticators anticipateanother year of below-normal temperatures this winter relative to the 10-year and 30-year averages. Suffice to say, cash price volatilityshould accompany any weather extremes.

“Although no one wants to boldly predict anything close to last winter’s polar vortex, the majority of prognosticators anticipate another year of below-normal temperatures this winter relative to the 10-year and 30-year averages.”


Natural GasJoint Venture Promises Marcellus/Utica Shale Gas to Southeast MarketsDubbed Atlantic Coast Pipeline LLC, Dominion Resources revealed plans inthe first week of September for a four-way joint venture between several ofthe Southeast’s largest natural gas companies. Why? To construct andoperate a 550-mile pipeline capable of transporting 1.5 billion cubic feet ofnatural gas each day from within West Virginia shale formations to energystarved markets in Virginia and North Carolina.

Touting some of the nation’s highest natural gas prices, residents in NorthCarolina and Virginia pay roughly 20 percent more for their natural gassupplies than the average American. Unlike the Colonial and Plantationpipelines, which transport refined petroleum products in relatively closeproximity to coast markets, the East’s predominant source of natural gasoriginates in Texas and bisects the region; leaving coastal markets severalhundred miles from the main trunk line traveling through westernTennessee and Kentucky. By increasing access to cost-advantaged resourcestrapped in the Marcellus and Utica shale formations, residents couldexperience some amount of relief after the pipeline’s completion in 2018.

Dominion and North Carolina-based Duke Energy Corp. retain the lion’sshare of the partnership —controlling 85 percent between the two—while Charlotte-based Piedmont Natural Gas and Atlanta’s AGL Resourcescontrol 10 and 5 percent, respectively. Expected to cost $4.5 to $5 billion,Dominion will construct and operate the pipeline while the other partnersconsume or resell natural gas supplies.

North CarolinaVirginia

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Study CorridorLateralDominion Existing Pipelines

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Atlantic Coast PipelineGeneral Location Map

FILE: M:\Clients\D-F\DOM\SRPP\_ArcGIS\Unpathed\Gas_Marketing_Brochure\20140722\_DOM_SEP_Genloc_GMB_Legal_Title_Block.mxd, REVISED: 08/29/2014, SCALE: 1:2,200,587 when printed at 11x17

Atlantic Coast Pipeline


Transportation & LogisticsThe American Trucking Association (ATA) reported near-recorddemand for truck tonnage in the third quarter as the favorableeconomic environment resulted in tighter capacity and greaterdemand for trucking assets. July produced a 3.6-percent increaseover June’s report of 2.3 percent, which was a 0.8-percentdecline from the previous month. Growth is expected to continuethrough the end of the year; though modestly compared to lastyear’s advance, which was the strongest growth the industry hadseen in 15 years.

Class 8 truck retail sales continued their torrid pace, jumping 22.5percent in July to nearly surpass June as the annual high. Recentmonths produced some of the highest sales increases since thebuying boom of 2006. Industry analysts expect the market tostay strong into next year, driven by replacement demand formore efficient and fuel-friendly trucks.

Hours of service issues remained in the forefront this quarter asthe 34-hour restart provision took center stage during July’sSenate Safety hearing on truck safety. According to Anne Ferro,chief of the Federal Motor Carrier Safety Administration (FMCSA),400 lives will be saved each year so long as legislation requiresdrivers to rest for two periods between 1 a.m. and 5 a.m. duringtheir 34-hour restart and limit restarts to once a week. Numeroussenators requested the rule be suspended while the FMCSAstudies its impact on safety due to the high number of truckstaken off the road during early morning hours for compliancesake. Ferro believes the additional trucks on the road during theseearly hours would prove insignificant and, since the provision hasbeen in effect for only a year, rolling it back temporarily wouldhave a detrimental effect on safety.

The Senate approved (81-13) to keep the Highway Trust Fundsolvent through next May; ensuring states receive necessary fundsfor highway projects over the next 10 months. Many states

feared cutbacks and their impact on reimbursement for projectsalready completed. The Department of Transportation waspreparing to implement a cash management program beforelegislators reached a decision. Several voted “no,” viewing theprovision as a short-term fix and a legislative failure to addressthe nation’s long-term highway needs.

The FMSCA announced planned studies measuring the relationshipbetween safety and driver pay. The studies address concerns fordrivers forced into unsafe situations because they are notcompensated while waiting to load or unload. The FMCSA arguessafety would be significantly increased if drivers werecompensated for all time on the clock. Drivers currently paid bythe mile are particularly susceptible to these circumstances.Pending legislation, championed by the Obama administration,would require carriers to pay drivers the federal minimum wagewhile they wait to be loaded or unloaded. The agency alsointends to “analyze the possible unintended consequences of thevarious methods by which commercial drivers are compensated. “The agency will obtain data by randomly selecting carriers toparticipate in an online questionnaire.

