Argus Americas Crude. Contents. Crude market prices and analysis. Overview. Key prices. In the news. Infrastructure. Industry

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1 Crude market prices and analysis Overview Crude futures opened the week flat as three of four major contracts worked toward expiration. Nymex May light, sweet crude futures fell by 7 /bl to $39.39/bl. May Mars recovered to WTI after trading at WTI the previous day. April Mars fell amid selling pressure last week as April trade ended, which weakened May Mars. ANS sold Monday for May delivery to the US west coast at a discount of $1.10/bl to May CMA Ice Brent. Argentinian refiner Axion was heard purchasing 1mn bl of Nigerian Bonga crude for May delivery in its recent tender. Argus began assessing the value of WCS at Houston, Texas. Announcement Argus has launched a new assessment for Western Canadian Select (WCS) at Houston, as well as a second trade month assessment for WTI Houston. The assessments are on page 2 of the Argus Americas Crude PDF report, and are published as data under codes PA and PA , respectively. In the news Infrastructure Total Port Arthur sulfur units malfunction Valero Port Arthur hydrotreater malfunctions Valero reports Benicia startup Shell restarts Martinez units Industry Cushing blends raise concerns on fouling WCS Houston, Maya prices parted ways in 2015 Man-made earthquakes raise hazards: USGS US economists' survey lowers oil price outlook US restricts dust exposure during fracturing Key prices All-day assessments Contents WTI, Gulf coast and midcontinent 2 West coast and Latin America 4 Canada 6 CME Nymex and Ice 6 Americas crude pipeline deals 7 News 9 Diff to WTI Diff to LLS Price ± LLS St James WTI Cushing WTI Midland WTI Houston Mars Clovelly WCS Hardisty WCS Cushing Argus Maya Forward curve: Locational spreads WTI/Brent 4:30pm London WTI/Brent 1:30pm Houston LLS/Brent 1:30pm Houston May Jun Jul :30pm Houston LLS/WTI Mars/WTI Mars/LLS May Jun Jul Forward curve: Time spreads 1:30pm Houston ICE Brent CME WTI LLS Mars May/Jun Jun/Jul Jul/Aug Forward curve: Outright prices 1:30pm Houston LLS WTI Midland Mars May Jun Jul Copyright 2016 Argus Media group

2 WTI Timing Low High WTI formula basis price WTI formula basis MTD Roll to next month Argus documentation links: WTI Cushing May WTI Cushing Jun WTI Cushing Jul WTI Cushing Aug Timing Price CMA Nymex May CMA Nymex Jun Timing Base Diff low Diff high Diff weighted Argus Americas Crude Methodology and Specification Guide Argus Global Compliance Policy Argus Media Editorial Code of Conduct Diff MTD weighted Low High Weighted WTI Houston May May WTI WTI Houston Jun Jun WTI WTI Midland May May WTI WTI Midland Jun Jun WTI WTI diff to CMA Nymex May CMA WTI postings-plus May Postings Gulf coast and midcontinent domestic Timing Base Diff low Diff high Diff weighted Diff MTD weighted Low High Weighted Bakken May CMA Nym LLS May May WTI LLS Jun Jun WTI HLS May May WTI Thunder Horse May May WTI Bonito May May WTI WTS May May WTI WTS Jun Jun WTI Poseidon May May WTI Mars May May WTI Mars Jun Jun WTI Southern Green Canyon May May WTI WCS Houston May CMA Nym WCS Cushing May CMA Nym US Gulf Coast and Midcontinent May Mars strengthened after being pressured weaker by a falling April Mars at the end of the April trade month. May Mars traded from $3.80/bl to $3.60/bl under WTI Cushing on Monday, after trading at WTI in the previous session, and being valued at WTI -4.60/ April Mars had weakened at the end of the April trade month amid increased late selling interest resulting in an LLS/Mars spread of $7/bl in the previous session, the widest since October The spread for April was $5.50/bl. LLS for May was also stronger with the arrival of May prompt trade. May LLS traded at premiums of $1.95/bl and $2/bl over WTI Cushing, after trading at WTI on Thursday. Permian WTI traded at the Magellan East Houston (MEH) terminal at a premium of $1.60/bl to WTI Cushing, within the range heard on May WTI Houston in the previous session, with 5,000 b/d changing hands. May WTI at the Midland delivery point changed hands at discounts of 35 /bl and 40 /bl to WTI Cushing, weaker from Thursday, when WTI Midland was valued at WTI Cushing -0.30/ The Midland/Houston spread for WTI was $1.34/bl on Copyright 2016 Argus Media group Page 2 of 15

