FN360 Q2 2015 by FUELSNews

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A P R I L M AY J U N E Q1

2nd QUARTER Q4

2 0 1 5

2nd QUARTER Q44

Q2 2015 Executive Summary At the close of 2014, analysts claimed $75 a barrel signified shale oil’s breakeven point. But oil field service providers have since tightened their belts and slashed drilling costs, lowering the industry’s breakeven closer to the current $60 a barrel range. Consequently, the second quarter kicked off with notable gains only to stall in May as drillers struck a balance. Of course, the industry’s acclimated to $60-a-barrel crude oil just in time for global production to receive its next shock. Crude oil rig counts continued their first quarter decline, shedding over 21 percent of remaining wells to only 628 — representing a 5year industry low — yet domestic drillers still maintained record-high rates of 9.6 million crude oil barrels a day. Unfortunately, after six months of dwindling rig counts and strong OPEC output, Big Oil analysts anticipate American production to finally fall from record highs, easing the global supply imbalance by an estimated half a million barrels a day. Offsetting the bullish effects such a cut would produce, Gulf oil producers increased output to their highest levels since 2012, overshooting quotas by 1.58 million barrels a day with no signs of stopping. Already, Iraqi producers increased second quarter production 3.2 percent to a record 3.145 million barrels a day. Meanwhile, Saudi production averaged an estimated 10.3 million barrels a day this quarter, setting a 13-year high, while exports soared to as much as 8.5 million barrels a day, a 10-year record. OPEC leaders made it clear in November. This is a battle of market share, which Gulf producers aren’t willing to lose — even to their own. Case in point, politicians set ambitious goals for Iran’s nuclear debate this spring, promising to withdraw debilitating sanctions if a deal passed, but fellow OPEC nations snubbed the group’s second-largest producer when asked to make space for potential post-sanction barrels. Iran’s oil minister fired back, telling reporters “If OPEC members want to keep prices at the same level, we expect them to make room for Iranian oil.” In the second quarter alone, the nation’s oil producers increased offshore crude inventories by approximately 19 million barrels, or 76 percent, in preparation for easing sanctions. Now, with barrels loaded and ready to travel, Iran poses possibly the greatest threat to the market’s recovery. While Iran threatens to impact supply, Greece most certainly undermines demand. “Grexit” rhetoric hit its peak during the second quarter after the nation’s anti-austerity government went toe-to-toe with European finance ministers and lost. Convinced the mere threat of leaving the common-currency bloc would force creditors to compromise, Prime Minster Alexis Tsipras took a hard line against economic reforms in his January campaign, but after a five-month impasse, Greek banks were compelled to close their doors and impose capital controls to halt bank runs. In the third quarter, watch for the anticipation of a sanction-free Iran to weigh on crude oil prices while Greece picks up the pieces following its June 30th default. Global demand should show minimal recovery late in the third before picking up in the fourth while global crude oil production maintains gluttonous rates, despite what talking heads want you to believe.

Index FUELSNews 360° Quarterly Report Q2 2015 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.

Overview

April through June, 2015

Second Quarter Summary

Economic Outlook 6

Global Economic Outlook

U.S. Economic Outlook

Fundamentals

Regional View 20

PADD 1A, Northeast Commentary–Evan Smiles

PADD 1B & 1C, Central & Lower Atlantic Commentary–Chris Carter

PADD 2, Midwest Commentary–Dan Luther

PADD 3, Gulf Coast

PADD 4, Rocky Mountain Commentary–Nate Kovacevich

PADD 5, West Coast, AK and HI Commentary–Lynn Argianas

Canada

Fracklog Fuels Production

Iranian Stockpiles Build

Domestic Energy Demand Shifts

Renewable Fuels

Federal Reserve Readies Rate Hike

Natural Gas

House Debates Crude Ban

Electrical Power

Transportation Logistics

Diesel Exhaust Fluid (DEF)

Fuel Taxes

FUELSNews 360˚ Supply Team

Overview April 2015 through June 2015 W

rapping up an uncharacteristically quiet quarter, crude oil futures rose steadily in April before coasting through the next two months, never straying far from $60 a barrel for long. Global crude oil production held strong near record rates while the value of the dollar versus foreign currencies added volatility. Fundamental concerns of rising OPEC production — particularly Iran — provided downward pressure while Greece and Ukraine both threaten the European Union’s economic recovery and, consequently, demand for crude oil.

WTI Crude Futures ISIS attacks cause heavy casualties in Baghdad

Dollar sheds 4% vs. the Euro

OPEC nations maintain 30mmbbl/d quotas Crude inventories post p lowest weeklyy gain g of 2015 Domestic crude oil inventories jump by 10.9 million barrels

Source: New York Mercantile Exchange (NYMEX)

Overview Second Quarter Summary R

efined products experienced seasonal gains on rising demand with a little added help from unexpected refinery issues. Strong first quarter 3:2:1 crack spreads — a rough estimate of refiners’ margins — bled into the second, encouraging some refiners to forego spring maintenance projects in favor of increased production. In some cases, that came back to bite them, as production disruptions strained their local markets even further. Gasoline production, in particular, struggled through the second quarter as drivers took full advantage of lower energy prices and several regionally-significant facilities experienced issues with their fluid catalytic crackers (FCC), a key unit in the gasoline manufacturing process.

Summary, 2nd Quarter 2015 $2.0896 $1.8866

$59.47

17599.96

Source: Bloomberg Finance L.P.

IIIII II

Global Economic Outlook

IIII II I

The World Bank recently downgraded global economic growth predictions for the second half of 2015 as emerging markets recorded significantly slower growth. In June, the organization adjusted its January forecast of 3.0 percent down two-tenths of a percent to 2.8 percent. Economies across Europe and Asia continue to suffer as Russia systematically unravels every diplomatic tie forged over the last quarter of a century. Meanwhile, China’s financial markets began showing cracks in the second quarter as equities soared to record heights while production and economic growth slipped below targets. Finally, Greece created considerable doubt of a European economic recovery this year and still casts a pall on neighboring EU economies. Though Russia’s covert conflict with neighboring Ukraine fell from headlines as soon as ISIS took the spotlight last summer, fighting continues throughout Ukraine’s eastern region. Russian-supported separatists undermine EU-brokered ceasefires, escalating tensions between their benefactors and EU trade partners. The Kremlin claims companies have suffered the worst of the economic cool down, but the nation’s former finance minister, Alexei Kudrin, fears Russia’s just entered “a full-fledged crisis.” Widely expected to contract by roughly 4 percent this year, the Russian Economy Ministry predicts a milder 2.8-percent 2015 contraction before expanding by 2.3 percent next year. Russia’s economic slowdown also hinders European economies — most notably, Germany.

According to German newspaper Die Welt, EU sanctions targeting Russian businesses and members of Putin’s inner circle cost Europeans as much as €100 billion and could result in roughly 2 million job losses. The People’s Bank of China lowered its 2015 economic forecast to only 7 percent in early June, citing falling industrial production, exports and property investments. Consequently, inflation projections fell 8 percentage points to 1.4 percent, fueling concerns of a spending and investment cooldown in the world’s secondlargest economy. China’s equity traders also noticed cracks forming late in the quarter as the Shanghai Composite Index fell precipitously halfway through June — down nearly 30 percent and fitting the criteria of a bear market. Doubling in only seven short months, investors couldn’t look past potential gains in an otherwise slow global economy. Many investors have already lost fortunes while others lost their life savings and more after wagering trillions in borrowed cash against the world’s top-performing index. Beyond this year, World Bank analysts anticipate faster growth of 3.3 percent as the U.S. Federal Reserve raises interest rates and bond repurchasing programs in Europe and Japan fuel growth among developed nations. As a leading exporter, China will continue to struggle until wealthier nations resume spending, but first they’ll endure the pain of a bursting bubble. •

“Many investors have already lost fortunes while others lost their life savings and more after wagering trillions in borrowed cash against the world’s top-performing index.”

IIIII II

U.S. Economic Outlook

IIII II I

After winter weather chilled the domestic ﬁrst quarter economy — expanding GDP by a meager 0.2-percent — supportive monetary policies and lower energy expenses increased overall demand for goods and services in the second quarter, fueling job growth, but risking the formation of yet another equity bubble. Federal Reserve policymakers held interest rates near zero for another quarter, dashing earlier estimates of a summer rate hike in favor of continued job growth and potential business investments; though analysts found investors more likely to put their money in equities than new business ventures. Both the Nasdaq Composite and S&P 500 hit record highs in the second quarter. Good news, right? Maybe not. While Nobel Laureate and Yale professor of economics Robert Shiller hasn’t seen the typically exaggerated expectations found in a “classic bubble,” elements of a stock bubble exist in today’s market. A traditional bubble forms as a result of heightened expectations, but

shareholders report waning conﬁdence in the market’s current valuation. Investors would normally reallocate their wealth to safer investments in this situation, but with the Fed suppressing interest rates, few alternatives exist, encouraging further investment in what buyers consider overvalued stocks. So, while the Fed’s concerned an early rate hike could stiﬂe long-term economic growth, the guaranteed short-term losses grow by the day. At the same time, Federal Reserve policymakers are sure to apply the brakes slowly, easing the market towards fair value. Even after interest rates return to normal, IHS analysts expect the nation’s GDP growth to maintain uncommonly low rates, calling 3percent growth “a relic of economic history.” Between 1980 and 2000, the U.S. economy grew by an average 3.4 percent as more women returned to the workforce and the nation generated greater revenues with substantially less government debt, but IHS suggested a considerably slower long-term forecast of 2.3 percent in mid-June, blaming Baby Boomer retirement and weak corporate investments.

