Sample Report: Argus Americas Crude

Argus Americas Crude Crude market prices and analysis

Issue 20-126 | Wednesday 1 July 2020

Overview Key prices

WTI crude futures rose as the US reported a large draw in All-day weighted average assessments $/bl domestic crude stockpiles. WTI Nymex August crude futures Diff to WTI Diff to LLS Price ± increased by 55¢/bl to settle at $39.82/bl. Ice September LLS St James +1.30 41.12 +0.45 Brent rose by 76¢/bl to $42.03/bl. The September Brent-Sep- WTI Cushing -1.30 39.82 +0.55 WTI Midland +0.04 -1.26 39.86 +0.64 tember WTI spread was $2.11/bl. WTI Houston +0.91 -0.39 40.73 +0.52 Mars Clovelly +1.05 -0.25 40.87 +0.46 Recent sour crude support against light sweet grades at the WCS Hardisty na na nc US Gulf coast is now appearing in the relationship between WCS Cushing -2.25 -3.39 37.73 +0.59 WCS Houston -1.63 -2.77 38.35 +0.46 the Argus Sour Crude Index (ASCI) and the Argus AGS Marker, a new Midland-quality coastal crude assessment launched at Forward curve: Locational spreads $/bl the beginning of the July trade month. WTI/Brent WTI/Brent LLS/Brent 4:30pm 1:30pm 1:30pm London Houston Houston WTI fob Houston narrowed by 35¢/bl to October Ice Brent Sep -2.14 -2.11 -0.91 this session to an assessed range of possible trade at discounts Oct -2.07 -2.02 -0.84 between $1.55/bl and $1.15/bl, while Bakken fob Beaumont Nov -2.06 -2.01 -0.77 widened by nearly 10¢/bl to discounts circling $1.60/bl. 1:30pm Houston LLS/WTI Mars/WTI Mars/LLS

Aug +1.30 +1.10 -0.20 Offers were due this session on Dominican Republic's Refi- Sep +1.35 +1.00 -0.35 domsa tender to buy 500,000 bl of light sweet crude for 19-20 Oct +1.38 +0.94 -0.44 July delivery to the port of Punta Palenque. Forward curve: Time spreads $/bl 1:30pm Houston ICE Brent CME WTI LLS Mars

Sep/Oct -0.08 -0.17 -0.20 -0.11 In the news Oct/Nov -0.13 -0.14 -0.17 +0.01 Nov/Dec -0.16 -0.11 -0.15 0.00

Infrastructure Forward curve: Outright prices $/bl Phillips 66 Wood River reports flaring 1:30pm Houston LLS WTI Midland Mars Phillips 66 Ponca City started FCC last week Aug 41.12 39.92 40.92 Sep 41.27 40.02 40.92 Oct 41.47 40.22 41.03 Announcement

New assessment for WTI at the US Gulf coast Contents Argus American GulfCoast Select (PA0030327) is a new WTI, Gulf coast, midcontinent, waterborne 2-5 price assessment reflecting standard Midland-quality WTI at Latin America 6 Canada 7 the US Gulf coast that is now available in this report. Visit CME Nymex and Ice 7 https://www.argusmedia.com/en/methodology/key-prices/ Americas crude pipeline deals 9 argus-ags for more information. News 11

WTI $/bl WTI formula WTI formula Roll to next Timing Low High basis price basis MTD month Argus documentation links:

WTI Cushing Aug 39.80 39.84 39.82 39.32 0.10 Argus Americas Crude WTI Cushing Sep 39.90 39.94 39.92 0.17 Methodology and Specification WTI Cushing Oct 40.07 40.11 0.14 Guide WTI Cushing Nov 40.21 40.25 Argus Global Compliance Policy Timing Price CMA Nymex Aug 39.98 Argus Media Editorial Code of Conduct CMA Nymex Sep 40.13 CMA Nymex Oct 40.27 CMA Nymex Nov 40.37 Diff Diff MTD MTD Weighted Timing Basis Diff low Diff high weighted weighted Low High Weighted average average average Average Argus AGS Marker Aug 40.42 40.57 40.48 39.97 Argus AGS Aug Aug WTI +0.60 +0.75 +0.66 +0.67 40.42 40.57 40.48 WTI Houston Aug Aug WTI +0.85 +1.00 +0.91 +0.93 40.67 40.82 40.73 WTI Houston Sep Sep WTI +0.90 +1.00 +0.95 +0.93 40.82 40.92 40.87 WTI Midland Aug Aug WTI -0.10 +0.20 +0.04 +0.03 39.72 40.02 39.86 WTI Midland Sep Sep WTI 0.00 +0.10 +0.05 +0.06 39.92 40.02 39.97 WTI Midland Enterprise Aug Aug WTI -0.10 +0.20 +0.04 +0.03 39.72 40.02 39.86 WTI diff to CMA Nymex Aug CMA -0.11 -0.06 -0.09 -0.15 WTI postings-plus Aug Postings +3.27 +3.32 +3.29 +3.23

Midcontinent $/bl Diff Diff MTD Weighted Timing Basis Diff low Diff high weighted weighted Low High average average average

Bakken Clearbrook Aug CMA Nym -1.75 -1.25 38.23 38.73 Bakken Cushing Aug Aug WTI +0.30 +0.50 +0.35 +0.42 40.12 40.32 40.17 White Cliffs Aug Aug WTI -1.10 -0.65 -0.88 -1.07 38.72 39.17 38.94 Niobrara Aug Aug WTI +0.65 +0.85 +0.75 +0.65 40.47 40.67 40.57 WCS Cushing Aug CMA Nym -2.50 -2.00 -2.25 -2.47 37.48 37.98 37.73

Texas $/bl Diff Diff MTD Weighted Timing Basis Diff low Diff high weighted weighted Low High average average average

WTL Midland Aug Aug WTI -0.41 -0.36 -0.39 -0.45 39.41 39.46 39.43 Bakken Beaumont-Ned- CMA Nymex + Argus Aug +0.70 +0.80 +0.75 +0.71 40.59 40.69 40.64 erland WTI diff to CMA WTS Aug Aug WTI -0.21 -0.11 -0.14 -0.36 39.61 39.71 39.68 WTS Sep Sep WTI -0.15 -0.10 -0.13 -0.20 39.77 39.82 39.79 Southern Green Canyon Aug Aug WTI -0.20 +0.20 0.00 +0.12 39.62 40.02 39.82 WCS Houston Aug CMA Nym -2.00 -1.25 -1.63 -1.68 37.98 38.73 38.35

Louisiana $/bl Diff Diff MTD Weighted Timing Basis Diff low Diff high weighted weighted Low High average average average