3 Announcement Argus completes and extends annual Iosco assurance review Argus has completed its fourth external assurance review of its price benchmarks, extending the scope of the process to cover petrochemicals and fertilizers for the first time, as well as again covering crude, products, biofuels, thermal coal, coking coal, natural gas and biomass benchmarks. The review was carried out by professional services firm PwC. Annual independent, external reviews of oil benchmarks are required by international regulatory group Iosco s Principles for Oil Price Reporting Agencies, and Iosco encourages extension of the reviews to non-oil benchmarks. For more information and to download the review visit our website Work/ Monday, weighted by volume, after averaging $2/bl during April trade. WTI Midland and WTS were relatively weak in April trade, with midcontinent maintenance that began in March expected to peak in April, according to the US government. Refinery utilization was at 86pc in the area, as of last week s government data, the lowest since the last round of maintenance late in May WTS was offered at WTI Cushing -0.35, but with little buying interest, no bids were heard. While WTS tends to be valued at a premium to WTI Midland in the midcontinent, the spread often reverses during refinery maintenance as downstream units are shut down in the region. US west coast pipeline Timing Base Diff low/high Low/High SJLB P-Plus May Postings -2.25/ Implied WTI diff May May -4.21/-3.71 Line 63 P-Plus May Postings -0.91/ Implied WTI diff May May -2.87/-2.37 Midway Sunset P-Plus May Postings +0.35/ Implied WTI diff May May -6.68/-6.18 Light postings avg Heavy postings avg US west coast waterborne Timing Base Diff low/high Low/High Isthmus USWC Mar K-Factor Mar ANS del May CMA Nym -0.82/ ANS del concurrent May May WTI -0.82/ Assessment rationale The minimum volume was met and volume-weighted calculated according to the methodology for Bonito sour, HLS, LLS, Mars, Southern Green Canyon, Thunder Horse, WTI Diff to CMA Nymex, WTI Houston, WTI Midland and WTI Postings. Poseidon was assessed at WTI -4.55/-3.65, after having been discussed at Mars -0.75/Even. The low end of Poseidon is 75 / bl under the low for Mars, while the high for Poseidon is at parity to the high for Mars. WTS was assessed at WTI Cushing -0.80/-0.65 where market participants saw value, after WTS was offered at WTI Cushing -0.35, which did not solicit any bidding interest. The Bakken assessment was set on the basis of fresh trade. Bakken sold at a discount of $1.80/bl (700 b/d). Thunder Horse vs ASCI LLS vs Mars 1.30pm Spread 10 Thunder Horse vs ASCI (5 day MA) Thunder Horse vs WTI (5 day MA) 8 7 Mars = Jul Sep Dec Mar Sep Nov Jan Mar 16 Copyright 2016 Argus Media group Page 3 of 15

4 The WCS Cushing assessment was set on the basis of fresh trade. WCS Cushing sold at a discount of $10.15/bl. The trade volume was not reported. US West Coast Alaskan North Slope (ANS) crude sold Monday for May delivery to the US west coast at a discount of $1.10/bl to May CMA Ice Brent. ANS for May delivery to the US west coast sold twice on Thursday at a discount of 50 /bl to May CMA Nymex WTI and once at a discount of 57 /bl. As the CMA Nymex WTI/CMA Ice Brent spread stood Thursday at $0.59/bl, the midpoint of trade Thursday represented a discount of $1.12/bl to May CMA Ice Brent. A total of 2.7mn bl of spot ANS has sold in seven transactions for delivery to the US west coast in May. The grade's discount to CMA Ice Brent has remained between $1.48-$1.09/bl for a volume weighted discount of $1.26/bl during May trade. Latin America Timing Base Diff low/high Low/High Mexico Maya (USGC) Mar K-Factor Mar Olmeca Mar K-Factor Mar Isthmus Mar K-Factor Mar Colombia Vasconia Prompt Jun WTI -6.96/ Jun Ice -7.30/-6.50 Castilla Prompt Jun WTI / Jun Ice / Argentina Escalante Prompt Jun WTI -5.66/ Jun Ice -6.00/-5.50 Assessment rationale The ANS assessment was set on the basis of fresh trade. Alaskan North Slope (ANS) crude sold Monday for May delivery to the US west coast at a discount of $1.10/bl to May CMA Ice Brent. As the CMA Nymex WTI/CMA Ice Brent spread stood Monday at 53 /bl, Monday's trade represents a discount of 57 / bl to May CMA Nymex WTI. Latin America Colombian medium sour Vasconia weakened by 15 /bl to an assessed discount of $6.90/bl relative to June Ice Brent as the low end of the range of possible trade widened by 30 /bl to include bearish market discussion late Thursday that valued the grade at discounts to June Ice Brent as wide as $7.30/bl less than the international benchmark. The wider bid/ask range coincided with Colombian statecontrolled Ecopetrol s announcement that flows on the 220,000 b/d Caño Limon-Coveñas were back to normal levels following 14 March WTI Houston vs LLS WTI Midland outright 2 LLS = Nov Dec Feb Mar Dec Jan Feb Mar 16 Copyright 2016 Argus Media group Page 4 of 15