U.S. Economic Outlook The University of Michigan’s monthly Consumer Sentiment Index rose to a five-month high of 96.1 in June after shedding 7.4 points from its 11-year high of 98.1, recorded in January. Survey director and chief economist Richard Curtin said “Consumers voiced in the first half of 2015 the largest and most sustained increase in economic optimism since 2004.” Greater consumer optimism translates to increased consumer spending, which Curtin expects to grow by 3.0 percent this year, driving better-than-expected economic growth. Federal Reserve members clearly intend to raise interest rates in 2015, but dovish updates coupled with Chairwoman Yellen’s insistence on a 2-percent inflation rate leave the date and rate of increase a source of speculation. In June, the IMF lowered its growth expectations for the U.S. from 3.1 percent to only 2.5 percent, citing a stronger dollar, falling energy prices and bad weather. The agency recommended an interest rate hike be put on hold until next year, believing the threat of weak economic growth outweighs that of a financial bubble fueled by near-zero interest rates. Regardless of timing, an interest rate hike would likely trigger a “significant and abrupt rebalancing of international portfolios with market volatility and financial stability,” according to the IMF. This would likely drive investors back to commodities, adding to crude oil prices.

Consumer Sentiment Index April 95.9

May 90.7

June 96.1

Consumer Sentiment Index

Source: University of Michigan

Headline Personal Consumption Expenditures (PCE) MoM Change

April 2.26

May 2.32

June

1.75* *projection

The Federal Reserve’s plan to raise interest rates hinges on a few key indicators — consistently lower unemployment rates, rising consumer spending, improving new home construction, and two-percent inflation rates. Unfortunately, that last one’s eluded the nation for more than three years now. Lower inflation rates tend to suppress economic growth and the Fed’s been consistent in its message of raising interest rates only when they’re certain the economy’s in the clear. Falling energy prices beginning last summer, however, stalled advancements recorded earlier in 2014. With energy stabilizing in the first half of 2015, expect to see PCE gains through the end of the year and an interest rate hike should follow closely. • 9

Trimmed Personal Consumption Expenditures (PCE)

Source: Federal Reserve Bank of Dallas

Fundamentals Fracklog to Fuel Domestic Production Growth through 2016 So far, headlines this year focused on the industry’s rapidly declining rig count, tumbling more than 55 percent since its mid-October peak to a six-year low. With producers shuttering rigs at such an alarming rate, market watchers expected production to follow closely, but operators instead hit record highs at the start of June and continued strong through the end of the quarter. How’s that possible?

Operational Rig Counts

ource: Baker Hughes

The story weekly rig counts can’t tell is that of the fracklog. While crude oil reaped more than $100 a barrel, producers completed wells as quick as they could. Still, drillers outpaced completion crews last year by almost 3:1, boring holes faster than frackers could tap wells. Once prices started to slip, however, producers stopped completion crews from “turning on the spigot,” leaving an estimated 300,000 barrels of daily crude oil production trapped underground and giving rise to the fracklog.

10 10

Fundamentals Consequently, nearly 4,000 wells across the nation’s three most rapidly expanding shale developments — Bakken, Eagle Ford, and the Permian Basin — sat, waiting to be fracked, at the start of June. Once fracked, most wells begin producing within three weeks of completion. That’s a lot of oil waiting for signs of a rally.

Untapped Well Inventory Builds Across U.S. Since oil prices began to slide in 2014, U.S. energy companies have delayed completing wells. Pennsylvania

Bakken 1,000

1,000

Uncompleted well inventory by basin (Jan. 2013 - Feb. 2015)

632 500

500

0 2013

401

2014 ’15 -500 2013

2014 ’15

Denver-Julesburg Ohio

1,000 1,000 500

243

500

324

0 0 -500

2013 2013

2014

’15

2014 ’15

Eagle Ford

Permian 1,540 1,500

1,000

500

Oklahoma

1,250 1,000 500

341

0 2013

2014 ’15

-500 2013

2014

’15

2013

2014 ’15

Source: Bloomberg Intelligence

So, it’s no surprise production rates have yet to decline. Better still, they likely won’t decline until later this year, if at all. To offset production losses from aging horizontal wells, producers in the three aforementioned regions must complete approximately 500 wells a month. With nearly 4,000 already drilled and ready to go, producers could stop drilling new wells today and still have enough oil in the fracklog to see the industry through to New Year’s Eve. • 11 11

Fundamentals

Did You Know?

According to OPEC, Iran’s proven oil reserves total more than 157 billion barrels, earning it the No.4 spot, globally. However, the nation’s oil production falls roughly 8 to 10 percent each year due to declining well pressure. Without enhanced oil recovery (EOR) techniques pioneered by Western competition, Iran could slip from the seventh-largest global oil producer to thirteenth, below Brazil and Nigeria, by 2020.

Iranian Offshore Oil Inventories Build even as White House Deal Delayed The self-imposed June 30th deadline came and went with little progress towards a nuclear deal after another three months of negotiation building on a multi-national accord struck this spring. Now, it’s unclear if Secretary of State John Kerry will even get the chance to present Iranian leaders with a proposal as Republican opposition eagerly wields veto authority and Iran’s supreme leader, Ayatollah Ali Khamenei, wages war on negotiation proceedings. In a late-June broadcast, Ali Khamenei again demanded the lifting of international sanctions prior to the dismantling of his nation’s nuclear infrastructure, a hardline requirement set forth by all nations in April negotiations.

Fundamentals Iran Crude Oil Exports by Destination (2011-2014)

Source: Energy Information Administration (EIA)

If by some chance, miracle, or mistake a deal is ratified, the National Iranian Oil Company’s (NIOC) Director for International Affairs, Mohsen Qamsari, told interviewers in May significant European demand already exists and Tehran could increase oilfield output to pre-sanction levels “provided that the Europeans are ready for it.” Iranian drillers produce an estimated 3.6 million barrels of crude oil each day, according to OPEC, but exports suffer under Western sanctions, slashed by nearly half in a four-year period.

Iranian producers have been busy since negotiators inked April’s preliminary agreement, however, storing an estimated 44 million crude oil barrels on offshore tankers belonging to the national carrier, NITC. According to a former official with the State’s oil company, “the first thing [NIOC officials] will try and do is offload a lot of that storage. Oil Minister Bijan Zanganeh has warned OPEC to make room for us. In other words, we are going to sell this oil at any price.””

Sanctioned Crude Oil Rapidly Fills Iranian Cargo Vessels

Source: HeffX-LTN via Hellenic Shipping News

Obviously, a 44-million barrel deluge would weigh on crude oil futures worldwide. At the same time, consistently stronger production rates from fellow OPEC nations reiterate their Thanksgiving Day refusal to “make room” for other producers, including their own. Therefore, if Secretary of State Kerry pulls off an Iranian deal, dismissing sanctions, domestic crude oil producers will eventually be the ones to reduce output as prices fall to unsupportive levels once more. • 13

Fundamentals

Shifting Demand and Rising Supplies Point Towards Energy Independence According to the Energy Information Administration’s (EIA) 2015 Annual Energy Outlook, domestic energy consumption should grow by only 0.3 percent each year through 2040, less than half the population growth rate and roughly a third of the industry’s annual growth over the past thirty years. At the same time, the nation’s recent energy renaissance reduced net energy imports from 30 percent of total consumption in 2005 to only 13 percent in 2013. As a result, the nation’s expected to achieve true energy independence around 2028.

Total Energy Production and Consumption 1980-2040 (quadrillion Btu)

By sector, the agency expects industrial and commercial consumption to gain as much as 0.7 percent each year — driven by increasing economic activity — while consumption stemming from transportation and residential applications remains ﬂat or even declines slightly.

Source: Energy Information Administration (EIA)

Total Energy Consumption by End-use Sector, 1960-2040 (quadrillion Btu)

Source: Energy Information Administration (EIA)

Fundamentals Declining transportation consumption results from federal policy promoting greater fuel efﬁciency and strong consumer demand sparked by rising fuel costs. At the same time, technological advancements (email, teleconferencing, social media, etc.) reduced consumer energy demand in recent decades and the EIA expects the trend to continue, suppressing transportation demand. Meanwhile, the U.S. Census Bureau reports a steady shift in population over the last decade as residents migrated to warmer climates. Consequently, electrical consumption, which analysts expect to grow by 0.5 percent each year between 2013 and 2040, cools an increasing number of homes at peak day-time rates while heating fewer homes.