LLS Aug Aug WTI +1.25 +1.35 +1.30 +1.33 41.07 41.17 41.12 LLS Sep Sep WTI +1.30 +1.40 +1.35 +1.32 41.22 41.32 41.27 HLS Aug Aug WTI +1.10 +1.30 +1.20 +1.13 40.92 41.12 41.02 Thunder Horse Aug Aug WTI +1.00 +1.10 +1.04 +1.11 40.82 40.92 40.86 Bonito Aug Aug WTI -0.15 +0.15 0.00 +0.11 39.67 39.97 39.82 Poseidon Aug Aug WTI -0.20 +0.05 -0.08 +0.10 39.62 39.87 39.74 Mars Aug Aug WTI +1.00 +1.10 +1.05 +1.16 40.82 40.92 40.87 Mars Sep Sep WTI +0.95 +1.00 +0.98 +1.12 40.87 40.92 40.90 LOOP Sour Aug Aug WTI +0.65 +0.90 +0.78 +0.88 40.47 40.72 40.60

US Gulf Coast and Midcontinent

Recent sour crude support against light sweet grades at the the gap closed by about 5¢/bl. US Gulf coast is now appearing in the relationship between August LLS was also down by 10¢/bl against Cushing, falling the Argus Sour Crude Index (ASCI) and the Argus AGS Marker, a to a $1.30/bl premium. The LLS premium versus Mars was at new Midland-quality coastal crude assessment launched at the 25¢/bl, roughly unchanged from Tuesday. beginning of the July trade month. The US Energy Information Administration (EIA) reported that ASCI has been at a premium to the Argus AGS Marker for US crude inventories fell by 7.2mn bl to 533.5mn bl last week. The three consecutive trade sessions. The ASCI premium was es- total fell from a record high in the previous week and is about 15pc tablished at roughly 40¢/bl on Wednesday, with the gap widen- above the five-year average for this time of year. ing by about 25¢/bl. For its part, the Argus AGS Marker firmed by 58¢/bl to Assessment rationale $40.48/bl this session, reflecting a 25¢/bl discount to the WTI The minimum volume was met and volume-weighted average Houston pipeline index at effective premiums to the Nymex light calculated according to the methodology for LLS, Mars, WTI sweet crude futures contract between 60¢/bl and 75¢/bl. Diff to CMA Nymex, WTI Houston, WTI Midland Enterprise, WTI Nine August WTI Houston deals totaling 18,000 b/d were Midland, WTL Midland and WTS. reported for inclusion in the new index, changing hands at The Bakken Clearbrook assessment was left unchanged from premiums to the US light sweet crude benchmark at Cushing, the prior day with no new information. Oklahoma, between 85¢/bl and $1/bl on Wednesday. Another No Poseidon trades were reported. The grade was assessed at 1,000 bl of WTI at the Echo terminal sold in the financial, but the midpoint of bids and offers. physically deliverable, market this session at an outright price No SGC trades were reported. The SGC low value was assessed of $40.25/bl, which was just 36¢/bl stronger than Nymex WTI using the bid heard against Mars applied to the lowest Mars at the time of the transaction. trade reported, and the SGC high value was the offered level Further inland, August WTI Midland was up by about heard against WTI Aug. SGC was assessed at the midpoint of 10¢/bl against Cushing, flipping back to a premium of that range. about 5¢/bl on Wednesday. WCS Cushing was assessed at the midpoint of possible trade, In Louisiana, August Mars was down by about 10¢/bl against with the offer level reflected at the high end and the low end Cushing, falling to a $1.05/bl premium. Prompt Mars was at unchanged on no fresh bid discussion. roughly a 15¢/bl premium to prompt WTI Houston, although WCS Houston was assessed at the midpoint of bids and offers.

Announcement

Argus successfully completes annual Iosco assurance review Argus has completed the eighth external assurance review of its price benchmarks covering crude oil, products, LPG, petro- chemicals, biofuels, thermal coal, coking coal, iron ore, steel, 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 https://www.argusmedia.com/en/about-us/gover- nance-compliance

US waterborne US Gulf coast waterborne $/bl Timing Basis Diff low/high Low/High Dirty freight rates $/t WTI fob Houston Prompt Aug CMA Nymex +0.58/+0.98 40.56-40.96 Prompt Aug WTI Houston -0.17/+0.23 Prompt Oct Ice -1.55/-1.15

USGC-east coast Canada Bakken fob Beau- Prompt Aug CMA Nymex +0.38/+0.73 40.36-40.71 70,000t 10.30 USGC-Europe mont/Nederland 70,000t 14.29 Prompt Aug WTI Houston -0.37/-0.02 Prompt Oct Ice -1.75/-1.40

USGC-China US Gulf coast prices vs global benchmarks $/bl 270,000t 20.37 Timing Basis Price Differential 130,000t 27.69 WTI Houston Sep Sep Dubai swaps* 41.21 -0.27 USGC/Carib-Singapore Aug Nov Ice Brent -1.51 130,000t 22.69 Aug Nov Dubai -0.75 WTI Midland Sep Sep Dubai swaps* 40.31 -1.17 Aug Nov Ice Brent -2.38 Freight rate $ lumpsum Aug Nov Dubai -1.62 Route Daily Worldscale LLS Sep Sep Dubai swaps* 41.61 +0.13 USGC Aframax reverse lightering 225,000 Aug Nov Ice Brent -1.12 Aug Nov Dubai -0.36 Mars Sep Sep Dubai swaps* 41.39 -0.09 Waterborne WTI rallied while Bakken fob Beaumont fell as Aug Nov Ice Brent -1.37 fresh data released this session indicates a draw in domestic Aug Nov Dubai -0.61 supply and increased refinery runs at the US Gulf coast. Bakken Beaumont/ Aug Nov Ice Brent -1.60 WTI fob Houston narrowed by 35¢/bl to October Ice Brent Nederland Aug Nov Dubai -0.84 this session to an assessed range of possible trade at discounts between $1.55/bl and $1.15/bl, while Bakken fob Beaumont Argus uses today’s US pipeline outright prices at Nymex settlement to calculate spreads to today’s Ice Brent settlement and Argus Dubai prices three months widened by nearly 10¢/bl to a roughly $1.60/bl discount to the forward, to account for travel time from the US to Asia-Pacific. international benchmark at the same time. *Outright prices are calculated by applying the previous day’s US pipeline dif- ferentials to today’s Singapore Nymex WTI 4.30pm timestamp, to then calculate The Argus WTI Houston pipeline index was nearly flat this spreads to Dubai swaps at that timestamp. session relative to the basis at a 91¢/bl volume-weighted average premium to the US light sweet benchmark at Cushing, Oklahoma. Information Administration (EIA) published this session. Refinery Lingering stocks at the US Gulf coast ebbed by 1.31pc, or runs in the US Gulf coast region increased by more than 2pc, or more than 4mn bl, to 303.97mn bl in the week ended 26 June, 169,000 b/d, to 7.65mn b/d at the same time. Regional refinery according to the latest available statistics from the US Energy utilization rates rose from 77pc to 78.3pc.