5 Canada domestic Grade Timing Basis Diff low/high Low/High Diff daily weighted Daily weighted Daily deals Daily volume b/d Trade month weighted Monthly deals Monthly volume b/d Syncrude (SSP) May CMA Nym +2.00/ / WCS May CMA Nym / / , Condensate May CMA Nym -1.25/ /40.25 MSW May CMA Nym -4.00/ /37.40 LSB May CMA Nym -4.93/ /36.32 LLB May CMA Nym / /27.90 WCS Cushing May CMA Nym / /30.85 Canada waterborne prices Timing Basis Diff low/high Low/High Hibernia Dated North Sea -0.15/ /- Terra Nova Dated North Sea -0.30/0.00 -/- rebel attacks that forced the line out of service and triggered a force majeure on at least three Vasconia shipments scheduled to load out of Coveñas. With no immediate threat to Vasconia supplies in the near term, market sentiment trended downward. Heavy sour Castilla Blend could soon move in the opposite direction amid anticipation of jeopardized crude exports out of Venezuela as rumors circulate the market of a backlog of up to 70 crude and products tankers anchored in the Caribbean near Venezuelan state-owned PdV s Curacao port, waiting to load and unload. Venezuela exports about 1.8mn b/d, according to recent estimates by the US Energy Information Administration (EIA), most of which originates from the extra-heavy Orinoco Belt in central Venezuela. Orinoco crude is most frequently diluted with light sweet crude or condensate to create 16 API Merey, which competes with Colombia s Castilla Blend. Spot crude discounts could also firm in an apparent surge in Chinese oil demand despite the upcoming refinery turnaround season. Apparent oil demand crude production plus net oil imports rose to more than 12.4mn b/d in February amid unseasonably low gasoline inventories that resulted in the need for more imported crude to refine. While refinery maintenance is now entering full swing, market participants agree most April cargoes out of Colombia have been sold and traders are waiting for the May program to begin. May-loading cargoes from Latin America would likely arrive in China in late June or July, leaving enough time for major refineries to resume normal operations. Separately, Argentinian refiner Axion was heard purchasing 1mn bl of Nigerian Bonga crude for delivery to lightering areas offshore Argentina May in its recent tender in consortium with Shell and Petrobras. Axion s parent company, Bridas, was last reported importing Nigerian crude to Argentina in a tender to purchase 1mn bl of Bonny Light for late-february delivery. Poseidon vs Mars Vasconia vs Urals Med 80kt Mars = 0 8 Urals = Sep Nov Jan Mar Sep Nov Jan Mar 16 Copyright 2016 Argus Media group Page 5 of 15

6 Canada In western Canada, the heavy benchmark declined. Western Canadian Select (WCS) crude sold at a discount of $13.45-$13.25/bl to May CMA Nymex WTI, down from a discount of $13.35-$13.00/bl during the previous session. WCS at Cushing, Oklahoma, changed hands at a discount of $10.15/bl, down from a discount of $10.25-$9.75/bl. Cold Lake at the Enterprise Crude Houston (Echo) terminal in Houston, Texas, traded at a discount of $10.25/bl. The Argus assessment for WCS at Houston, Texas, which began Monday, was set at a discount of $9.75/bl to reflect the typical spread between WCS and Cold Lake. Syncrude was discussed at a premium of $2.00-$3.25/bl, down from a premium of $2.00-$3.35/bl. Mixed Sweet Blend (MSW) was discussed at a discount of $4.00-$3.35/bl, up from a discount of $4.15-$3.60/bl. Edmonton condensate was discussed at a discount of $1.25- $0.50/bl, up from a discount of $1.15-$0.70/bl. Bakken for pipeline injection at Clearbrook, Minnesota, changed hands at a discount of $1.80/bl, down from a discount of $1.70-$1.40/bl. CME Nymex light sweet Timing Open Low High 4:30pm London 1:30pm Houston settle May Jun Jul Aug Ice Brent Timing Open Low High 4:30pm London 1:30pm Houston settle ± May Jun Jul ANS vs Bakken 4 3 Bakken = 0 ± 2 Assessment rationale The Syncrude assessment was set on the basis of fresh discussion. Syncrude was discussed at a premium of $2.00-$3.35/bl. No trades were reported Monday. For WCS the minimum aggregate volume was met and volume weighted calculated. The WCS Cushing assessment was set on the basis of fresh trade. WCS Cushing sold at a discount of $10.15/bl. The trade volume was not reported Sep Nov Jan Mar 16 WCS differential to WTI Sep Nov Jan Mar 16 Copyright 2016 Argus Media group Page 6 of 15

7 Deals done US pipeline deals done Grade Location Trade month Basis month Differential basis Differential Price Volume b/d WTI Cushing Oklahoma Apr Apr CMA Nymex trade days ,000 WTI Cushing Oklahoma May May CMA Nymex trade days ,500 WTI Cushing Oklahoma May May CMA Nymex trade days ,000 WTI Cushing Oklahoma May May CMA Nymex trade days ,000 WTI Cushing Oklahoma May May CMA Nymex trade days ,000 WTI Cushing Oklahoma May May Phillips 66 Posting ,000 WTI Magellan East Houston May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI ,000 WTI Midland Texas May May WTI WTI Midland Texas May May WTI ,000 Bonito sour St. James Louisiana May May WTI ,000 HLS Empire Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 LLS St. James Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Mars Clovelly Louisiana May May WTI ,000 Southern Green Canyon Nederland / Texas City May May WTI ,000 Thunder Horse Clovelly Louisiana May May WTI ,000 Thunder Horse Clovelly Louisiana May May WTI ,000 Thunder Horse Clovelly Louisiana May May WTI ,000 Copyright 2016 Argus Media group Page 7 of 15