More homeowners taking up residents in warm climates

Growth Decline

Annual percentage change in population

Source: US Census Bureau

Regardless of the industry’s recent decline, production remains comparatively strong to where it was a decade ago and will likely continue its upward trajectory in the years to come. Increasing volumes of natural gas and crude oil will ﬂow to coastal markets, ready for export, while gasoline consumption, accounting for 58 percent of transportation consumption in 2013, declines by 21 percent over the next 27 years. Energy demands may be changing, but the nation’s abundant natural resources should easily meet those demands. However, while abundant, those resources will come at an increasing price as drillers exhaust existing shale plays and move on to costlier formations, forcing Brent crude oil higher to $141 a barrel by 2040, according to EIA estimates. • 15

Fundamentals

Federal Reserve to Sap Energy Prices Later this Year Since Janet Yellen assumed the role of Federal Reserve Chair last year, financial policy makers have scrutinized the nation’s economic data, preparing for the first benchmark interest rate hike in nearly a decade. After almost seven years of near-zero rates following the global financial crisis, the topic’s raised significant debate as many analysts and government officials see more room for the economy to grow before the Fed applies the breaks. But while reduced interest rates stimulate economic growth, rising rates tend to increase the dollar’s value versus foreign currencies, reducing import costs and boding well for energy prices.

Crude oil barrels are valued in U.S. dollars, creating an inverse relationship between petroleum products and the economy as a whole. As the dollar weakened prior to the Fed’s 2008 interest rate reduction, fuel prices surged to record highs even as equity markets imploded. Conversely, the dollar’s signiﬁcant gains since last summer only magniﬁed the energy market’s decline while equities extended their recovery.

US Dollar–Euro Exchange Rate vs. WTI Crude Futures

Source: Bloomberg

“ If the Fed raises rates too soon, the nation’s

recovery could stall, contributing to higher unemployment rates (an important measure for the Federal Reserve) and reduced economic growth.”

Just before Memorial Day, Federal Reserve Chair Janet Yellen told the Providence, RI Chamber of Commerce, “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target.” As expected, the value of the U.S. dollar rose over the long weekend, applying renewed pressure to the crude oil market’s struggling recovery.

US Dollar–Euro Exchange Rates

Source: Bloomberg

If the Fed raises rates too soon, the nation’s recovery could stall, contributing to higher unemployment rates (an important measure for the Federal Reserve) and reduced economic growth. Too late and the Fed risks inﬂation, which can easily be controlled. So, expect a patient approach and watch for a rate hike later this year, most likely after the construction season ends and home building slows. • 17

Fundamentals

House Debates Crude Oil Ban as Refiners Enjoy Lucrative Exports Since the shale oil boom began nearly a decade ago, refiners made good use of growing petroleum resources during recent years, ramping up refining operations just as fuel prices reached all-time highs. Unfortunately, domestic consumers saw little or no savings in conjunction with production increases. Instead, average crack spreads — a common measure of refining margins — more than doubled in the last five years, suggesting refiner profits grew while consumers paid record rates for fuel.

3:2:1 Crack Spreads

Source: Energy Information Administration (EIA)

So, where were the additional gallons going? Overseas. Refined product exports rose considerably as producers found more favorable prices in Latin America, Europe, and Africa. As a result, lifting the crude oil ban represents little financial threat to domestic consumers. On the other hand, lifting the nation’s long-standing crude oil ban presents a significant threat to energy-dependent rivals overseas, such as Iran and Russia. The United States leads the globe in year-over-year production growth and releasing American barrels into an already depressed market just as Iran tries to muscle its way back in could drop the Brent-WTI spread to as low as $3 a barrel, according to Bank of America forecasts, slowing their recovery and reducing their influence. 18

Brent–WTI Spread

Source: Bloomberg

With the global supply imbalance and threat of abundant Iranian barrels in mind, House Energy and Commerce Committee Chairman Fred Upton (R-MI) told subcommittee attendees in early June, “It’s time that Congress considers revising the ban on crude oil exports,” suggesting both consumers and foreign allies could benefit from easing the 40-year-old restriction. Though Representative Upton stopped short of endorsing fellow Republican Joe Barton’s (R-TX) proposed repeal, Upton’s comments marked a definitive change in his public opinion, moving him off the fence and into the fray. Ban supporters, including much of the refining community, maintain the legislation’s repeal would ultimately raise domestic fuel prices as cost-advantaged barrels make their way overseas, but Upton countered, arguing increased exports would stimulate job creation with minimal impact to fuel prices while extending our geopolitical influence. In fact, an IHS study published last year concluded crude oil exports would lead to further increases in domestic oil production — actually lowering fuel prices — while supporting almost one million new jobs. The firm estimated total investments stemming from increased exports at $746 billion by the end of 2030 while saving motorists approximately $265 billion over the next 15 years. Still, public opinion hasn’t been swayed and, for that reason, Bank of America analysts only give the ban’s repeal a 50/50 chance of passing within the next 24 months. • 19

Regional Views PADD 1 East Coast PADD 1A Northeast

BEAR

Evan’s Estimation I Evan Smiles,

Supply Supervisor See his bio, page 55

Expect a bearish third quarter in the New York Harbor area this year as strong Gulf Coast and European gasoline production outpaces demand and surplus barrels spill over into Northeast markets via the Colonial Pipeline and barges. This should steady gasoline prices or even reverse late-spring gains, despite peak driving demand. Similarly, distillates should see downward pressure as Northeast reﬁnery utilization stays strong and demand weak. Tropical storms, of course, represent a wild card, given the Northeast’s limited distribution infrastructure. Any disruption in pipeline shipments from power outages or storm damage could easily drive wholesale prices higher for weeks at a time.

PADD 1A Wholesale vs. DOE Retail (dollars per gallon)

Source: Energy Information Administration (EIA)

Northeast Acquisitions Reshape the Face of Fuel Several notable Northeast acquisitions took place in the second quarter this year. The beginning of April, ArcLight Capital Partners finalized the purchase of Petroleum Products Corporation (PPC), gaining nearly 9 million barrels of refined product storage capacity at terminals throughout Pennsylvania. The previously PPC-owned terminals and wholesale business now operate under the name Pyramid Petroleum Terminals LLC (PPT). In addition to the PPC acquisition, ArcLight purchased Gulf Oil and its fleet for an estimated $1 billion, introducing ArcLight to the Northeast’s branded gasoline market. 20

“ Dating back to the industry’s infancy with Standard Oil

(SO), those extracting the crude also reﬁned, distributed and sold fuel directly to end users. This model continued even after anti-trust laws shattered John D. Rockefeller’s empire into 34 smaller companies which, ironically, later merged into what’s known now as “Big Oil.”

Standard Oil Reﬁnery, circa 1911

Meanwhile, the Red Apple Group expanded its Northeast footprint, buying out the petroleum side of PPL EnergyPlus Retail LLC. This purchase comes after the Red Apple Group acquired the Riverhead Terminal on Long Island in 2012 and the assets of Metro Fuel Oil and Metro Terminals in 2013. The refined products wholesale business of PPL EnergyPlus Retail will now be marketed under the name of United Energy Plus Terminals LLC (UEPT). Though its roots lie in grocery store management, the Red Apple Group’s acquisitions in retail distribution, wholesale fuel storage, and refining illustrate a growing trend within the industry — downstream vertical integration. Dating back to the industry’s infancy with Standard Oil (SO), those extracting the crude also refined, distributed and sold fuel directly to end users. This model continued even after anti-trust laws shattered John D. Rockefeller’s empire into 34 smaller companies which, ironically, later merged into what’s known now as “Big Oil.” Today, Big Oil’s largely retreated from the high-touch, high-cost retail market in favor of more attractive upstream margins, leaving behind a void, or opportunity, depending on your outlook. Delta, Red Apple, and a slew of independent refiners/distributors pounced on Big Oil’s withdrawal from the market, gobbling up downstream assets and controlling their fuel expenses with an iron fist. Of course, what these refiner-users gain in control, they sacrifice in flexibility and overhead expenses. Delta’s a prime example of an end user searching for price and product security. While they found it in an aging Pennsylvania refinery, justifying the purchase after heavy first-year losses proved difficult. Though the refinery’s turning a profit today — thank you, falling crude oil prices! — Delta and its Monroe Energy subsidiary, the poster child for downstream vertical integration, have a long way to go before this investment pays off. •

Did You Know?

The word “petroleum” comes from the Greek word “petros” (oil) and the Latin “oleum” (rock). Fifth-century Greek historian Herodotus first told of the Babylonians using asphalt to construct walls and towers while the Chinese drilled the first well in 347 AD, but it wasn’t until German mineralogist Georg Bauer coined the term “petroleum” in 1556 that people stopped calling it “rock oil.”

PADD 1 East Coast PADD 1A Northeast

Portland, Maine Welcomes New Gasoline Specifications

Source: mainemap.facts.co

As of June 1st, all counties surrounding the Portland, Maine area — once consuming conventional low-RVP gasoline blends (CBOB) through the summertime — transitioned to a year-round reformulated gas (RFG) mandate. State regulators, in conjunction with the U.S. Environmental Protection Agency (EPA), enacted the RFG obligation to reduce frequent price spikes associated with low-RVP CBOB consumption in a largely RFG region. The seven Southern Maine counties were the only New England districts requiring low-RVP CBOB between May and September each year and the only Northeast markets outside of Pittsburg retaining the obligation. Even though reformulated gas historically collects a 10-cent per gallon premium over summer CBOB, analysts expect the RFG spec change to benefit consumers. Regarded as a specialty blend in the Northeast, CBOB gasoline often proves hard to come by with few refiners producing the conventional blend and recurrent supply disruptions sapping inventories. With the Southern Maine counties now observing the same mandate as other New England metropolitan areas, including Boston, Providence, New Haven and Springfield, supply issues should prove less frequent. Product specifications throughout the rest of Maine remain unchanged, consuming high-RVP CBOB products year-round. • 22

How Northeast Refiners got their Groove Back According to the Energy Information Administration’s (EIA) monthly crude-by-rail data, reﬁneries along the East Coast (PADD1) received more than half their February crude oil inputs by railcar.