Anticipated US crude export cargoes — 15-45 days forward Approximate Tanker name volume '000 Estimated grade Load window Load port Chartered destination ETA bl

Azure Nova 2,000 WTI or Mars 12-31 Jul tbd China tbd Xin Hui Yang 2,000 Mars 27 Jul LOOP China 14 Sep San Jacinto 1,000 WTI 6-31 Jul Houston, Texas Singapore tbd Eagle Versailles 2,000 WTI 25 Jul tbd China 12 Sep Sonangol Kalandula 1,000 WTI 19 Jul Houston, Texas Europe or China tbd Mikela P 1,000 WTI or Bakken 1-31 Jul tbd Europe tbd Ninawa 2,000 WTI 26 Jul Ingleside, Texas Asia-Pacific tbd Nordic Cygnus 1,000 WTI or Mars 20 Jul tbd Singapore 30 Aug Houston Voyager 2,000 WTI or Mars 1-31 Jul Galveston lightering China tbd

This could indicate some alleviation of recent supply pressure US west coast pipeline, 30 Jun $/bl at the US Gulf coast and lend support to waterborne prices. Basis Diff to Ice Brent Outright Crude futures also drew support this session from a 1pc fall in Light postings avg Aug +0.87 42.02 total US crude stocks to 533.53mn bl in the week ended 26 June, Heavy postings avg Aug -3.80 37.35 from a record high 540.72mn bl set in the previous week. US production was flat last week at 11mn b/d but may US west coast waterborne $/bl increase as domestic producers begin to restart previously Timing Basis Diff low/high Low/High shut-in wells this month. ANS del Aug CMA Nym +3.58/+3.68 43.56-43.66 US independent ConocoPhillips plans to restart some previ- Aug CMA Ice +1.45/+1.55 ously curtailed production in the continental US and Alaska ANS del concurrent Aug Aug WTI +3.58/+3.68 43.40-43.50 with the expectation of improving oil demand, according to a company press release last session. ANS del USWC monthly volume-weighted average $/bl Separately, offers were due this session for Dominican Repub- Basis Diff lican refiner Refidomsa’s tender to buy a 500,000 bl cargo of Light May Ice CMA -1.24 Louisiana Sweet (LLS) or Nigerian Bonny Light crude for 18-20 July Jun Ice CMA -11.92 delivery to Punta Palenque, Dominican Republic. Jul Ice CMA -3.30 LLS sold in the US Gulf coast physical pipeline market this Aug MTD Ice CMA +1.30 session at premiums to WTI circling $1.30/bl, or roughly $1/ bl under October Ice Brent. An estimated 30-60¢/bl cost to load crude at the dock would indicate waterborne LLS values longed disuse could hamper efforts to ramp up output. around parity to WTI fob Houston. Eastern fields could add as much as 600,000-750,000 b/d to But fob values at the US Gulf coast have been trending lower Libyan production, which Argus estimates averaged just 80,000 versus their respective pipeline benchmarks amid limited global b/d in May. Only the offshore Al Jurf and Bouri fields have crude demand during the ongoing Covid-19 pandemic. been producing reliably throughout the blockades. WTI fob Houston was assessed at roughly parity to the WTI Houston pipeline index this session but has averaged a 15¢/ Assessment rationale bl discount since Friday’s start to the August US trade month. The ANS assessment against CMA Nymex WTI was adjusted to Waterborne WTI also averaged a 15¢/bl discount to the pipe- maintain the spread to CMA Ice Brent established when the line benchmark throughout the July trade month, down from grade last traded. an average 12¢/bl premium during June trade. In other news, crude output has resumed in eastern Libya for the first time since blockades paralyzed the country's oil WTI Houston vs SGC $/bl sector in January and could lead to reduced demand for US 8 light sweet crude in Europe. SGC = 0 The Mesla field — which was producing 60,000-80,000 b/d in 6 the months before the shutdown — restarted last night, according to a field engineer. Mesla output is typically comingled with Sarir 4 production and exported from the Marsa el-Hariga terminal. 2 Libya’s production is not being exported yet, as a force hh majeure is still being maintained at the country’s eastern 0 export terminals. Attempts to reopen eastern ports could be circumvented if the -2 Libyan National Army (LNA) intercedes to take over the terminals. Maintenance work has been carried out at eastern Libyan fields -4 during their shutdown, but a Libyan source warned that the pro- 27 Feb 20 8 Apr 20 20 May 20 1 Jul 20

Vasconia vs Basrah Light fob Sidi Kerir $/bl South America $/bl Timing Basis Diff low/high Low/High 10 Basrah Light = 0 Colombia Vasconia Prompt Oct WTI -0.73/+0.27 39.36-40.36 5 Oct Ice -2.75/-1.75 Castilla Prompt Oct WTI -3.23/-2.23 36.86-37.86 Oct Ice -5.25/-4.25 0 Argentina hh Escalante Prompt Oct WTI -0.48/+0.52 39.61-40.61 Oct Ice -2.50/-1.50 -5

Mexico $/bl -10 Timing Basis Diff Price 2 Jan 20 3 Mar 20 1 May 20 1 Jul 20 Maya Excluding USWC Jul Aug Nymex -2.14 37.68 Latin America USWC Jul Aug Nymex -3.44 36.38 Europe Jul Sep Dated Brent -8.56 33.83 Offers were due this session on Dominican Republic's Refidom- Asia-Pacific Jul Sep Dubai -4.89 37.60 sa tender to buy 500,000 bl of light sweet crude for 19-20 July Isthmus Excluding USWC Jul Aug Nymex -2.09 37.73 delivery to the port of Punta Palenque. USWC Jul Aug Nymex +0.96 40.78 The company was seeking US Light Louisiana Sweet (LLS) Europe Jul Sep Dated Brent -7.06 35.33 or Nigerian Bonny Light, two grades typically listed in its crude Asia-Pacific Jul Sep Dubai -3.24 39.25 tenders. But absent from this latest tender was Argentinian Olmeca Medanito crude which it also usually lists as an option. Americas Jul Aug Nymex -0.69 39.13 LLS offers were to be made relative to WTI, while those Europe Jul Sep Dated Brent -6.41 35.98 for Bonny relative to Dated Brent. Offers will remain valid until 3 July. Mexico K-factors $/bl Prompt-month LLS was on Wednesday reported trading in the Timing K-factor US Gulf coast physical pipeline market at a $1.30/bl premium to Maya USGC Jul -3.55 WTI Nymex, for a volume-weighted average of the same value. Maya USWC Jul -4.85 If the tender is awarded for Bonny Light, it will be the first Maya Europe Jul -8.20 Maya Asia Jul -5.40 west African crude to arrive at the port this year, according to Isthmus USGC Jul -3.50 oil analytics firm Vortexa. In 2019, five west African cargoes -ar Isthmus USWC Jul -0.45 rived at the port, while 11 shipments arrived in 2018. Isthmus Europe Jul -6.70 And next session bids are due for Chilean Enap's Argentinian Isthmus Asia Jul -3.75 arm Sipetrol and Argentinian Compañía General de Combustibles' Olmeca USGC Jul -2.10 tender to sell 250,000 bl of light sweet Maria Ines crude. Olmeca Europe Jul -6.05 The parcel would be expected to load 22-27 August from the port of Punta Loyola, Argentina. Bids are due on an fob- basis relative to Ice Brent. France, the Netherlands, Malaysia and India also increased Elsewhere, Brazil's crude exports jumped by 22.3pc to their share of Brazilian crude exports in May compared with 12 1.907mn b/d in May compared with April, and by almost 75pc months earlier. on the year, according to data from oil regulator ANP. Meanwhile, a cargo of Venezuelan crude arrived at the China's share of exports in May accounted for around 67pc, 235,000 b/d refinery run by Italy's integrated Eni and Kuwait's up from almost 53pc in the same period of 2019, according state-owned KPC at Milazzo, Sicily. to data from Brazil's foreign trade ministry. Around 54pc of Around 1mn bl is on board the Delta Tolmi waiting to dis- receipts from crude exports in January-May 2020 came from charge, and will be the first Venezuelan crude at Milazzo since China, down from almost 64pc in the same period of 2019. February 2019.