8 Infrastructure news Total Port Arthur sulfur units malfunction Sulfur units briefly malfunctioned last week at Total's 240,000 b/d refinery in Port Arthur, Texas. The refiner reported 24 hours of increased emissions attributed to a process unit malfunction beginning at 10:30am ET on 26 March. Workers "immediately stabilized both units to return to normal operations," according to the filing. Total did not identify the units, but previous filings suggest equipment the refinery uses to remove sulfur and other contaminants from products and gas at the refinery. Valero Port Arthur hydrotreater malfunctions A hydrotreater malfunction increased emissions late last week at Valero's 325,000 b/d refinery in Port Arthur, Texas. The refiner reported roughly two hours of increased emissions attributed to trouble with a hydrotreater, which uses hydrogen, catalyst and pressure to remove sulfur and other contaminants from refinery streams. Flaring began around 10:30am ET on 25 March, according to a filing to state environmental regulators. Valero reports Benicia startup Unit startups over the weekend increased emissions at Valero's 170,000 b/d refinery in Benicia, California. The refiner reported planned unit restarts increasing emissions beginning at 5pm ET on 26 March, according to a filing to state hazardous materials monitors. Valero previously reported planned maintenance on unidentified units beginning in mid-january. The refiner also reported shutting down an unidentified unit on 4 March. Valero declined to comment on refinery operations. Shell restarts Martinez units Shell restarted an unidentified unit today at its 165,000 b/d refinery in Martinez, California. The refiner reported emissions associated with the start up today in a filing to regional air quality monitors. The company had earlier reported in a separate filing restarting another unidentified unit on 24 March. A company representative could not be immediately reached for comment. Shell reported shutting down an unidentified unit a week earlier, according to a separate filing. industry news Cushing blends raise concerns on fouling Light, sweet crude blends out of Cushing, Oklahoma, could be contributing to fouling at some refineries, leading to increased maintenance and costs. The problem appears to be related to asphaltenes, a component common to heavier crude oil that when refined can be transformed into petroleum coke. But when the asphaltenes fall out of the crude solution they become precipitated asphaltenes, and are more likely to turn into coke in parts of the refinery where they are unwelcome, including in refinery treatment and heating systems. Refiners can face more frequent, costly maintenance and lost operating efficiency. Refiners contacted by Argus declined to comment on how the contaminant has affected operations. Precipitated asphaltenes are nothing new, as the industry has been noting them in crude for many years. Dozens of crudes produced around the world have varying levels of precipitating asphaltenes. But the precipitated asphaltenes are appearing with greater frequency in samples of crude delivered from Cushing, where the US benchmark oil price is set. This has prompted the industry consortium Crude Oil Quality Association (COQA) to set up a subcommittee to study and potentially resolve the issue. While the subcommittee's work is still in the early stages, it is possible the blending of light sweet crude in Cushing with heavy or sour crudes could be causing the problem. Precipitated, or undissolved, asphaltenes commonly result from the blending of a small amount of heavy or sour crudes with mostly lighter crudes. As shale crude gets lighter it must be blended with heavier crude to reduce the API gravity to meet the WTI benchmark specification. Asphaltenes are not common in WTI at the wellhead in west Texas' Permian basin, said Irwin Wiehe, president of Soluble Solutions, the company hired by COQA to test samples for the study. Less than 10pc of Permian samples submitted to Wiehe contained undissolved asphaltenes. And while WTI in Cushing has long been a mix of different crudes, precipitated asphaltenes have not been an issue until Since then, Copyright 2016 Argus Media group Page 8 of 15