Share of net crude oil inputs to PADD 1 refineries by source (January 2010-February 2015)

Source: Energy Information Administration (EIA)

In 2008, fewer than 10,000 carloads of crude oil traversed the nation and most travelled alone or in small numbers. Advances in drilling technology and elevated crude oil prices, however, soon presented refiners an opportunity to replace costly, complicated imports with cheaper domestic barrels, but nearly all lacked the infrastructure needed to unload unit trains hauling as many as 120 crude-laden cars. Over the next five years, roughly 30 offloading facilities were constructed to

Originated carloads of crude oil vs. terminated carloads of crude oil On US Class 1 Railroads

Estimate based on preliminary data

Source: American Assoc of Railroads, Federal Railroad Administration

accommodate unit trains and roughly a third of those popped up around Northeast refineries. By 2014, an estimated half a million cars connected cost-advantaged barrels to refining hubs across the nation and Northeast refiners had alleviated their competitive disadvantage to Gulf Coast and Chicago producers. While railcar shipments from the nation’s booming shale basins advanced President Obama’s calls for energy independence — displacing waterborne imports from war-torn African nations — and supported regional refineries, an unrelenting string of highly-publicized railcar disasters have led to increasingly tighter federal regulations and public unease, costing shippers more to transport cost-advantaged barrels. Additionally, barrels originating in the Bakken shale formation — Northeast refiners’ primary source for crude-byrail shipments — may grow scarce or lose their cost advantage as production rates taper in response to falling rig counts. If Northeast refiners can survive the pinch between rising costs and lower product prices, perhaps they’ll double down on crude-by-rail shipments and expand production rates in the coming years, providing consumers greater security of supply and possibly lower refined product prices. •

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

BULL

Chris’s Concept I Chris Carter,

Supply Manager See his bio, page 55

For the third quarter of 2015, I’m bullish on Gulf Coast products. Towards the end of the second quarter Gulf Coast ULSD traded 9.5cpg under the July NYMEX heating oil contract. Reﬁnery utilization remains at high levels and exports continue gaining strength from the Gulf. However, as we enter the height of hurricane season, I believe we will see prices gain additional ground.

PADD 1B Wholesale vs. DOE Retail (dollars per gallon)

Source: Energy Information Administration (EIA)

PADD 1C Wholesale vs. DOE Retail (dollars per gallon)

Source: Energy Information Administration (EIA)

Florida Markets Recover from Winter Arb Just in Time for Hurricane Season Florida continues to be a feast or famine market. As the second quarter began, wholesale diesel earned a significant premium over prompt NYMEX heating oil contracts after shipping delays stemming from heavy March fog in the Houston channel drove local markets roughly 20cpg higher. Summer months historically benefit the state as warmer weather weakens Northeast shipping arbitrages (“arbs”). With the seasonal arb between New York Harbor and Gulf Coast finally closed, shippers are bringing additional product into the market, preparing for the hurricane season and easing spreads to the national diesel benchmark. The graph at left highlights Florida’s seasonal Florida Diesel less NYMEX Heating Oil Futures pattern of costly spring and late-fall basis spikes, but disappearing arbs don’t fully explain the state’s recent 30cpg plunge.

Source: Oil Price Information Service (OPIS) and New York Mercantile Exchange (NYMEX)

Gulf Coast Distillate Inventories

Capitalizing on cheaper crude oil and relatively high refined product prices, refiners maximized facility output during the second quarter, adding to domestic fuel stores. As a result, Gulf Coast distillate inventories — origin for most Florida products — exceeded the region’s post-collapse seasonal average by almost 8 million barrels (▲20%) and 2014 volumes by as much as 9.8 million barrels (▲27%) during the second quarter. Consequently, shippers were inclined to share savings with Southeast consumers, including Florida. Watch these volumes as we move closer to fall turnaround. If meteorologists are correct and el Niño weather patterns in the Pacific produce another calm storm season, Florida consumers could enjoy weaker distillate prices this fall as Gulf Coast shippers liquidate distillate inventories before year-end. •

Source: Energy Information Administration (EIA)

PADD 1 East Coast

Southeast Pipeline Project Seeks Salvation in Atlanta Courts

PADD 1B & 1C

commitments for their proposed reﬁned product pipeline connecting several traditionally barge-fed markets in the Southeast to the Plantation Pipeline. The Palmetto Project would carry gasoline, diesel, and ethanol to markets in South Georgia, Florida, and South Carolina, but Georgia’s Department of Transportation denied permits for its 210-mile segment of the proposal in May. Now, the Superior Court of Fulton County will review the case after Kinder Morgan appealed the DOT’s decision in June.

Central & Lower Atlantic

At the start of August last year, Kinder Morgan launched a binding open season soliciting

“ A long-standing shortage of Jones Act vessels necessitates projects like the Palmetto to transport reﬁned product from Gulf Coast reﬁneries to coastal cities in the Southeast.”

A long-standing shortage of Jones Act vessels necessitates projects like the Palmetto to transport refined product from Gulf Coast refineries to coastal cities in the Southeast. The shortage frequently disrupts refined product shipments into markets up and down the East Coast and throughout Florida while encouraging demand for foreign imports despite a surplus of domestic refined product. Consequently, coastal prices often exceed those in pipeline-fed markets by a substantial margin, leading to price inefficiencies and ongoing arbitrage opportunities. Kinder Morgan had hoped to capitalize on the opportunity by July of 2017. The $1-billion project would carry 167,000 barrels a day via an expansion leased from Plantation Pipe Line Company between Baton Rouge, LA and Belton, SC. The rejected segment was a part of Kinder Morgan’s new 360-mile pipeline connecting Belton to Jacksonville, FL. 26

If Kinder Morgan manages to complete their pipeline project, it could fundamentally change the pricing and security of supply within the region. Shippers are obviously interested, freeing New York and Gulf Coast vessels to supply other markets, which is the only way to improve consumer pricing at this point. Despite increased domestic crude oil production, a 40year-old ban on crude exports, and above-average refinery runs, benefits are moving overseas in the form of added refined product exports. Improving a market’s distribution costs is about the only surefire method of reducing product prices so long as buyers somewhere else in the country or world would pay a higher price for your gallons. •

Colonial Pipeline Second quarter diesel shipments along the colonial pipeline proved fairly strong across the Southeast region. As winter thawed, power plant demand decreased. Several terminals then found themselves long diesel, forcing suppliers to sell well below shipping costs to make room for incoming batches. Consumers, of course, welcomed the price relief. Gas supplies along the Colonial pipeline’s path, on the other hand, tightened as a result of the annual RVP transition. Memorial Day weekend proved extremely tight for majors as many branded suppliers reportedly ran into issues. Low-sulfur Atlanta-grade gasoline suffered similarly during the transition, but rumors suggest Atlanta suburbs could ﬁnd relief from Low-sulfur requirements before next summer as regulators consider abandoning the 7.0-lb. boutique blend in favor of a more ubiquitous product. At the end of the second quarter, Atlanta consumers paid roughly 16cpg more for low-sulfur, 7.0-lb. gallons than 9.0-lb. blends used outside the city’s 45 county perimeter while still saving 2cpg versus reformulated (RFG) blends used in the mid-Atlantic year-round. •

“ Gas supplies along the Colonial pipeline’s path, on the other hand, tightened as a result of the annual RVP transition. Memorial Day weekend proved extremely tight for majors as many branded suppliers reportedly ran into issues.”

PADD 2 Midwest

BULL

Dan’s Dissertation I

Dan Luther, Supply Manager See his bio, page 54

Third quarter diesel supplies in the Midwest will remain plentiful and prices seasonally discounted relative to NYMEX futures. However, toward the end of August and into September, supply will likely tighten ahead of the fall reﬁnery maintenance season. Major projects scheduled for several key Midwest reﬁneries could impede production. Furthermore, the traditional harvest season should begin mid-September, increasing demand and sapping supplies just as winter weather approaches. As a result, the third quarter of 2015 should close with a tight Midwest ULSD market — very different from when it started, awash in product.

PADD 2 Wholesale vs. DOE Retail (dollars per gallon)

Source: Energy Information Administration (EIA)

Abundant Midwest Diesel Supply, but Tight Ohio and Michigan Supplies The second quarter ended with two dramatically different supply situations across PADD 2. On Magellan’s Central system running northward from Oklahoma to Minnesota, diesel ﬂowed abundantly due to strong production and unseasonably weak demand. The region’s diesel days of supply, a measure of inventory on hand, hit 52 days — 17 days more than the same time last year and roughly 21 days over the ﬁve-year average. 28

Magellan North Distillate Stocks

Source: Magellan

Most Midwest farmers made efﬁcient work of the spring planting season with only a short spike in demand — certainly not enough to offset strong supply from reﬁners. As a result, Great Plains diesel buyers enjoyed the cheapest fuel in the nation throughout much of the quarter.