Canada domestic $/bl Diff Diff MTD Weighted Timing Basis Diff low Diff high weighted weighted Low High average average average

Syncrude (SPP) na CMA Nym na na na na na na na WCS na CMA Nym na na na na na na na WCS Cushing Aug CMA Nym -2.50 -2.00 -2.25 -2.47 37.48 37.98 37.73

Canada domestic $/bl Canada waterborne prices $/bl Timing Basis Diff low/high Low/High Timing Basis Diff low/high Low/High

Condensate na CMA Nym na/na na-na Hibernia Dated North Sea na/na na-na MSW na CMA Nym na/na na-na Terra Nova Dated North Sea na/na na-na LSB na CMA Nym na/na na-na CME Nymex light sweet $/bl LLB na CMA Nym na/na na-na 1:30pm 4:30pm Timing Open Low High Houston ± London settle

Aug 39.84 39.05 40.58 39.79 39.82 +0.55 Canada Sep 39.88 39.11 40.61 39.87 39.92 +0.58 Oct 40.01 39.21 40.71 39.98 40.09 +0.61 There were no Canadian crude prices because of Canada Day Nov 40.10 39.29 40.75 40.07 40.23 +0.65 holiday.

Ice Brent $/bl 1:30pm 4:30pm Timing Open Low High Houston ± London Assessment rationale settle WCS Cushing was assessed at the midpoint of possible trade, Sep 41.58 41.03 42.62 42.01 42.03 +0.88 with the offer level reflected at the high end and the low end Oct 41.69 41.10 42.66 42.05 42.11 +0.84 unchanged on no fresh bid discussion. Nov 41.85 41.24 42.78 42.13 42.24 +0.85 WCS Houston was assessed at the midpoint of bids and offers.

EIA weekly data

Industry statistics ’000 b/d US refinery inputs ’000 b/d EIA Change 19,000 Production 11,000 0 18,500 Imports 5,969 -571 18,000 Total Stocks 533,527 -7,195 17,500 Runs 14,033 193 17,000 Percent Utilization 75.5% 0.9 16,500 Stocks Padd 1 12,504 -21 16,000 Stocks Padd 2 136,846 -1,096 15,500 15,000 Stocks Padd 3 303,967 -4,029 May 19 Aug 19 Nov 19 Mar 20 Jun 20 Stocks Padd 4 25,585 77 Stocks Padd 5 54,625 -2,126 Inputs 4 Week Moving Avg — EIA Imports Padd 1-4 4,917 -775 Imports Padd 1 510 -60 Imports Padd 2 2,631 -122 US crude inventories mn bl Imports Padd 3 1,434 -519

Imports Padd 4 342 -74 500 Imports Padd 5 1,053 204 480 Runs Padd 1 599 8 460 Runs Padd 2 3,402 -16 440 Runs Padd 3 7,652 169 Runs Padd 4 590 -1 420

Runs Padd 5 1,790 33 400 — EIA 380 May 19 Aug 19 Nov 19 Mar 20 Jun 20

Stocks 4 Week Moving Avg — EIA

US crude imports ’000 b/d

9,200

8,600

8,000

7,400

6,800

6,200

5,600 May 19 Aug 19 Nov 19 Mar 20 Jun 20

Imports 4 Week Moving Avg — EIA

Deals done

North America pipeline deals done Trade Basis Grade Location Differential basis Differential Price $/bl Volume b/d month month

LLS St. James Louisiana Aug Aug WTI +1.30 1,000 LLS St. James Louisiana Aug Aug WTI +1.30 1,000 LLS St. James Louisiana Aug Aug WTI +1.30 2,000 Mars Clovelly Louisiana Aug Aug WTI +1.00 3,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 1,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 1,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 2,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 2,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 2,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 3,000 Mars Clovelly Louisiana Aug Aug WTI +1.05 9,000 Mars Clovelly Louisiana Aug Aug WTI +1.10 1,000 Mars Clovelly Louisiana Aug Aug WTI +1.10 1,000 Mars Clovelly Louisiana Aug Aug WTI +1.10 2,000 WTS Midland Texas Aug Aug WTI Midland -0.25 1,000 WTS Midland Texas Aug Aug WTI Midland -0.15 1,000 WTS Midland Texas Aug Aug WTI Midland -0.15 2,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.11 1,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.11 5,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.10 2,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 1,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 1,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 4,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 5,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 5,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.09 7,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.07 1,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.07 1,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.07 5,000 WTI Cushing Oklahoma Aug Aug CMA Nymex trade days -0.06 5,000 WTI Midland Enterprise Aug Aug WTI -0.10 1,000 WTI Midland Enterprise Aug Aug WTI -0.10 1,000 WTI Midland Enterprise Aug Aug WTI -0.10 1,000 WTI Midland Enterprise Aug Aug WTI -0.10 1,000 WTI Midland Enterprise Aug Aug WTI -0.10 1,000 WTI Midland Enterprise Aug Aug WTI -0.10 2,000 WTI Midland Enterprise Aug Aug WTI -0.10 2,000 WTI Midland Enterprise Aug Aug WTI -0.10 2,000 WTI Midland Enterprise Aug Aug WTI -0.10 3,000 WTI Midland Enterprise Aug Aug WTI -0.05 1,000 WTI Midland Enterprise Aug Aug WTI -0.05 5,000 WTI Midland Enterprise Aug Aug WTI 0.00 1,000 WTI Midland Enterprise Aug Aug WTI 0.00 1,000 WTI Midland Enterprise Aug Aug WTI 0.00 1,000 WTI Midland Enterprise Aug Aug WTI 0.00 1,000 WTI Midland Enterprise Aug Aug WTI 0.00 1,000 WTI Midland Enterprise Aug Aug WTI 0.00 2,000 WTI Midland Enterprise Aug Aug WTI 0.00 2,000 WTI Midland Enterprise Aug Aug WTI 0.00 5,000 WTI Midland Enterprise Aug Aug WTI +0.05 2,000 WTI Midland Enterprise Aug Aug WTI +0.05 2,000 WTI Midland Enterprise Aug Aug WTI +0.05 5,000