9 industry news about 75pc of the WTI samples Wiehe has received contained precipitated asphaltenes. The issue does not seem to be going away. Seven of the nine WTI samples submitted so far in 2016 contain precipitated asphaltenes, according to Wiehe. The COQA subcommittee is testing samples of WTI originating from multiple locations and shipped on various pipelines, in an effort to determine the source and cause of the problem. Given the infrequency of the issue in samples directly from west Texas compared to Cushing-delivered samples, blending appears to be the most likely cause in Cushing, while contamination is the probable cause for west Texas crude. WCS Houston, Maya prices parted ways in 2015 Prices for Western Canadian Select (WCS) crude at Houston, Texas, diverged from the Mexican heavy sour grade Maya in 2015 as infrastructure expansions allowed more WCS volumes to reach the US Gulf coast. Canadian infrastructure company Enbridge on 1 July expanded the capacity of Line 67 of its Mainline System - the primary conduit for Canadian crude to the US midcontinent - to 800,000 b/d. Canadian crude as a share of Texas imports below 24 API climbed to 18pc in 2015 from 8pc in 2014, while Maya s share during the same period fell to 34pc from 40pc. Values for WCS at Houston and Gulf coast-delivered Maya diverged in The WCS discount to Light Louisiana Sweet (LLS) more than doubled to $14.43/bl on 24 August 2015 from $5.96/bl on 29 June. Maya, however, held a premium of more than $5/bl to WCS at Houston on 24 August. Its discount to LLS fell to $9.21/bl from $5.23/bl on 29 June. WCS at Houston held an discount of 66 /bl to Maya at the Gulf coast during April 2016 trade. To reflect this shift, Argus will today begin formally assessing the value of WCS at Houston to bring transparency to the market for Canadian heavy crude at the Texas Gulf coast. One of the reasons that Maya has remained stronger on the Gulf coast compared with WCS is the formula used to calculate its value. West Texas Sour (WTS), a grade priced at Midland, Texas, accounts for 40pc of Maya s calculated value. WTS strengthened last year when start-up of the Permian Express 2 pipeline eliminated a glut in Midland, allowing that crude to find an outlet at the Gulf and boosting prices. Canadian crude reaches the Texas Gulf coast via the Enbridge-Enterprise joint venture Seaway and Seaway twin pipelines or TransCanada's 700,000 Marketlink pipeline. The Seaway lines deliver to the Jones Creek terminal; Freeport, Texas; the Phillips 66 Sweeny refinery; Texas City, Texas; and the Enterprise Crude Houston (Echo) terminal in Houston, Texas. Echo terminal connects to Enterprise's Houston Ship Channel Terminal (Oiltanking). In addition, the Enterprise Seaway Beaumont line connects Echo to Sunoco Nederland, Phillips 66 Beaumont and Enterprise's Beaumont Marine West (BMW) terminal. The Phillips 66 Beaumont terminal received 56,344 b/d of crude from Enterprise from February through December 2015, according to Texas Railroad Commission filings. Marketlink delivers to the Sunoco Nederland terminal. LyondelBasell's 268,000 b/d refinery (Houston Refining) in Houston, Texas, took 46,190 b/d of Canadian heavy crude in The company has committed space on Enbridge's Flanagan South Pipeline System (FSP). Sunoco Nederland received 57,171 b/d of Canadian crude, while Motiva's 600,000 b/d refinery in Port Arthur, Texas, took 60,458 b/d, mostly via Sunoco Nederland. Man-made earthquakes raise hazards: USGS The US Geological Survey (USGS) for the first time has identified potential hazards from human-induced earthquakes in its latest maps, including those linked to wastewater disposal wells used by the oil and gas industry. The new maps show that some portions of the central and eastern US now have a similar risk of damaging earthquakes as high-hazard areas of California. The agency previously only identified natural earthquake hazards. Much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced, said chief of the agency s National Seismic Hazard Mapping Project Mark Petersen. About 7mn people live and work in areas of the central and eastern US with potential for damaging shaking from induced seismicity. Oklahoma and Texas have the largest populations exposed to earthquakes triggered by human activities, with wastewater disposal being the primary cause for recent events, the USGS said. In addition, Oklahoma and Texas are among six states with the most significant hazards from induced seismicity. The other four are Kansas, Colorado, New Mexico and Arkansas. The central US has undergone the most dramatic increase Copyright 2016 Argus Media group Page 9 of 15

10 industry news in seismicity over the past six years. The region had an of 24 earthquakes of magnitude 3.0 or higher from 1973 to That number jumped to an of 318 per year from 2009 to The peak was last year with 1,010 earthquakes of 3.0 or above, mostly in Oklahoma. A sharp increase in earthquakes in Oklahoma has coincided with a surge in oil and gas drilling activity. The number of earthquakes in the state above a magnitude 3.0 increased to more than 900 in 2015, compared to about 580 in 2014 and about 100 in Earthquakes near Cushing, Oklahoma, have been of special concern because it is a major crude tankage hub, with more than 66mn bl of oil stored there currently, according to the Energy Information Administration. Oklahoma regulators have been limiting wastewater well injections to curb the potentially damaging earthquakes. The latest rules implemented earlier this month by the Oklahoma Corporation Commission (OCC) would reduce wastewater well injections by 300,000 b/d. The Oklahoma regulations now include an area of more than 10,000 square miles in central and western Oklahoma and more than 600 wastewater disposal wells in the Arbuckle formation. The new USGS maps clearly show the need for such regulatory actions, said OCC commissioner Dana Murphy. The continued development of seismic hazard mapping will provide another important tool for Oklahoma and other states that are working to reduce earthquake risk. US economists' survey lowers oil price outlook West Texas Intermediate (WTI) prices likely will $40/bl in December and rebound to $50/bl in December 2017, according to a survey by the National Association for Business Economics. The December 2016 outlook is $14/bl lower than in the previous survey conducted three months earlier. That compares with an of $37/bl in December The lower outlook for WTI reflects expectations of a slowly recalibrating oil market, said National Retail Federation chief economist Jack Kleinhenz, who presented the survey today. The lower outlook for oil and other energy prices drove down the group's projection of the US consumer price index change to 1.4pc for 2016, down from the previous projection of 1.8pc. Economists highlight the downward pressure on inflation from falling oil prices because it helps to keep the US inflation rate below the 2pc threshold the Federal Reserve identified among key determinants of its interest rate decisions. The surveyed economists' view of energy prices and the overall inflation rate results in expectation of a much slower rebound path for US interest rates. The survey projects two or three interest rate hikes by the US Fed later this year. The Fed's interest rate target is of crucial interest to the US energy industry, where many companies have loaded their balance sheets with debt. The survey, based on responses from 48 economists at major North American banks, consultancies and academic institutions, also lowered the US real GDP growth outlook to 2.2pc for 2016, down from a projected 2.6pc in the previous survey. That compares with a 2.4pc growth rate for US restricts dust exposure during fracturing Federal regulators have given oil and gas companies two years to meet new, tougher limits on the amounts of silica dust workers can breathe during hydraulic fracturing operations. The US Occupational Health and Safety Administration (OSHA) on 25 March finalized a new rule intended to prevent US workers from getting unhealthy amounts of silica dust in their lungs. The rule applies to companies conducting hydraulic fracturing because sand used in the process can generate high levels of silica dust. The new exposure limits are about five times more stringent than the existing standards issued in OSHA estimates the new silica dust limits will prevent 600 deaths/yr across all industries in the US, including 12 deaths/yr in the hydraulic fracturing sector. The agency also wants companies to provide medical exams to workers that face the highest exposure levels. Hydraulic fracturing companies will need to meet the tighter silica limits starting in June 2018, potentially by having workers wear respirators. OSHA gave hydraulic fracturing companies until June 2021 to install new equipment such as waters sprayers and enclosures to control dust. The agency has estimated hydraulic fracturing companies will spend $29mn/ yr to comply with the rule, although it found sector-specific health benefits of $75mn/yr tied to fewer worker sick days, medical expenses and deaths. Oil and gas groups have previously complained the agency underestimated how much it will cost to comply with the rule. Independent Petroleum Association of America executive vice president Lee Fuller said it was unclear what the rule s cost would be for oil and gas producers but called it troubling that the agency did not convene a panel to study its effect on small businesses. Copyright 2016 Argus Media group Page 10 of 15