“ Fuel buyers in Ohio and Michigan were not as lucky as reﬁnery downtime tightened supply. The unexpected malfunction of a compressor at PBF’s 175,000-bpd Toledo reﬁnery in late May left many key markets short product.”

Fuel buyers in Ohio and Michigan were not as lucky as reﬁnery downtime tightened supply. The unexpected malfunction of a compressor at PBF’s 175,000-bpd Toledo reﬁnery in late May left many key markets short product. Prices at the rack jumped soon after the incident, with prices in Toledo, OH rising over 8 cents per gallon, relative to the benchmark Chicago diesel contract, in just two days. Columbus, OH was not far behind with prices rising 11 cents per gallon against Chicago diesel within the week.

Ohio Valley Less Benchmark Chicago Diesel

Source :Oil Price Information Service (OPIS)

To start the third quarter, inventories remained strong across the Great Plains while the supply situation in Ohio and Michigan improved slightly as reﬁning capacity returns to normal. Through July and much of August, diesel demand typically stabilizes as most of the agricultural ﬁeldwork happens in the spring and fall. Watch for prices to come under pressure before the fall harvest, at which time bloated inventories will come in handy, easing demand driven price hikes so typical for the region. • 29

PADD 3 Gulf Coast

PADD 3 Wholesale vs. DOE Retail (dollars per gallon) $4.00 $3.80 $3.60 $3.40 $3.20 $3.00 $2.80 $2.60 $2.40 $2.20 $2.00

1.20 1.00 0.80 0.60 0.40 0.20 0.00

DOE Retail

Wholesale

Wholesale-to-Retail Spread (secondary axis)

Average Rack-to-Retail Spreads Rolling 12-mo.

2014 — Q2

2015 — Q2

48¢

30¢

34¢

Source: Energy Information Administration (EIA)

Ft. Smith, AR Terminal Temporarily Closed, Magellan Makes Progress toward North Little Rock, AR Magellan Pipeline continued work on the $150 million project connecting North Little Rock, AR to its Central system pipeline network, temporarily closing its Ft. Smith, AR terminal in late May to upgrade pumping stations and work on the proposed line connecting the two cities. Magellan expects the closure to last nearly three months, halting refined product shipments to the only terminal in the Ft. Smith area. Consequently, fuel suppliers will instead long haul from terminals over an hour and a half away, costing consumers more per gallon and risking supply disruptions. Magellan will employ a 160-mile line leased Ft. Smith to Little Rock Pipeline Project from Ozark Gas Transmission, requiring only about 50 miles of new pipeline to connect Ft. Smith with the existing line. The new line will carry roughly 75,000 barrels of gasoline, diesel, and jet fuel to North Little Rock each day from mid-continent refiners. Up to this point, the only pipeline to supply Central Arkansas has been Enterprise’s TEPPCO line. Originating in Eastern Texas, TEPPCO shipments often prove unreliable given the pipeline’s severe constraints. Access to refineries in Oklahoma and Kansas should improve flexibility and security of supply for area fuel buyers. The entire project is expected to wrap up early next year. •

Source: Magellan

“ An abundance of diesel and weak demand –

particularly from the oilﬁeld services sector – led to falling prices as sellers sought to entice fuel buyers.”

Texas Diesel Shootout A May standoff between rack suppliers in two Texas cities led to deep discounts for consumers in Dallas and San Antonio this quarter. An abundance of diesel and weak demand — particularly from the oilﬁeld services sector — led to falling prices as sellers sought to entice fuel buyers. In Dallas, local prices slipped more than 6 cents per gallon below the Gulf Coast diesel benchmark while discounts in San Antonio reached nearly 5 cents per gallon against the same index for several days.

In a balanced supply situation, diesel in both markets typically sells for 5 to 6 cents per gallon over Gulf Coast diesel spot assessments. Recent discounts actually amount to upwards of 10 cents per gallon when compared to typical rates. In San Antonio, buyers can expect lower prices to persist, likely as long as oilﬁeld service demand deteriorates. In Dallas, pricing already recovered from its early-June lows, but could easily return to its discounted level in the third quarter. •

Texas Rack Diesel Less Benchmark Gulf Coast Diesel

Source: Oil Price Information Service (OPIS)

PADD 4 Rocky Mountain

BULL

Nate’s Notion I

Nate Kovacevich, Supply Manager See his bio, page 55

Diesel prices in the Rocky Mountain region should stay pressured this summer relative to the rest of the country as Group 3 inventories remain at historical highs. The Denver market — connected to the Group via the Magellan pipeline — traded at discounts well below Group 3 pipeline economics because the Group’s diesel oversupply combined with depressed values in the Mountain region to produce signiﬁcantly lower prices.

Recently, gasoline barrels were moved by truck from the Northwest Group region (i.e. ND) into Montana, Utah, Wyoming, Idaho, and eastern Washington as gasoline economics in the Group proved cheap compared to the Mountain region. Meanwhile, Denver gasoline inventories stayed in line with demand and prices remained relatively low. This fall, I’d expect a rebound in prices as reﬁnery maintenance takes its toll on production and overabundant Group 3 supplies ease once agricultural activity picks up during harvest season.

PADD 4 Wholesale vs. DOE Retail (dollars per gallon) $4.20 $4.00 $3.80 $3.60 $3.40 $3.20 $3.00 $2.80 $2.60 $2.40 $2.20 $2.00

1.20 1.00 0.80 0.60 0.40 0.20 0.00

DOE Retail

Wholesale

Wholesale-to-Retail Spread (secondary axis)

Average Rack-to-Retail Spreads

Rolling 12-mo.

2014 — Q2

2015 — Q2

37¢

21¢

25¢

Source: Energy Information Administration (EIA)

Surging Inventories and Weak Demand Produce Rocky Mountain Savings Crack spreads in the Rocky Mountain region fell in the first quarter as tepid demand during the winter and an oversupply of diesel in the Midwest this spring pushed product from PADD 2 into PADD 4. Midwest refiners then ran at full speed in the second quarter, with PADD 2 throughput rising to 2.7 million BP in May, up 3 percent from a year earlier. Obviously, those barrels need to go somewhere, and PADD 4 proved a valuable destination for refiners in the Midwest. Group 3 distillate stocks ran at historic highs for the last six months and current stocks in the Magellan north system measure near 8.4 million barrels, up 900,000 barrels from last year and more than 3 million barrels since 2013.

PADD 4 diesel markets traditionally underperform the national retail average through much of the first quarter, but this year, that weakness extended into the second quarter, as well. In fact, PADD 4 diesel prices averaged an 8-cent per gallon discount to the national mean through the first half of the year when prices typically rebound during the second quarter. Obviously, the Midwest’s refined product glut impacted the Rockies and will likely continue until inventories in the Group drop to more manageable levels. When will that happen? Well, the Midwest market just finished its spring agricultural push. So, a rebalancing of supply and demand isn’t likely until the fall harvest. •

PADD 4 Distillate Inventories

Source: Energy Information Administration (EIA)

31 33

PADD 5 West Coast, AK, HI

BULL

Lynn’s Lessons I

Lynn Argianas, Director of Supply, West See her bio, page 54

At the start of the third quarter, it appears only two refineries will be conducting wide spread maintenance in July. Considering the import arbitrage closed in June while refinery maintenance and low product inventories persisted, I expect to see prices rise again in July before tapering later in the month. Beyond July, refinery runs should pick up as maintenance plans remain limited and elevated refining margins ensure peak output, boosting uncommonly low refined product inventories and balancing supply with demand for the first time this year.

PADD 5 Wholesale vs. DOE Retail (dollars per gallon)

Source: Energy Information Administration (EIA)

West Coast Refinery Failures Produce More Opportunity than Fuel PADD 5 Crude Oil Inputs

The West Coast suffered its most volatile quarter in many years. Even after the United Steelworkers settled their strike, numerous reﬁnery issues — both planned and unplanned — drove reﬁnery runs to their lowest level since 2010, propelling gasoline, diesel and jet fuel spot markets to the highest in the nation.

Source: Energy Information Administration (EIA)

Reﬁnery issues fueled rising basis values, ﬁrst in late-February then again in early-May, after more than a year of relative quiet. Spot CARB gasoline prices in Los Angeles rose from an April low of $1.80 a gallon to a high of $2.83 in May. At the same time, CARB diesel prices in Los Angeles rose 43 cents per gallon.

California Spot Gasoline vs. NYMEX RBOB Futures

Energy Information Administration (EIA) and Oil Price Information Service (OPIS)

West Coast Retail Gasoline vs. National Average

On the bright side, lower crude oil prices softened the blow as both gasoline (▼11%) and diesel fuel (▼22%) fell short of prices recorded at the same time last year. Still, there is no quick fix for supply disruptions in this part of the country. The California Air Resources Board (CARB) maintains unique and strict specifications for the state’s gasoline and diesel fuel, limiting the number of refineries capable of meeting CARB requirements. The only solution to high prices, of course, is high prices. By early June, importers — attracted by elevated fuel prices — delivered several million barrels of jet fuel and gasoline, correcting California’s supply imbalance and, consequently, its prices.