Numerous trucking trade associations petitioned TransportationSecretary Anthony Foxx to stop the FMCSA from publishing theindividual safety scores of motor carriers online. As a part of CSA,the Compliance, Safety, Accountability program managed byFMCSA, the Safety Measurement System has been the subject ofsignificant controversy; particularly since the U.S. GovernmentAccountability Office (GAO) reported significant statistical issueswith the data behind the scoring. While Secretary Foxx’s officehas yet to respond, the FMCSA stands behind their program,stating that by providing the data to the public, the SMS programimproved overall safety. The trucking associations ask that thescores be removed while the FMCSA works to resolve the issuesidentified by the GAO.

Transportation & Logistics

Despite the safe delivery of more than 2.47 million carloads ofhazardous materials in 2012 and a 91-percent decline in hazmatrelated accidents along the railroad since 1980, several high-profileaccidents drove North American lawmakers to adopt stricter policiesin the handling of volatile cargo, such as crude oil and ethanol.

In late July, U.S. Transportation Secretary Anthony Foxx proposedregulations requiring roughly one-third of the nation’s railcar fleet bephased out over the next two years. According to the Association ofAmerican Railroads (AAR), the affected DOT-111 model representsmore than two-thirds of the industry’s 335,000-car active fleet, butonly 92,000 of those cars are currently hauling flammable liquids.Of those 92,000, approximately 14,000 meet the industry’s latestsafety standards.

By August, the U.S. Department of Transportation published theirproposal for long-term changes to the way in which railways handlecrude oil shipments. Studies found crude oil extracted from tightshale formations in the Bakken region exhibited greater volatilitythan traditional crude stocks, increasing the likelihood of

Railways Increase Shipment of CrudeOil despite Regulatory Changes

Average weekly U.S. rail carloads of crude oil and petroleum products

FN360o


Number of rail carloads per week Million barrels per day

catastrophic failure in older railcar models. Consequently, railroadsvoluntarily reduced their speeds and improved equipment inspectionsahead of federal regulations requiring upgrades to existing models.

As the industry phases out older cars to comply with stricterequipment standards, trains hauling non-compliant cars filled withcrude or ethanol will reduce their speed to less than 40 miles an hour— a 20-percent reduction from the national standard. This isexpected to extend lead times, decreasing railcar availability,increasing delivery costs, and reducing cost advantages for refiners.

Refiners along the East Coast will likely feel the greatest impact inthe form of crude shipment delays and rate hikes, as cost-advantagedcrude from the Western United States and Canada must travel by railbefore reaching their facilities. Consumers may actually feel the pinchtwice as ethanol shipments for E10 gasoline are impacted, as well.Earlier this year, we witnessed historically high ethanol prices thanksto slower railcar turns. While those issues eventually resolvedthemselves, this may prove slightly more permanent.

“Refiners along the East Coast will likely feel the greatest impact in the form of crude shipment delays and rate hikes, as cost-advantaged crude from the Western United States and Canada must travel by rail before reaching their facilities.”


Prices for North American urea, the key component in the manufacture of Diesel Exhaust Fluid (DEF), stabilized during August andSeptember. Prices remained in a weekly range of $340 to $365 per short ton (st) since early August and during recent weeks the pricingrange narrowed to between $345 and $355/st.

Expect prices to settle in the $330 to $340/st range as we head into the fourth quarter of 2014. The NOLA urea forward curve showstrading in a tight range of $330 to $335/st for November and December contracts.

The Chinese export window for prilled urea closes on November 1st, at which time additional export duties are reapplied to prilled ureaexported from China. We expect this to lend additional support to the North American urea pricing. At the same time, Pakistan and India willlikely be significant buyers from the Chinese. As such, it is likely that $330 to $340/st will be a bottom for the NOLA index, which is basedon the price per short ton of prilled urea delivered into New Orleans.


Diesel Exhaust Fluid (DEF)

Source: GreenMarkets

U.S. Gulf Coast NOLA Barge Urea (Dollars per Short Ton)

FN360o

The North American DEF urea market remains short of supply capacity withdomestic producers supplying roughly half of the existing DEF urea demand.At the same time, DEF demand is forecasted to grow 30 percent annuallythrough 2020 as additional on and off-road SCR-equipped vehicles enter themarket. While domestic producers will continue to expand plant capacity andnew North American plant constructions are planned (e.g., CHS andYara/BASF), we believe the North American market will remain short supplyfor the next 3 to 5 years. Consequently, we expect the annual cyclical costcurve to gradually increase in year-over-year urea and DEF supply cost,barring any major disruptions or anomalies in the global ammonia and ureamarkets, which could drive North American DEF supply costs higher.

DEF Longer-term Outlook (2015+)

DEF Near-term Outlook


Mansfield’s National Supply Team

Andy Milton VP of Supply & DistributionAndy heads the supply group for Mansfield and during his tenure the company has grown from 1.3 billion gallons toover 2.5 billion gallons per year. Andy’s industry experience spans all aspects of the fuel supply business from truckdispatch, analytics, and index pricing to hedging and bulk purchasing. Prior to Mansfield, Andy worked at RaceTracPetroleum. Andy’s expertise in purchasing via pipeline, vessel, and the coordination via futures and options forhedging purchases enables him to successfully lead a team of experienced and motivated supply personnel atMansfield. Andy’s team handles a wide geographic area of all 50 states and Canada, including all gasoline products,ULSD, kerosene, Heating Oil, biodiesel, Ethanol, and Natural Gas. Andy’s education began at Young Harris Collegeand later at Georgia Southern University where he received a BS in Sports Management.

Mansfield’s supply team brings unique experience and industry expertise to the table. From contract pricing and hedging totrading of fuel, renewables and alternatives such as CNG and LNG, the Mansfield supply team covers the gamut of knowledgethat is required to manage today’s complex national fuel supply chain. Although they work as a national team, each member’sregional focus enables Mansfield to deliver geographic based supply solutions by more efficiently managing market specificrefining, shipping and terminal/assets.

Dan Luther Manager of Supply & DistributionDan is responsible for purchasing, hedging, and the distribution of natural gas and renewable fuels. Before joiningMansfield, Dan was Director of Operations at Aska Energy and also worked at RaceTrac Petroleum, where he helpedmanage all barge, rail, and truck fuel deliveries before assuming ethanol trading responsibilities, includingpurchasing product to fulfill RaceTrac’s demand while trading product across other U.S. markets. Dan holds a BSBAin Supply Chain Management and Marketing from Ohio State University and is currently working towards his MBAat Georgia Tech.

Evan Smiles Northeast Supply SupervisorEvan began his career with Mansfield as an intern in the supply department back in the winter of 2011,assisting in the Southeast region. Evan quickly advanced into the role of Northeast Supply OptimizationAnalyst and currently holds the position of Northeast Supply Supervisor, handling various tasks includingsupply bids, day deal purchasing, long haul analysis, contract negotiations/fulfillment and supplyoptimization. Evan earned a BS in Sports Management and BBA in Finance from the University of Georgia.

Nate Kovacevich Senior Supply ManagerBefore joining the company, Nate worked for Yocum Oil Company as a Senior Trader where hisresponsibilities included managing the company's refined product and renewable fuels procurement,handling all hedging related activities, and providing risk management tools and strategies to help customersmitigate volatility and price risk. Nate previously worked for FCStone, where he performed commodityresearch and analysis for customers with agricultural and petroleum related risk, devised and implementedrisk management programs and strategies, and executed futures and option orders on all the majorexchanges as well as any OTC related transactions. Nate earned his BA in Entrepreneurship and Economicsfrom the University of St. Thomas


Evan Poole Supply Support ManagerEvan started his career with Mansfield analyzing purchasing strategies and index behavior throughoutthe US and Canada. He’s the resident expert in Canadian refined products and serves in an advisorycapacity to the Canadian Supply team. Evan holds an MBA concentrated in Managerial Leadership fromPiedmont College.

Mansfield’s National Supply Team

Chris Carter Southeast Supply ManagerChris serves as the Southeast Supply Manager responsible for refined product purchases including contracts,day deals and rack purchases. The Southeast region covers Florida, Georgia, Mississippi, Alabama,Tennessee, South Carolina, North Carolina, Virginia and Maryland. His responsibilities also include supplycontracts and current bids. Chris manages pipeline shipments of gas and diesel on the Colonial, Plantationand Central Florida Pipelines. Chris joined Mansfield in 2009 as a Supply Optimization Analyst and earnedhis BA in Business Management from North Georgia College and State University.

Jessica Phillips Renewable Supply & Distribution SupervisorJessica is based out of Houston, TX and is responsible for nationwide purchasing, hedging, and thedistribution of renewable fuels. Joining the Mansfield team in 2009, she has held multiple titles over theyears: Contracts Coordinator, Regional Supply Analyst, Senior Strategic Supply Analyst, and as of late,Renewables Supply Supervisor. Jessica has a strong background in refined products scheduling, contracts,optimization and market analysis and is driven to continue to expand her knowledge in renewable andalternative fuels.

Mansfield Energy Corp.

www.mansfieldoil.com

www.fuelsnews.com

678.450.2000

1025 Airport Pkwy SW

Gainesville, GA 30501

United States of America

Disclaimer: The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore,no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein areprovided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contract.

©2014 Mansfield Energy Corp.

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