11 INDUSTRY NEWS OSHA responded to oil industry criticisms about compliance costs in the final rule. The agency said the cost of controlling silica dust is unlikely to have a significant effect on the hydraulic fracturing industry. These compliance costs were a minor issue when weighed against oil and gas prices, which drive demand for hydraulic fracturing services, the agency said. US offshore sector makes push on blowout rule ExxonMobil, Chevron and other oil and gas companies are making a final push to convince regulators to modify pending offshore drilling safety standards they say could constrain production in the US Gulf of Mexico. In meetings this month with White House officials, company executives have reiterated complaints that safety standards the US Bureau of Safety and Environmental Enforcement (BSEE) proposed last year are too prescriptive. BSEE is expected to finish its so-called well control rule as soon as April, six years after the deadly 2010 Deepwater Horizon oil spill spurred a push for new rules. The lobbying drive comes as low crude prices have created headwinds for further expansion of US offshore drilling. Oil and gas companies on 23 March showed muted interest in the Bureau of Ocean Energy Management s (BOEM) lease sale for the central Gulf and no interest in acreage made available in the eastern Gulf. High bids in the central Gulf sale dropped to $156mn, 70pc lower than a similar offshore lease sale held last year. Industry officials say uncertainty over new regulatory requirements is also contributing to tough times for the offshore sector. Beyond the well control rule, President Barack Obama s administration last week proposed to restrict air pollution from offshore oil operators and to put the Atlantic off-limits to offshore leasing through If you look at each regulation, it has a minimal effect, but it is death by a thousand cuts, the offshore industry group National Ocean Industries Association president Randall Luthi said. Luthi served as director of the US Minerals Management Service, the predecessor of BSEE and BOEM, under former president George Bush. Obama s administration so far has declined requests by environmentalists for an outright ban on offshore drilling. Bracewell attorney Kevin Ewing said the administration is unlikely to need such a ban because it can guide where drilling occurs less controversially through regulations. It has become so difficult to get permits in the arctic, the litigation is so intense, the drilling window so tight, the price of oil so low, it is not attractive, Ewing said. Oil and gas companies complain BSEE departed from industry standards when writing the well control rule. ExxonMobil officials, in a 7 March meeting with White House staffers, said the proposed well control rule could increase risk and leave some reserves stranded, according to the company's handouts for the meeting. ExxonMobil declined to comment beyond what was in the handout. Chevron, in its meeting on 4 March, referenced concerns that part of the rule could render many wells un-drillable. Chevron could not be reached for further comment. US independents Anadarko and Murphy Oil raised similar concerns in meetings this month. Oil and gas companies have been most worried about drilling margin standards designed to prevent blowouts. These standards would require companies to use specific amounts of drilling mud, but industry groups worry they could discourage drilling many types of offshore wells. Industry groups want BSEE instead to adopt a consensus standard from industry group the American Petroleum Institute that would be Argus Rio Crude Conference May 9-11, 2016 Rio de Janeiro, Brazil Don t miss the only crude trading event focusing on the production and distribution of Latin American crude. Register early and save! Petroleum illuminating the markets Market Reporting Consulting Events Copyright 2016 Argus Media group Page 11 of 15