Energy Information Administration (EIA)

Not to be outdone by California, the state of Washington had two large refineries performing maintenance between May and June. On May 6th, the U.S. Oil Refinery in Tacoma suffered a fire which shut down their 39,000 barrel per day refinery until sometime in July. • A Tacoma oil refinery has burst into flames.

Source: Tacoma Fire Department

Canada Canadian Rig Counts Decline on Oil Market Rout After several weeks of downtime stemming from the northern Alberta wildfires, Canadian oil sands producers returned to work in early June. Nearly 235,000 barrels per day — roughly 10 percent of total oil sands production — dropped offline as a result of the evacuations. Two major oil sands producers in the Cold Lake area, Cenovous Energy and Canadian Natural Resources, accounted for a combined 215,000 crude oil barrels per day. The sudden drop in supply volumes buoyed Western Canadian Select (WCS) crude prices, which gained nearly $2.00 a barrel versus the U.S.-based West Texas Intermediate (WTI) crude contract as the ordeal unfolded in late March. While WSC still trades at a $7.50 per barrel discount to WTI, it’s in a much healthier place than June 2014 when the contract garnered a $20 per barrel discount to the U.S. benchmark. In fact, the current differential to WTI represents a five-year high. •

WTI vs. WCS Similar to their American counterparts, Canadian oil sands producers cut production in the last year and slashed capital spending as crude prices plummeted. Canada’s oil exports to the United States suffered as a result. Last month, oil exports posted their largest monthly decline on record, averaging less than 2.8 million bpd in May and a 360,000 (11.4%) barrel per day reduction from April. At the same time, syncrude output fell by more than half since the beginning of the year on planned maintenance.

Western Canadian Select (WCS) vs. WTI Crude

Source Bloomberg

Canada Consequently, the Canadian Association of Petroleum Producers (CAPP) cut its 2030 oil production forecast by 17 percent, or 1.1 million barrels per day, to 5.3 million barrels. The drop in crude from over $90 per barrel last year to $40 per barrel this spring caused new investment in production growth to drop sharply in the country. Economics, rather than politics, limit the oil industry’s growth over the next decade. CAPP believes the majority of the nation’s growth over the next 15 years will come from oil sands in northern Alberta, accounting for roughly 75 percent of production by 2030. Meanwhile, conventional oil production is expected to stay relatively ﬂat during that timeframe. Falling prices and a lack of fundamental supply/demand support led to a gloomier outlook than the organization’s previous forecast. But, since so many capital spending decisions depend on current economics, a price rebound in the coming months would likely change the organization’s long-term production forecast. •

Canadian Crude Oil Production Millions of barrels per day

2014

2015

2020

2025

2030

Eastern Canada

0.22

0.26

0.17

0.09

Western Canada

3.52

3.68

4.37

4.36

4.25

–

+0.01

+0.43

+0.98

3.74

3.89

4.64

4.96

5.33

+ Western Canada TOTAL*CANADA

*Totals may not add up due to rounding Source: Canadian Association of Petroleum Producers

Andrew Barr/National Post

Renewable Fuels BEAR

Jessica’s Judgment I

Jessica Phillips, Renewable Supply & Distribution Supervisor See her bio, page 55

Just a few weeks since the EPA’s RFS2 proposal release and I can still hear the groans and grumbles. On the bright side, you won’t be reading any more ambiguous commentary from me blaming “the uncertainties surrounding the RFS” anytime in the foreseeable future. Guess I’ll need a new scapegoat. In any event, I am bearish for Q3. I expect the ethanol industry will start pulling on the production reins in light of a reduced RVO and price aggressively to reduce inventories. Corn will lose popularity to sugarcane, as Brazilian imports will likely increase. Biodiesel powerhouses rejoiced at the growing volumes, but remain guarded as supporters await news of the blender’s tax credit. Fairweather politicians are already starting to come out of the woodwork, advocating the return of the tax incentive and overall renewable fuels support ahead of the impending presidential election. Modest 2015 sales coupled with a higher RVO and building inventories should provide biodiesel price relief.

2014-2016 RFS2 Proposal After 18 months of delays, the Environmental Protection Agency (EPA) presented its long-awaited Renewables Fuels Standard (RFS2) for 2014 and 2015 before throwing in a 2016 target for good measure. Extending debates down to the wire, the Agency published its proposal one business day before the June 1st deadline. While the proposal remained open for comments through the end of July, the current timeline suggests ﬁnalized 2014, 2015, and 2016 targets, along with biomass diesel volume requirements for 2017, before November 30th of this year.

Volumes Used to Determine the Proposed Percentage Standards*

*All volumes are ethanol-equivalent, except for biomass-based diesel which is actual

Both petroleum and renewable advocacy groups objected to the EPA’s previous and proposed volume obligations, each citing industry growth, economic impacts, and transportation fuel infrastructure as concerns. Following the EPA’s announcement, ethanol producers were expectedly disheartened with the RFS proposal, suggesting a reduction in volume obligations versus statutory targets will negatively affect agricultural economies and diminish industry related investments — all of which impede progress towards breaking the ethanol blend wall. Meanwhile, biodiesel producers and supporters appear indifferent: appreciative of the biomass diesel increase year over year, but not especially awe-struck by the numbers. If the EPA can adhere to this schedule, the agency would be restoring the intended deadlines as deﬁned in the statutory requirements, advancing the renewable fuels industry into 2016 with clear goals and realistic expectations, absolved of volume obligation uncertainty and market speculation. • 38

Did You Know?

Unveiling his namesake engine at the 1911 World’s Fair in Paris, France, German scientist Rudolf Diesel predicted his invention “would help considerably in the development of agriculture of the countries.” Why? The first diesel engine consumed fuel derived from peanut oil. His original design was later modified to accept petroleum-based diesel due to its low cost

RIN Overview This time last year, D4 Biodiesel RINs hovered around 80 cents per RIN while 2015 vintages averaged 85 cents per RIN. Biodiesel RINs spiked brieﬂy following the EPA’s Renewable Fuels Standard proposal, which increased biomass-based diesel targets for 20142016, but prices normalized within a couple days. Ethanol RINs remain the chief topic of conversation, however, as prices collapsed a day before the RFS2 announcement after a bearish report from Citi Research predicted the contents of the EPA’s proposal. D6 RINs fell from 65 cents per RIN, losing more than 10

“ Ethanol RINs continued to

cents per RIN within a few hours of the report’s release. Citi analysts suggested the RFS2 would hold D6 prices between 37 and 70 cents per RIN, expecting the Renewable Volume Obligation (RVO) to fall well short of the statutory requirements. Ethanol RINs continued to tumble once the EPA’s proposal conﬁrmed lower conventional biofuel targets, but prices mended in late June after bottoming out near 36 cents per RIN, closing the month at roughly 45 cents per RIN. Federal mandates fell 10.7 percent shy of the industry’s estimates, creating a surplus of RINs in the marketplace and driving D6 RINs to their lowest in years. •

Renewable Identification Number Values

tumble once the EPA’s proposal conﬁrmed lower conventional biofuel targets, but prices mended in late June after bottoming out near 36 cents per RIN, closing the month at roughly 45 cents per RIN.” Source: Oil Price Information Service (OPIS)

Renewable Fuels Production and Consumption

Accounting for the EPA’s recent RFS proposal, the U.S. Department of Energy (DOE) revised its 2015 and 2016 ethanol production forecasts, suggesting a 936,000-barrel per day target this year before declining slightly next year to 933,000 barrels a day. While the EPA’s proposed volume obligations still require approval, most industry watchers agree volume reductions are inevitable.

First quarter production mimicked 2014 Q1, logging approximately 248 gallons and representing only moderate YoY growth. Regardless, inventories managed to grow by 25 percent from the same time last year, largely due to slow sales as biodiesel marketers struggle to compete with cheaper distillate prices.

Despite declining production rates, the agency anticipates ethanol consumption to grow by approximately 891,000 barrels a day this year before gaining another 896,000 barrels a day in 2016. Unfortunately, demand growth will be driven by rising gasoline consumption and not consumer demand for more concentrated ethanol blend rates, such as the widely publicized and more widely debated E15 and E85 blends. For now, the DOE expects the E10 blend wall to hold.

Biodiesel producers will likely record another modest year without the biodiesel blender’s tax credit propping up demand. Producers and blenders operate at roughly breakeven rates under current market conditions, but many hold out hope for another retroactive award, extending the program for its eleventh year. With this being an election year, politicians will likely rally support for the agricultural community a little earlier than normal. •

Renewable Fuels Global Goals The United States is not the only country with renewable fuels targets. In fact, 59 countries around the globe presently enforce renewable transportation fuel mandates — more than twice the number recorded in 2005, according to the International Renewable Energy Association (IRENA), an intergovernmental group supporting countries seeking to lower their carbon footprints. Renewable mandates promote environmental preservation, economic growth, along with energy independence and security. Agrarian societies, for instance, may ﬁnd cellulosic or plant-based products more economically viable than traditional petroleum-based fuels. Brazil, the world’s thirteenth-largest crude oil producer, struggled to meet petroleum demands before embracing its No.1 resource in the ‘70s. As the world’s largest sugarcane producer, ethanol quickly proved both a logical and proﬁtable alternative to

increasingly scarce crude oil barrels. By the late ‘80s, retail ethanol sales surpassed gasoline at the peak of the Pró-Álcool Program and would do it again in early 2008, becoming the world’s top ethanol consumer, top exporter, and second-largest producer. Two out of three ain’t bad. According to IRENA’s Renewable Energy Target Setting, 164 countries — up from only 43 in 2005 — have adopted at least one type of renewable energy target, including among other electric power generation, the heating/cooling sector, and transportation. While more than 90 percent of 164 nations established targets for their electric power generators, biofuel consumption for both heating and transportation enjoys growing global demand and increased support among policymakers. •

Global Map of National Renewable Energy Targets of All Types, 2015

Source: IRENA based on REN21, 2014 and REN21, 2015.