Deals done (continued)

North America pipeline deals done Trade Basis Grade Location Differential basis Differential Price $/bl Volume b/d month month WTI Midland Enterprise Aug Aug WTI +0.10 1,000 WTI Midland Enterprise Aug Aug WTI +0.10 1,000 WTI Midland Enterprise Aug Aug WTI +0.10 2,000 WTI Midland Enterprise Aug Aug WTI +0.10 2,000 WTI Midland Enterprise Aug Aug WTI +0.10 2,000 WTI Midland Enterprise Aug Aug WTI +0.10 2,000 WTI Midland Enterprise Aug Aug WTI +0.10 3,000 WTI Midland Enterprise Aug Aug WTI +0.10 5,000 WTI Midland Enterprise Aug Aug WTI +0.10 5,000 WTI Midland Enterprise Aug Aug WTI +0.15 1,000 WTI Midland Enterprise Aug Aug WTI +0.15 1,000 WTI Midland Enterprise Aug Aug WTI +0.15 1,000 WTI Midland Enterprise Aug Aug WTI +0.15 1,000 WTI Midland Enterprise Aug Aug WTI +0.15 2,000 WTI Midland Enterprise Aug Aug WTI +0.15 2,000 WTI Midland Enterprise Aug Aug WTI +0.15 3,000 WTI Midland Enterprise Aug Aug WTI +0.15 4,000 WTI Midland Enterprise Aug Aug WTI +0.20 2,000 WTI ECHO Houston Aug 40.25 32 WTI Magellan East Houston Aug Aug WTI +1.00 2,000 WTI Magellan East Houston Aug Aug WTI +0.90 2,000 WTI Magellan East Houston Aug Aug WTI +0.90 1,000 WTI Magellan East Houston Aug Aug WTI +0.95 1,000 WTI Magellan East Houston Aug Aug WTI +0.85 1,000 WTI Magellan East Houston Aug Aug WTI +0.90 2,000 WTI Magellan East Houston Aug Aug WTI +0.90 5,000 WTI Magellan East Houston Aug Aug WTI +0.85 3,000 WTI Magellan East Houston Aug Aug WTI +0.95 1,000 Thunder Horse Clovelly Louisiana Aug Aug WTI +1.00 3,000 Thunder Horse Clovelly Louisiana Aug Aug WTI +1.05 2,000 Thunder Horse Clovelly Louisiana Aug Aug WTI +1.05 3,000 Thunder Horse Clovelly Louisiana Aug Aug WTI +1.10 2,000 Thunder Horse Clovelly Louisiana Aug Aug Mars -0.05 1,000 Thunder Horse Clovelly Louisiana Aug Aug Mars 0.00 7,000 Bakken Cushing Oklahoma Aug Aug WTI +0.35 3,000 Bakken Beaumont / Nederland Aug Aug WTI +0.75 10,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.45 1,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.45 2,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.45 2,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.45 3,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.40 1,000 WTL Midland Midland Texas Aug Aug WTI Midland -0.40 3,000

Infrastructure news

Phillips 66 Wood River reports flaring BP-Husky Toledo reports process unit upset A flaring event occurred earlier this week at Phillips 66's A malfunction with a fuel gas system led to increased emis- 356,000 b/d refinery in Roxana, Illinois. Flaring started around sions yesterday at BP-Husky's 170,000 b/d joint-venture refin- at 11pm ET on 29 June, and the release was stopped the fol- ery in Toledo, Ohio. lowing day, according to a filing to state hazardous materials The refiner notified state environmental monitors of the monitors. Phillips 66 did not comment on the unit involved. upset on 30 June, which resulted in two hours and 24 minutes of increased emissions. Phillips 66 Ponca City started FCC last week BP operates the refinery in a joint venture with Canadian A fluid catalytic cracking (FCC) unit started up at Phillips 66's integrated firm Husky. 194,000 b/d refinery in Ponca City, Oklahoma, last week. Increased emissions during the startup from within the Phillips 66 Ferndale FCC flares last week unit's regenerator occurred on 24 June, according to a filing to A fluid catalytic cracking (FCC) unit upset led to increased state environmental monitors. flaring on 24 June at Phillips 66's 100,000 b/d refinery in The refiner said in May it had deferred upgrades on an FCC Ferndale, Washington. in order to hold onto cash and limit on-site workers during the The refiner notified regional air quality monitors that flar- Covid-19 pandemic. ing occurred for seven hours. FCCs convert vacuum gasoil primarily to gasoline blendstocks. FCCs convert vacuum gasoil primarily to gasoline blendstocks. iNDUSTRY news

US crude stocks fall by 7.2mn bl b/d compared to the previous week, according to EIA estimates. US crude inventories fell by 7.2mn bl to 533.5mn bl last Crude imports fell by 571,000 b/d to about 6mn b/d. week as refinery runs increased, according to the Energy Imports from Saudi Arabia fell sharply after swelling in Information Administration (EIA). previous weeks because of the arrival of very large crude The total fell from a record high of 540.7mn bl in the carriers (VLCCs) chartered by Saudi state-owned shipping previous week and is about 15pc above the five-year aver- company Bahri. Saudi imports averaged 826,000 b/d last age for this time of year. week, down from 1.4mn b/d in the prior week. Crude stocks in the US Strategic Petroleum Reserve (SPR) Gasoline inventories held fairly flat on the week at moved higher by 1.7mn bl to 655.4mn bl in the week ended 26 256.5mn bl. Diesel stockpiles were also effectively un- June, as the US leases space to private companies in an effort changed, at 174.1mn bl. to help with a supply glut. The SPR stocks are not included in By Eunice Bridges the overall EIA commercial crude inventory figures. Stocks at the key Cushing, Oklahoma, hub, eased by US imports of Opec crude down sharply 260,000 bl to 45.6mn bl in an eighth week of withdrawals. US crude imports from Opec countries fell in April to the low- US refiners processed an average of 14mn b/d of crude last est level since at least 1973, according to the latest Energy week, up by 193,000 b/d from the previous week, the EIA said. Information Administration (EIA) monthly data. Refineries operated at 75.5pc of capacity. Imports from Opec members averaged 641,000 b/d in April, US crude production was flat at 11mn b/d. Production has down by 166,000 b/d from the previous month. It marked the been trending lower this year as US producers have cut output lowest monthly average in the EIA database. as efforts to contain the Covid-19 pandemic have caused a The lower figure partially reflects that imports from plummet in oil demand. Crude output last week was down by Ecuador are no longer included in the Opec total, as 1.2mn b/d from a year earlier. that country left the group in January. The US imported US crude exports last week fell by 65,000 b/d to about 3.1mn 164,000 b/d from Ecuador in April.