12 industry news more flexible than the proposed rules. BSEE director Brian Salerno has said the agency heard the industry s concerns loud and clear and, in response, revised the rule. Industry officials expect BSEE will update the rule to include an alternative compliance option on drilling margin, so companies could request waivers from the standards for individual wells. Enbridge weighs options after Sandpiper ruling Enbridge is evaluating its options after Minnesota regulators upheld a ruling that could delay its 225,000 b/d Sandpiper pipeline project and related Line 3 expansion until The Minnesota Public Utilities Commission on 24 March denied a petition to reconsider the 11 January decision. The commission let stand a requirement that Enbridge complete a final environmental study before regulators begin accepting direct testimony in the Sandpiper case as part of its review. Enbridge has said that the ruling could delay the in service dates of Sandpiper and Line 3 to We will continue to evaluate our options to move these important projects forward, Enbridge said today. In the meantime, we will continue to work cooperatively with regulatory authorities in preparing for the environmental impact statement. The Sandpiper project was originally scheduled to be in service in early 2016, but has been delayed because of opposition from environmental groups and some Native American tribes. The $2.6bn Sandpiper project would connect the Bakken formation of western North Dakota to a hub at Superior, Wisconsin. Nearly half of the line, about 300 miles (483km), would cross Minnesota, running from the North Dakota border to Clearbrook, Minnesota, and then to Superior, Wisconsin. From there, the crude would move to refineries in the US midcontinent, Gulf coast and eastern Canada. Sandpiper is a joint venture between Enbridge and US refiner Marathon Petroleum. The related $7.5bn Line 3 plan would replace the existing crude pipeline from Hardisty, Alberta, to Superior, Wisconsin. Enbridge contested the 11 January ruling, saying in a filing to the commission that the ruling is unlawful and unreasonable and should be reconsidered. Baytown refinery, chemical contracts extended United SteelWorker (USW) members have approved four-year contracts for the chemical and refining plants at ExxonMobil's 557,000 b/d refinery in Baytown, Texas. Workers last week narrowly approved a contract ExxonMobil offered without negotiating local issues, according to the union's international office. The approved contracts will run to May Laboratory workers rejected the offer and continue to negotiate, according to the union. ExxonMobil today confirmed the refinery and chemical plant ratification, and said talks with laboratory workers continued. The company's Baytown, Beaumont and Baton Rouge refineries' USW employees negotiate contracts apart from national talks covering most of the US refining industry. Workers at Beaumont moved off of the national cycle last June, months after United SteelWorkers began the largest refining industry strike in decades. Pemex boosts gasoline output Mexico s state-run Pemex is boosting gasoline production ahead of the historic opening of the country s retail fuel market. Pemex produced 404,800 b/d of gasoline in February, a 7.8pc increase from the previous month of January and a 2.3pc increase from February 2015, the latest company data indicates. Mexico remains a net gasoline importer, with an of 427,700 b/d purchased abroad last month, up 1.5pc compared to January and up 1pc from a year earlier. In contrast to gasoline, diesel production fell by 7.2pc to 255,800 b/d compared to January and by 9.7pc from the same month of Imports in February fell by more than 10pc to 110,400 b/d compared with January, and by a hefty 33pc from February Under a ground-breaking energy reform that is dismantling Pemex s long-held oil industry monopoly, independent companies have been able to set up their own service stations since 1 January 2016, although none have to date. Currently, Mexico s 12,000 service stations are Pemex franchises. Starting on 1 April, fuel retailers will be able to import gasoline and diesel from non-pemex suppliers, nine months ahead of an initial deadline of 1 January Authorizations for new stations will be granted by Mexico s energy regulator CRE based on a set of requirements, including environmental impact studies cleared by the agency for security, energy and the environment (ASEA), which has said it is overstretched. At a recent conference in New York, Mexico s deputy energy secretary Lourdes Melgar said a need for political support partly explains why the government decided to advance the retail opening. We ve been under a lot of pressure to move at Copyright 2016 Argus Media group Page 12 of 15

13 industry news REGISTER NOW and save USD200 China-Russia Oil & Gas 2016 Seeking reliable partners in a volatile world 31 st March 1 st April 2016 Regent Beijing Hotel, China For more information, please contact Yuan Chang yuanchang.yu@argusmedia.com a steady pace and not to stop regardless of changing conditions such as oil prices, she said. Melgar also said the government is concerned it would not attract the necessary logistics investment by the time the retail sector transitions to market-driven prices in January We were not sending the right signal to companies to invest in infrastructure and storage, Melgar concluded. Mexico has long emphasized upstream investment at the expense of lower-profit storage terminals, pipelines and logistics. Mexico s energy regulator CRE and the finance and energy ministries have yet to issue requisite regulation, generating industry concerns and questions about the framework for investment. Nonetheless, investors are starting to show interest, according to Mexico's energy secretary Pedro Joaquín Coldwell. He said two groups are considering the construction of multipurpose pipelines, and five others are eying gasoline imports and terminal construction, especially near the US border and in major cities such as Mexico City, Monterrey and Guadalajara. Gulf Mexico, an affiliate of Indian conglomerate Hinduja Group, was the first to announce earlier this month it was planning to start up Gulf-branded service stations in Mexico this year. The group is seeking to represent a little under 25pc of the market, equivalent to about 3,000 service stations. The downstream transition is taking place against the backdrop of a steady decline in Pemex s upstream operations. In February, the company produced 2.214mn b/d of crude, a 2pc dip from January, and a 5pc decrease from a year ago. Including NGLs, liquids production reached 2.516mn b/d, or 2.4pc less than in January. Natural gas production sank by 8.3pc to 6.122bn ft3/d (171.4mn m3/d), while imports jumped by 47pc from a year ago, reflecting rising shale gas pipeline shipments from the neighboring US. Crude exports climbed by 10.8pc last month to 1.241mn b/d compared with January, but fell by 5pc from a year ago. The Americas remained Pemex s biggest client, accounting for 58pc of crude exports, followed by Europe (26pc) and Asia- Pacific and other countries (15.3pc). Export revenues picked up from last month at $881mn but were still at record lows, almost 50pc less of last year s value and 73pc below what they were before prices started to plunge in mid PetroRio targeting upstream acquisitions Brazilian independent oil company PetroRio plans to acquire upstream assets this year in a push to significantly expand oil production to 100,000 b/d in 2017 from just 8,400 b/d last year. PetroRio is negotiating to acquire one of the offshore assets that state-controlled Petrobras is selling as part of its $14.4bn divestment plan, according to chief financial officer Blener Mayhew. Copyright 2016 Argus Media group Page 13 of 15