Natural Gas Cash Price From the start of the second quarter, cash prices followed the typical shoulder period trend of trading below the prompt month contract. This trend continued into June until summer heat developed across the Southeast before spreading north and west. By the middle of June, cash Henry Hub prices traded 10 cents per dekatherm (DT) above the July contract — highly unusual pricing for this time of year echoed by unusual weather.

Forward/Term Prices Term pricing remained relatively stable over the April-June period while the Jul ‘15 contract bounced between $2.50 and $3.10/DT and Cal ’16 through Cal ’20 proved range bound, as seen in the chart below. •

NYMEX Natural Gas Foreward Pricing

Source: New York Mercantile Exchange (NYMEX)

Natural Gas

Natural Gas Supplies The U.S. supply picture is still developing as domestic production continues to grow. Increased shale supply in the near future will more than offset Gulf of Mexico and older dry gas reductions. Rig counts continue their decline. However, improved overall efﬁciency in production per rig continues to drive the supply picture. •

Weekly Natural Gas Rig Count and Average Spot Henry Hub

Source: Baker Hughes

US Natural Gas Production and Imports

Source: Energy Information Administration (EIA) Short-term Energy Outlook, 2015

Natural Gas

Natural Gas Demand Demand continues to grow with near-term pricing under $3.00 per million British thermal units (mmBtu). Power generation demand led the pack as hotter than normal June weather taxed electric cooling systems across the nation. As evidenced in the chart below, increased power generation and industrial consumption will more than offset residential and commercial sector reductions this year. •

US Natural Gas Consumption

Source: Energy Information Administration (EIA) Short-term Energy Outlook, 2015

Natural Gas Consumed for Power Generation in the East (April-October)

Source: Bentek Energy via Energy Information Administration (EIA)

As discussed in last quarter’s FN360, natural gas is currently displacing all coal supply available, sans Powder River Basin. With term pricing hovering in the low $3.00/DT range, one would expect this trend to continue for the foreseeable future. • 44

Natural Gas Natural Gas Storage Inventory As expected, above-average natural gas production contributed to injection rates exceeding 5-year averages, but cannot fully explain such strong injection rates. The contango between cash/balance of summer prices and winter pricing provides storage players the added incentive to inject. Note in the chart below the steeper contango in the 2015 forward curve into next winter versus the forward curve at this time last year.

NYMEX Natural Gas Foreward Pricing

Source: New York Mercantile Exchange (NYMEX)

However, the industry’s above-average injection rates have not translated into a signiﬁcant increase in weekly builds this injection season versus last. In the chart below, the slope of the injection rate is not noticeably different year over year, possibly due to increased natural gas demand from power generators. •

Working Gas in Underground Storage

Source: Energy Information Administration (EIA)

Electrical Power

Cash/Summer Cash power prices proved largely muted in the April-May shoulder period thanks to warming spring temperatures. However, aboveaverage June temperatures across much of the country increased price volatility. June PJM West daily cash pricing traded between $25 and $70/MWh while SP15 traded in a range of $20 to $75/MWh. The wetter weather in Texas kept a tight lid on pricing where daily cash traded from $20 to $55/MWh. Gearing up for the hotter Jul-Aug period, summer pricing has shown its fair share of volatility, as well. While PJM and ERCOT trended down, SP15 moved higher as hotter weather is expected to persist and drought-like conditions continue out west. •

Power Generation The new paradigm in natural gas pricing improved gas-ﬁred power generation’s competitive edge over coal power plants. The graph below shows how coal generation continues to decline while natural gas sees steady increases. Considering most newly-built power plants today consume natural gas, it’s no surprise DOE analysts expect natural gas generation to surpass coal as the nation’s largest electric power source by 2040. Discouraging coal plant investments, federal and regional emission standards increase energy costs by an estimated 40 to 80 percent, according to DOE estimates.

“ Considering most

US Net Electricity Generation by Energy Source (2010-2016)

newly-built power plants today consume natural gas, it’s no surprise DOE analysts expect natural gas generation to surpass coal as the nation’s largest electric power source by 2040.” Source: U.S. Energy Information Administration, Electric Power Monthly, Short-Term Energy Outlook

Electrical Power

New York State Power Plant Heat Rates (1999-2013)

Furthermore, deregulation encourages investment in new generation technologies, improving heat rates in areas like New York. As indicated in the chart below, Empire State power providers improved the “heat rate” — rate at which fuels convert to power — by 30-percent between 2000 and 2013 while natural gas generation surpassed that of coal during the same time period – no coincidence. Consequently, producers now generate the same amount of energy with two-thirds the fuel. •

Source: IPPNY publication “15 Years of Competitive Markets”

Power Demand The Southeast’s summer cooling season kicked off early while Texas/ERCOT has been dealing with abnormally high precipitation, suffering ﬂash ﬂoods in late May followed by Tropical Storm Bill in mid-June. NOAA projects a warmer summer than last with cooling degree days for the June, July and August period up more than 7 percent year-over-year. While seasonal conditions certainly impact consumption, the graph below depicts the formation of another clear trend. The commercial and transportation sectors both show strong year-over-year demand growth, offsetting noise from other sectors with the expectation of sustained growth in the coming years. •

US Electricity Consumption

Source: Energy Information Administration (EIA) Short-term Energy Outlook, June 2015

TSA Changes the TWIC Program

Transportation Logistics

At the beginning of 2015, the Transportation Safety

Transportation Capacity Concerns

Administration announced numerous enhancements to the Transportation Worker Identiﬁcation Credential (TWIC) program, including increased proof of citizenship document requirements, fee structure changes, and improved card features.

While transportation capacity proved erratic over the past ten years, carriers of late enjoyed a period of calm and opportunities for business growth abound. Decreased fuel costs certainly contribute to such opportunities, softening the impact of rising driver pay and equipment costs.

Meanwhile, economist and transportation industry expert Noel Perry believes increased regulations and retirement will claim some 700,000 licensed truckers this year, driving utilization rates back to 2014 crisis levels within the next two years and limiting load turns. Furthermore, CSA mandates, costly technology surrounding e-Logs, and strict hours of service regulations are expected to keep new drivers from ﬁlling rapidly growing vacancies. Unless shippers attract a new generation of drivers soon or demand declines due to slower economic growth, capacity should tighten signiﬁcantly in the next 12 to 24 months and customers will suffer narrowed margins as distribution costs rise considerably. How can shippers survive the shortage? With rates expected to increase between 4 and 9 percent over the next 16 months, planning appropriately is the best solution. Establish budgets and negotiate longer term contracts with carriers capable of advancing your business strategies. Contracting carriers now should guarantee the capacity you need down the road while consistent demand will promote stronger relationships and greater quality of service. • 48

Starting this month, all applicants born in the United States and claiming citizenship must prove their citizenship using credentials that are in line with other TSA programs, like Hazardous Material Endorsements and the TSA Pre-check program. Providing these details should ensure consistency in the programs and the eligibility of all approved applicants. The fee for the TWIC program will also fall to $128, saving applicants $1.75 in FBI fingerprint processing charges. Additionally, and after much criticism, the TSA increased the maximum number of allowable characters for a driver’s last name by five letters. Since May of 2014, the TSA had only included the first 14 characters of a driver’s last name, causing considerable confusion as card holders tried to justify the disparity between TWIC cards and their actual last names. The agency hopes 19 is the magic number for those with longer last names. The layout of the card has also been enhanced, changing the expiration date format, separating the middle name, moving the card version above the magnetic strip, altering card bar codes, and including previously omitted data. Application and card updates should substantially enhance a program which ensures dangerous individuals do not gain unescorted access to secure areas of the nation’s maritime transportation system, an area where many fuel and chemical terminals exist. •

Transportation Logistics New EPA Proposal Raises Cost of Class 8 Trucks What makes up only 4 percent of road traffic, but contributes onequarter of the nation’s greenhouse gas emissions? According to the Environmental Protection Agency (EPA), Class 8 trucks. In late June, the Agency proposed regulations requiring newer model tractors to improve their fuel efficiency by up to 40 percent before 2027 and cut the industry’s fuel consumption by nearly a quarter. Current tractor-trailers average roughly 5 to 6 miles per diesel gallon and the EPA would see that average raised to 9mpg. According to Forbes’ source with the Environmental Defense Fund, more aggressive fuel economy standards could reduce the cost to own and operate Class 8 diesel trucks by as much as 21 cents per mile, saving shippers millions annually. While agreeing with potential fuel savings and the need for MPG improvements, members of the American Trucking Association (ATA) argue the EPA’s timeline borders on too aggressive, suggesting manufacturers

won’t have time to adapt without costing big rig operators significantly more both on initial purchases and maintenance. The EPA estimates compliant rigs would cost as much as $14,000 more — a cost the Agency says owners would recoup in 18 months through fuel savings. The Energy Information Administration (EIA) currently expects distillate fuel consumption to rise by 90,000 barrels a day (▲2.3%) this year and another 50,000 barrels a day (▲1.2%) in 2016 as manufacturing output increases along with foreign trade and marine fuel use. Meanwhile, distillate inventories are expected to set 5-year highs by the middle of next year. Of course, the EPA’s proposed MPG improvements could reverse diesel’s growth forecast — as it has with gasoline — and lead to greater refined product exports as greater overseas demand and elevated distillate inventories skew the nation’s supply balance.

Distillate Inventory Forecast

Source: Energy Information Administration (EIA)

Lastly, while rising miles per gallon directly impact the nation’s distillate fuel consumption, the increased cost of tractors could also drive shippers away from petroleum products all together and into the arms of alternative fuel sources, such as compressed natural gas (CNG). With rising diesel rig costs and improving CNG tractor prices reducing the differential between the two, the decision will eventually come down to commodity price. • 49

Diesel Exhaust Fluid (DEF) DEF OUTLOOK

Demand for DEF in North America is expected to continue its strong growth trajectory through 2025. Growth began in earnest in 2010, with the implementation of the Environmental Protection Agency’s (EPA) EPA ’10 emissions standards, which imposed stringent NOx and particulate matter (PM) limits on both medium and heavy-duty on-highway vehicles while necessitating the implementation of Selective Catalytic Reduction (SCR) technology for new vehicles in these classes. SCR units reduce harmful NOx emissions and utilize Diesel Exhaust Fluid (DEF). In 2014, the EPA required SCR technology on all newly manufactured off-road heavy duty equipment, as well. As of June 2015, nearly all newly manufactured medium and heavy-duty trucks, buses, and off-road equipment in North America are SCR-equipped. Historically, there have been two important drivers of DEF demand. First, the adoption of SCR technology as heavy-duty engine manufacturers’ only viable solution to meet NOx reduction targets mandated by the EPA. Integer estimates that 15 to 20 percent of the current U.S. heavy duty on-road ﬂeet is SCR-equipped today with typical DEF dosages ranging between 3 and 4 percent of diesel consumption. Secondly, diesel consumption in the U.S. rose by 38 percent between 2007 and 2014, according to data from the Energy Information Administration (EIA). As a result, DEF consumption grew with increased diesel demand. 50

However, going forward there is a third driver of DEF demand - fuel economy and CO2 requirements. Phase 1 of ﬂeet-wide CO2 compliance is already in place, and voluntary fuel economy standards are already pushing engines to operate at optimal levels, requiring less diesel and producing less CO2. These operating conditions will have to be further optimized when federal NHTSA (National Highway Transportation Safety Administration) fuel economy standards become mandatory in 2016 and when limits become stricter for MY 2017. Under these conditions, diesel consumption is likely to stabilize, but higher combustion temperatures and greater air intake needed to ensure better fuel efﬁciency will result in higher NOx emissions. Therefore, we expect greater dependence on SCR units to achieve required emissions levels, and increased DEF dosage rates – potentially increasing by as much as 50 percent over current levels. DEF demand will continue to grow through 2025 as a result of these three demand drivers. Yet, North America’s urea production (DEF is 32.5 percent technical grade urea produced by Nitrogen fertilizer plants) remains fragile. 40 percent of the DEF consumed in North America is imported as urea concentrate or dry prilled urea. North American domestic production remains short of demand and by the time supply catches up we expect a step change in demand due to 2017 NHTSA-mandated fuel economy standards.

Diesel Exhaust Fluid (DEF) Fertilizer plants that produce DEF are more accustomed to operating on a fertilizer production schedule, which means two key shipping seasons – spring and fall. They are still not accustomed to the 24x7 demands of the transportation sector. This year four of North America’s large urea plants will go down for maintenance for 4 – 8 weeks apiece. Each one of these plants represents 10 to 20 percent of domestic production. These scheduled turn-arounds at four large production plants one after the other over the next four months will be equivalent to four refineries going down, back-to-back and overlapping for four months. It’s a significant event, but these types of nitrogen plant maintenance turn-arounds have become a regular occurrence. Compounding the challenge of fragile supply is the fact that we have a DEF storage infrastructure across the supply and logistics chain that is under-sized for the increased demand and protracted plant down-time cycles. We believe DEF demand will increase 3 to 4 times over the next ten years.

Furthermore, DEF storage needs across the supply chain are half of what they should be for today’s DEF demand patterns. As a result, the DEF supply system will need to build 6 to 8 times the storage capacity that exists today. This storage will come in the form of larger storage tanks at marine terminals, larger storage capacities at production plants, more rail terminals, greater storage at local distributors, and finally more storage capacity at customer locations.

End-customer locations should size their DEF storage capacities such that they receive one DEF delivery per week and as they approach two deliveries per week, those locations should be considering expanded storage options. The DEF supply and logistics infrastructure is still too small and fragile to be operating under anything more than twice per week deliveries. So, study your DEF demand patterns, assume they will increase by 50 percent per truck already equipped with SCR and by 3 to 4 times overall and map out a storage and replenishment plan that keeps each of your locations between one and two DEF deliveries per week. • © 2015 Mansfield Energy Corp.

Diesel Taxes The sum of city, state, and federal taxes in cents per gallon

Diesel tax change, cents per gallon

ÂŠ 2015 Mansfield Energy Corp.

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

Andy Milton Senior VP of Supply and Distribution Andy heads the supply group for Mansfield and during his tenure the company has grown from 1.3 billion gallons to over 2.5 billion gallons per year. Andy’s industry experience spans all aspects of the fuel supply business from truck dispatch, analytics, and index pricing to hedging and bulk purchasing. Prior to Mansfield, Andy worked at RaceTrac Petroleum. Andy’s expertise in purchasing via pipeline, vessel, and the coordination via futures and options for hedging purchases enables him to successfully lead a team of experienced and motivated supply personnel at Mansfield. 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 College and later at Georgia Southern University where he received a BS in Sports Management.

Lynn Argianas Director of Supply, West Lynn has a broad-based background in reﬁning and trading. She began her career at ConocoPhillips where she traded, gasoline, distillate, ethanol, ngl’s and crude oil. She was a VP at Morgan Stanley and a Business Development Manager at Cargill before joining Mansﬁeld Oil where she is Director of Supply West Coast. Lynn has a BA in Finance and Economics from the University of Illinois Champaign and a MBA in from St. Mary’s College in Moraga, CA.

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

Chris Carter Supply Manager Chris 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 supply contracts and current bids. Chris manages pipeline shipments of gas and diesel on the Colonial, Plantation and Central Florida Pipelines. Chris joined Mansﬁeld in 2009 as a Supply Optimization Analyst and earned his BA in Business Management from North Georgia College and State University.

Nate Kovacevich Supply Manager Before joining the company, Nate worked for Yocum Oil Company as a Senior Trader where his responsibilities 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 customers mitigate volatility and price risk. Nate previously worked for FCStone, where he performed commodity research and analysis for customers with agricultural and petroleum related risk, devised and implemented risk management programs and strategies, and executed futures and option orders on all the major exchanges as well as any OTC related transactions. Nate earned his BA in Entrepreneurship and Economics from the University of St. Thomas.

Evan Smiles Supply Supervisor Evan 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 Optimization Analyst and currently holds the position of Northeast Supply Supervisor, handling various tasks including supply bids, day deal purchasing, long haul analysis, contract negotiations/fulﬁllment and supply optimization. Evan earned a BS in Sports Management and BBA in Finance from the University of Georgia.

Jessica Phillips Renewable Supply & Distribution Supervisor Jessica is based out of Houston, TX and is responsible for nationwide purchasing, hedging, and the distribution of renewable fuels. Joining the Mansﬁeld team in 2009, she has held multiple titles over the years: 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 and alternative fuels.

Fernando de Agüero President, Mansfield Power & Gas Fernando possesses a broad energy industry experience ranging from regulated utilities to deregulated merchant and retail business. He has launched five privately held energy ventures. Holding positions as CEO of a wholesale natural gas and electric supplier, Chairman, CEO and President of a deregulated retail natural gas marketer, Manager and CEO of a deregulated retail electric provider, Co-Founder, Chairman and CEO of a leading smart grid-enabled prepaid utility solutions and software development company and held various leadership roles spanning strategic planning, finance, business development, commercial operations and trading at AGL Resources, GenOn (formerly Mirant Corporation) and Southern Company. 55

2nd QUARTER Q44

FUELSNews 360° M A RK ET N E WS & INFOR MATIO N

Mansfield Energy Corp. www.mansfieldoil.com www.fuelsnews.com 678.450.2000 1025 Airport Pkwy SW Gainesville, GA 30501 United States of America

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* Some of the information provided is owned and licensed by OPIS. In no event shall any user copy, modify, publish, retransmit or otherwise reproduce information from OPIS. Copyright 2015. All rights reserved. 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 are provided 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.