iNDUSTRY news

Saudi Arabia sent the most crude to the US among Opec in compliance with the pipeline’s original 1953 easement and a countries in April, with 414,000 b/d. The second highest Opec 2018 agreement with Michigan, Jamo said. shipper to the US in April was Iraq, with 139,000 b/d. The west line “may continue to operate thereafter subject Saudi crude imports to the US have been dropping to the results of the ILI and further order of this court,” he said. steadily over the past few years from an average of about Enbridge said it will conduct an ILI run on the west seg- 1.1mn b/d in 2016 to an average of 500,000 b/d in 2019. ment and share its findings with the state in accordance with Saudi imports averaged about 430,000 b/d in the first the court’s orders. three months of this year, according to the EIA. Line 5 carries light crude, light synthetic crude and But crude imports from Saudi Arabia should trend much NGLs from Superior, Wisconsin, to Sarnia, Ontario. Line higher when the EIA reports data on subsequent months because 5 feeds refineries in Detroit, Michigan, and Toledo, Ohio. of the arrival of a fleet of very large crude carriers (VLCCs) char- The system also supplies NGLs which are refined into pro- tered by Saudi state-owned shipping company Bahri. pane at a facility in Rapid River, Michigan. Among all countries, Canada is the top source of US crude At the virtual hearing yesterday, Enbridge argued that imports with 3.6mn b/d in April. the state of Michigan does not have the authority to regu- Meanwhile, overall US crude exports fell by more than 13pc late interstate oil pipelines and that the state presented in April but stayed above 3mn b/d as efforts to combat the Co- no evidence that the west leg of the line was unsafe. vid-19 pandemic slashed global demand. US crude exports aver- Michigan officials told the court that “there is a serious risk aged about 3.1mn b/d in April, down from 3.6mn b/d in March. of harm to natural resources” and to many communities. The By Eunice Bridges state argued that both lines should remain shut until Enbridge provides more information on Line 5 so regulators can deter- Court allows Enbridge to start part of Line 5 mine whether it is “reasonably prudent” to restart it. A Michigan county court ruled today that Enbridge can restart Enbridge chief executive Al Monaco in a letter on 21 June a segment of its 540,000 b/d Line 5 crude and natural gas told Michigan governor Gretchen Whitmer (D) the company liquids (NGL) pipeline while an investigation is pending into would not resume operation on the east leg without discus- recently discovered damage. sions with Michigan and approval from federal regulators. The ruling in the Ingham County Circuit Court allows Enbridge said today that the east leg will remain shut as Enbridge to restart the west leg of the system which crosses it works with the US Pipeline and Hazardous Materials Safety under the Great Lakes. As it travels under the Straits of Macki- Administration to ensure all of the safety assessments are nac, Line 5 splits into two 20-inch-diameter parallel pipelines. complete and data provided prior to restarting. Enbridge said today it will begin safely restarting the west A state court earlier this month backed an agreement Enbridge segment and anticipates operations will soon return to normal. reached with Michigan to build a $500mn tunnel under the Straits The east leg of the system has been shut since 18 June of Mackinac to house part of Line 5. The company says the tunnel after Enbridge discovered a “disruption" to an anchor sup- would bolster protections from anchor strikes and other damage. port. The company said in a hearing yesterday that a screw By Eunice Bridges anchor on the east leg is bent. Ingham County judge James Jamo on 25 June ordered US drops rule to delay oil royalty payments Enbridge to also shut the west leg after Michigan request- President Donald Trump’s administration has quietly withdrawn ed an emergency injunction. a rule that was expected to cite Covid-19 as the basis for al- Jamo said in the ruling today that the west leg can restart lowing oil and gas operators on federal land to defer paying for the purpose of conducting an in line investigation (ILI) to government royalties for three months. further assess any possible damage to that leg of the pipeline. The royalty payment delay rule was marked as “with- The ILI is needed to fulfill requirements for “the exercise of drawn” on 29 June, according to a government database of due care by a reasonably prudent person for the safety and rules that are under interagency review at the White House. welfare of all persons and of all public and private property” The US Interior Department’s Office of Natural Resources

iNDUSTRY news

Revenue (ONRR), which has previously declined to discuss the Alaskan oil demand at USWC ebbs rule, did not respond to a request for comment. Alaskan North Slope (ANS) production rose last week while cargoes Oil and gas industry officials had expected the rule would in transit to the US west coast waned despite increased refining. have provided operators a three-month deferral of royalty pay- ANS production in the week ended 26 June rose by ments, as a way to help conserve cash for operators struggling 6,000 b/d to nearly 395,000 b/d, according to the Alaska from low energy prices caused by Covid-19. Department of Revenue (ADR). But details about the pending rule prompted backlash from The Prudhoe Bay region produced over 6,000 b/d more last Democrats in the US Congress, who said there was no basis for week to reach more than 290,000 b/d, while production in the the administration to rewrite rules to “bail out” oil and gas Kuparuk Region ebbed by roughly 600 b/d to over 64,000 b/d. companies that were struggling before the pandemic. Oil and The June 2020 production monthly average of about 392,000 gas royalty payments to the federal government totaled $5.7bn b/d represents more than an 18pc decline from prior year. from September-May, the first nine months of fiscal 2020, and US independent ConocoPhillips plans to begin restoring about half of those payments are shared with states. curtailed production in Alaska this month after Covid-19 de- “It is unclear why the public should accept the industry’s demand loss forced Alaskan oil producers to shut in. mands for special treatment at face value, or why this administra- At the US west coast, refining runs increased by 1.88pc or tion thinks now is a reasonable time to institute a blanket delay 33,000 b/d to 1.79mn b/d last week, helping draw stocks in the in payments,” US House Natural Resources Committee chairman region by nearly 4pc or 2.13mn bl to 54.63mn bl in the week Raul Grijalva (D-Arizona) wrote in a 27 May letter to the director ended 26 June, according to the latest available statistics from of the White House Office of Management and Budget. the US Energy Information Administration (EIA) published today. Oil prices have recovered somewhat since May, when ONRR Percent utilization at the US west coast also increased submitted the rule for internal review at the White House. An from 64pc to 65.3pc, but ANS demand at the US west coast has oil industry official last week said election-year politics might fallen during the August trade cycle. have caused the rule to stall after it was submitted. ANS was last reported trading on 12 June at a $1.50/bl pre- ONRR yesterday separately sent a letter to oil and gas mium to CMA Ice Brent, for a preliminary volume weighted aver- leaseholders extending by three months, until 1 October, the age $1.30/bl premium for August arrivals at the US west coast. deadline to recalculate and pay royalties based on a 2016 ANS was reported sold 14 times last trade month at discounts rule the administration unsuccessfully tried to throw out. to the international benchmark Ice Brent between $5.10/bl and The agency cited disruptions from Covid-19 as the basis to 50¢/bl, compared to seven deals reported so far at higher prices. give operators more time to comply with the rule, which was Cargoes of Alaskan oil in transit to the US west coast fell last expected to cost industry upwards of $72mn/yr. week by over 23pc, or 705,000 bl, to 2.33mn bl, while competing The Trump administration has used other mechanisms imports increased by over 24pc, or 204,000 b/d, to 1.1mn b/d. to lower royalty payments by oil and gas operators on Also last week, US president Donald Trump’s administration federal land. Interior since this spring has approved 12 said it was opening 7mn acres of land in the National Petro- applications from offshore operators for royalty relief on leum Reserve in Alaska (NPR-A) to oil and gas development, a a monthly basis. The agency also has approved requests change adopted ahead of a lease sale in December. on 338 onshore leases to reduce royalty rates to as low as By Benjamin Peyton 0.5pc, according to a government database. The US Bureau of Land Management this summer also plans Oil companies won favorable terms for SPR to propose a rule that would eliminate royalties on gas that is Some oil companies storing crude in the US Strategic Petro- flared because of pipeline or processing limits, so long as the leum Reserve (SPR) under a special program are compensating flaring is "consistent with state or tribal rules, regulations or the federal government with crude that would sell for substan- orders," according to a regulatory agenda published yesterday. tially less than the cost of commercial storage. By Chris Knight Nine oil companies and trading firms signed contracts in

iNDUSTRY news

April to store up to 23mn bl of crude in the SPR in anticipation bl of storage, will pay an average exchange ratio of 0.75pc, or of a recovery in prices. Injections under the program were a payment of 74,500 bl/month. The company paid its lowest scheduled to finish up yesterday. exchange ratio, 0.25pc, to store 3.5mn bl of crude at the SPR’s Payments for storage costs are made in crude. Three of the Bryan Mound site in Texas. ExxonMobil said it participated in companies have contracts under which they will provide an the storage program but did not respond to any questions. amount of sweet and sour grades that, based on yesterday’s WTI Chevron will pay an exchange ratio of 1pc for storing 750,000 Houston price of $40.21/bl, would translate into paying 4¢-44¢/bl bl of crude at the SPR’s Bayou Choctaw site in Louisiana, or a per month for storage, according to an Argus analysis of govern- payment of 7,500 bl/month. Chevron confirmed it was awarded a ment contracts obtained under the Freedom of Information Act. storage lease but said it does not discuss commercial matters. That compares with a cash storage price of 55¢/bl per The nine companies participating in the storage program month during a 7 April auction for sour commercial storage signed their contracts on 13-16 April, when storage was in high space in May and June at the Louisiana Offshore Oil Port. demand primarily because of a collapse in demand caused by But other companies have committed to pay higher stor- Covid-19 and a surge of supply from Opec+ members. On those age fees. And beyond the storage costs, the program offers days a company with access to storage and transportation could broader benefits, by enabling producers to avoid shutting in make a profit of $13/bl, by buying a crude futures contract for production and by boosting the US' emergency stocks. May delivery at $20/bl and selling the same contract for August The US Energy Department began the program on 2 April delivery at more than $33/bl. The contracts were signed days as a way to help the oil industry during an historic crash in before a storage crunch in Cushing, Oklahoma, contributed to prices and demand, brought about by a sudden disagreement the Nymex WTI crude price dropping to -$37.63/bl. in production levels by Opec+ countries and efforts to limit The potential profits from a market in contango could have the spread of the Covid-19 pandemic. The Energy Department, supported decisions by the trading firm Vitol to offer an -ex which sought competitive bids for up to 30mn bl of storage, change ratio as high as 5.6pc for storing 600,000 bl of crude at said it would award contracts to the companies offering the SPR’s Big Hill site in Texas. The company as a whole agreed to highest “exchange ratio,” which is the percentage of crude a an average exchange ratio of 4.1pc for storing a total of 2.4mn company agrees to leave in the SPR each month as payment bl of crude at the Big Hill site, meaning it will transfer about for using the storage capacity. 94,400 bl/month to the SPR. The agency eventually leased 23.2mn bl of storage, and it The wide variation in exchange ratios could have been is unclear if any bids were rejected. driven by infrastructure constraints, bidding strategies and at- Companies will leave an average of 1.9pc of the crude tractiveness of storing crude at specific SPR sites. in the reserve each month as payment for storage, or up to The Energy Department did not respond to a request 440,000 bl/month, the contract documents show. for comment. But some of the contracts provide far less compensation, A program 'worth doing' at rates that at today's crude prices would be equivalent to a The storage program as a whole seems to have been fraction of the cost of commercial storage. The result was the a good deal for taxpayers, consultancy ClearView Energy government accepted exchange ratios as low as 0.1pc, or pay- Partners managing director Kevin Book said. The budget ing 1 bl of crude for every 1,000 bl stored. for operating the SPR, alongside recent modernization Norway’s Equinor submitted the successful bid with the programs, suggests a cost of nearly 4¢/bl each month to 0.1pc exchange ratio for storing offshore grade Southern Green maintain the SPR’s 713.5mn bl design capacity, he said. Canyon, under which it will transfer 320 bl/month for storing The nine companies in the program, on average, will trans- 320,000 bl at an SPR facility in West Hackberry, Louisiana. The fer to the SPR an amount of crude equivalent to paying 74¢/ company won a similar bid to store the same amount of crude bl each month at today’s prices. And by next spring, when oil at the same facility, paying an exchange ratio of 0.5pc. The companies are required to withdraw all the crude from stor- company did not respond to a request for comment. age, their payments could add 1.8mn-4mn bl of crude to the ExxonMobil, which won the largest SPR contract, for 10mn SPR, depending on how soon they begin withdrawing.

iNDUSTRY news

The program also benefited the oil sector by opening up Politics entangling exile PdV board large amounts of storage at a time when little was available, An "ad hoc" board of state-owned PdV that is a key part of US- avoiding the need for some operators to curtail production. The backed opposition leader Juan Guaido’s parallel administration SPR over the past two months has been filled at an average rate is running into political resistance in the run-up to National of more than 300,000 b/d, according to government data, which Assembly elections in early December. is the equivalent of operating a large refinery. The storage pro- Ten deputies in the opposition-controlled assembly withheld gram added 20.5mn bl of crude into the SPR as of 26 June. support for three board appointments yesterday, alleging they “What is it worth to keep an industry going?” Book said. “If were not given enough time to consider their credentials. In a small operators got a boost from this, then there are probably letter yesterday to Guaido, who heads the assembly, the July some folks who say that even if it caused wear and tear on the 16 block of lawmakers — an offshoot of Venezuela’s traditional SPR, it was worth doing.” Accion Democratica party — also complained about a “lack of The Energy Department for more than two months declined required transparency” in Citgo, PdV's opposition-controlled US to release the terms of compensation, which it said was "con- refining arm. The maverick lawmakers pointed to “opacity” in a fidential."Argus last month obtained redacted versions of the recent Citgo bond issuance, contracting and donations. contracts through a Freedom of Information Act request, and Although the assembly’s communications arm informally then successfully filed an appeal challenging the redactions. The tweeted out the new appointments yesterday, these were not agency's quasi-judicial arm, the Office of Hearing and Appeals, officially confirmed by the ad hoc board itself. And the board last week ruled there was “no basis” to claim the bids were did not issue a public reply to the dissident lawmakers, although confidential and ordered the agency to release the records. one critic dismissed their opposition as political infighting. By Chris Knight The politics is complicating the opposition's effort to recruit technocrats. Several of Guaido’s associates and advis- Venezuelan crude arrives at Milazzo ers have recently left his team, in part because the posts are A cargo of Venezuelan crude has arrived at the 235,000 b/d unpaid positions and they had not expected that Maduro would refinery run by Italy's integrated Eni and Kuwait's state-owned remain long in power in the face of US sanctions. KPC at Milazzo, Sicily. The preliminary board appointments are industry veterans, Around 1mn bl is on board the Delta Tolmi waiting to led by Horacio Medina, head of PdV’s joint and new ventures discharge, and will be the first Venezuelan crude at Mila- division in 1988-2002. He is supposed to replace Maria Lizardo, zzo since February 2019. who resigned along with economist Alejandro Grisanti in May. Another two crude cargoes are signalling arrival at Milazzo Javier Linares, who since October 2019 has been a member by 9 July, a 750,000 bl cargo of Baltic Urals and a 700,000 bl of the ad hoc board of PdV’s joint ventures subsidiary CVP, was shipment of US WTI, according to Argus tracking. This suggests tapped to replace Grisanti. receipts may increase in July from just 90,000 b/d in June, and And project engineer Luis Vilchez is supposed to take the compared with 145,000 b/d in May, and is likely to be the result seat of Gustavo Velasquez, who had served on PdV’s ad hoc of scheduling and Milazzo running crude from storage. Receipts board since February 2019. were 155,000 b/d in the first half of 2020, around 65pc of capac- The nine-member ad hoc board, chaired by exiled PdV vet- ity in line with statements from Eni on its refinery throughput. eran Luis Pacheco, has no control over PdV’s decaying opera- Of last month's crude receipts at Milazzo, 25,000 b/d was tions inside Venezuela, which are still in government hands. Baltic Urals crude from Primorsk, 20,000 b/d Azeri BTC blend, The parallel board’s main priority since its February 2019 ap- 15,000 b/d Libyan Al Jurf and 10,000 b/d from Iraq's southern pointment — shortly after Guaido declared an interim presidency loading terminal at Basrah. For the second consecutive month — has been the legal defense of Citgo from multiple creditors, Milazzo took Abu Dhabi's Das Blend, amounting to 15,000 b/d. arbitration claimants and bondholders. The matter takes center Assessed by Argus, Milazzo's crude receipts in June had a stage this month as a pivotal legal case advances in Delaware, the weighted average gravity of 33.7° API and 1.2pc sulphur com- corporate headquarters of Citgo’s parent PdV Holding. pared with 32.4°API and 1.7pc sulphur in May. A leaked audio of Guaido’s recently resigned attorney By Adam Porter general Jose Ignacio Hernandez pointed to the opposition’s

iNDUSTRY news strategy of favoring ConocoPhillips in the proceedings. Weaker domestic fuel demand has opened more space Looming elections for crude exports and reduced the need for crude imports Venezuela will hold National Assembly elections on 6 needed for blending. Crude imports dropped to a record December, a rubber-stamp electoral board (CNE) announced low of 59,087 b/d in May. Brazilian refineries, nearly all today. Earlier the CNE announced that it would expand the run by Petrobras, increased domestic crude runs to around assembly from a current 167 seats to 277. 90pc compared with 85pc in May 2019. Indira Alfonzo, president of the five-member CNE board, The increase is related to more sweet pre-salt crude said yesterday that the expansion will allow “a clear and un- allocated for the production of low-sulfur marine fuel for equivocal normative development” during the five-year legisla- export. Petrobras’ fuel oil production, mainly bunker, av- tive period that starts in January 2021. eraged 338,768 b/d in May, an 82pc year-on-year increase The move would further undermine the sway of the four and up almost 31pc over April. main political parties in Guaido’s political coalition in favor of Brazil’s fuel oil exports averaged 233,714 b/d in May, a splinter groups and the ruling socialist party. 15.5pc increase over April and up 37pc on the year. The assembly presidency gave Guaido the constitutional Brazilian oil production averaged around 2.755mn b/d basis for his declaration of an interim presidency in January in May, down by 6.5pc from April, and up a slight 1.36pc on 2019, with the goal of forcing out Maduro. Despite extensive the year, ANP data indicates. US sanctions, Maduro has held onto power, with support from Oil production and exports are expected to slow in Russia, China, Turkey, Iran and Cuba, among others. Scores the coming months as Petrobras launches a maintenance of Western countries back Guaido and have said the electoral campaign expected to trim around 200,000 b/d from its system is not credible. domestic production portfolio. By Patricia Garip By Nathan Walters

Brazil crude exports, bunker output surge Brazil’s crude exports jumped by 22.3pc to 1.907mn b/d in May Argus North American Crude Oil Forward Curves compared with April, and by almost 75pc on the year, according to data from oil regulator ANP. Argus has launched a forward curves service for North The surge points to a further recovery in demand from American crude oil markets. The new service covers China, the main outlet for Brazil’s pre-salt crude. 24 crude oil grades and trading locations over the In April, state-controlled Petrobras exported a record 1mn midcontinent, North Sea, Gulf Coast, and Canada. b/d of crude and touted resilient Chinese demand. The company does not publish monthly export data, but regularly publishes notices on fuel and crude export and production records. Other pre-salt producers such as European firms Shell, Total and Galp are also dispatching pre-salt cargos to Asia. Among these is Shell’s 2mn bl shipment to Qinzhou port in mid-June. In terms of receipts, China's share of exports in May accounted for around 67pc, up from almost 53pc in the same period of 2019, according to data from Brazil's foreign trade ministry. Around 54pc of receipts from crude exports in January-May 2020 came from China, down from almost 64pc in the same period of 2019. France, the Netherlands, Malaysia and India also increased their share of Brazilian crude exports in May www.argusmedia.com/Crude-Oil-Forward-Curves compared with 12 months earlier.

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