14 industry news Earlier this month, PetroRio terminated a $25mn agreement to acquire Petrobras 20pc stake in the deepwater Bijupirį and Salema fields in the Campos basin. The decision followed Shell s 16 February decision to cancel the sale of its 80pc operating stake in the two mature fields to PetroRio. The companies did not specify why the deal fell through, but production at the fields dropped from 22,000 b/d of API crude in early 2015 to 14,000 b/d in February. PetroRio says it is also evaluating three more upstream assets in Brazil and is considering others in Argentina, Peru, Colombia and Paraguay. The company says a workover at the shallow-water Polvo field in the Campos basin, the company s only producing asset, has extended the life of the field from 2016 to Sales of 20 API crude produced at the field d 4,900 b/d last year, at an offloading price of $49.85/bl. PetroRio finished 2015 with around R619mn ($168mn) in cash, up from R364mn at the end of first quarter The company reported a R110mn profit in 2015, up from a R1bn loss in PetroRio has streamlined operations in recent years, cutting staff from 380 in 2013 to 83 in The company has also reduced operating costs from $240mn in 2013 to $109mn in In October 2015, PetroRio finalized the sale of its stake in natural gas blocks in the onshore Solimões basin to Russia s state-owned Rosneft. Early this month, PetroRio terminated exploration off Namibia, where multiple exploration campaigns failed to identify commercial quantities of oil. Announcements CORRECTION: An HLS deal was misreported, resulting in the below correction for 24 March. Diff Low/High Diff wted avg Low/High Wted avg HLS -0.50/ / Copyright 2016 Argus Media group Page 14 of 15

15 The most up-to-date Argus Americas Crude methodology is available on Argus Americas Crude Argus Americas Crude Methodology Argus uses a precise and transparent methodology to assess prices in all the markets it covers. The latest version of the Argus Americas Crude Methodology can be found at: For a hard copy, please info@argusmedia.com, but please note that methodogies are updated frequently and for the latest version, you should visit the internet site. Announcement METHODOLOGY AND SPECIFICATIONS GUIDE ARGUS AMERICAS CRUDE Contents: Methodology overview 2 Americas Pipeline Markets 8 Americas Waterborne Markets 13 Updates 14 LAST UPDATED: JUNE 2014 All data change announcements can be viewed online at Alternatively, to be added to the distribution list for all announcements, please datahelp@argusmedia.com. Argus US Refined Products Forward Curves Argus US Refined Products Forward Curves reflect real commodity market activity, free from distortion and representative of fair market values. For more information, please contact us at moreinfo@argusmedia.com. illuminating the markets Argus Americas Crude is published by Argus Media group Registered office Argus House, 175 St John St, London, EC1V 4LW Tel: Fax: +44 (0) sales@argusmedia.com ISSN: X Copyright notice Copyright 2016 Argus Media group. All rights reserved. All intellectual property rights in this publication and the information published herein are the exclusive property of Argus and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, by reading this publication you agree that you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, ARGUS MEDIA, the ARGUS logo, ARGUS AMERICAS Crude, ASCI, and other ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit for more information. Disclaimer The data and other information published herein (the Data ) are provided on an as is basis. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party s reliance on the Data and disclaims any and all liability related to or arising out of use of the Data to the full extent permissible by law. Publisher Adrian Binks Chief executive Neil Bradford CEO Americas Euan Craik Global compliance officer Jeffrey Amos Commercial manager Karen Johnson Editor in chief Ian Bourne Managing editor Jim Kennett Editor Gustavo Vasquez Tel: houstoncrude@argusmedia.com Customer support and sales Technical queries technicalsupport@argusmedia.com All other queries support@argusmedia.com London, UK Tel: Astana, Kazakhstan Tel: Beijing, China Tel: Dubai Tel: Moscow, Russia Tel: Rio de Janeiro, Brazil Tel: Singapore Tel: Tokyo, Japan Tel: Argus Media Inc, Houston, US Tel: Argus Media Inc, New York, US Tel: Petroleum illuminating the markets Issue Ref: