Platts Methodology and Perspectives on Bunker Fuel …

1 2013 Platts , McGraw Hill Financial. All rights reserved. Platts Methodology and Perspectives on Bunker fuel Markets Platts 11th annual Bunker and Residual fuel Oil Conference JW Marriott June 24, 2014 Market Overview Physical residual fuel oil market Residual fuel oil swaps US bunkers Latin American bunkers 2 Residual fuel Oil Swaps USAC 1%S fuel oil swaps saw pickup in backwardation in 2014, due to lack of prompt supply What caused the supply tightness? Less LSFO output from Atlantic Coast refineries as result of more crude throughput with a higher API Higher API=Less fuel oil Increased demand for fuel oil for power generation USAC experienced one of coldest winters on record Natural gas prices spiked to as high as $120/MMBtu (around $670/b) 3 LSFO Backwardation also saw record highs ( )( ) Spread, Atlantic Coast 1%S ($/b) ( )( )

2 Hi-lo spread for 2014 vs 2013 2014 1%S M1 Swap Outright Prices -16-15-14-13-12-11-10-9-8-7-6-5-4 JFMAM-16-15-14-13-12-11-10-9-8-7-6-5-4 JFMAMUSAC 1%S M1 Brent Crack Swap Outright prices until mid-April in 2014 were lower than in 2013 Similarly, the USAC 1%S swap in 2014 was relatively weaker to Brent than it was in 2013 Bunkers: US East Coast The average spread between IFO 380 CST New York and the front-month Brent crude contract widened 15% from 2013 $ , Brent-380 New York, Jan-June 2013 $ , Brent-380 New York, Jan-June 2014 High Sulfur Bunker fuel in USAC rebounded in Q2 Jan-March, 380 CST New York averaged 5% lower than Q1 2013 ($ ) Apr-Jun, 380 CST New York averaged 3% higher than Q2 2013 ($ ) 7 Brent crude 380 CST NY IFO spread 90951001051101151202-Jan-142-Feb-142-Mar -142-Apr-142-May-142-Jun-14 New YorkBrentNew York (2013)Brent (2013)Bunkers: US Canada & West Coast Sluggish demand edged down HS bunkers at Vancouver/Seattle ports.

3 Vancouver Jan-Jun avg: 2013: $ ex-wharf 2014: $ ex-wharf ( ) Seattle Jan-Jun avg: 2013: $ ex-wharf 2014: $ ex-wharf ( ) The average spread between high sulfur bunkers in Seattle and Vancouver has widened 18% in 2014. Jan-Jun 2013: 380 CST Van 380 CST Sea = $ Jan-Jun 2014: 380 CST Van-380 CST Sea = $ 9 IFO 380 CST Vancouver Seattle spread 5505705906106306506706902-Jan-142-Feb-14 2-Mar-142-Apr-142-May-142-Jun-14 SeattleSeattle 2013 VancouverVancouver 2013 Bunkers: Panama vs Houston The spread between the IFO 380 CST Houston price and IFO 380 CST Balboa will fluctuate due to fierce supplier competition. In Q1, IFO 380 CST Panama held a $ average premium over IFO 380 CST Houston, due to limited supplies on the wake of loading delays.

4 During May, the average premium fell to $ , due to low seasonal demand and ample supplies. On June 16, IFO 380 CST Panama was at a $2/mt discount to Houston for the first time in the year. 11 Narrowing Houston-Panama spread 12 5405505605705805906006106206306402-Jan-1 42-Feb-142-Mar-142-Apr-142-May-142-Jun-1 4 IFO 380 CST HoustonIFO 380 CST BalboaPlatts Methodology changes -Intro to Platts assessments -Changes made in 2014 -Upcoming proposed changes 13 Editorial and market assessments are conducted with complete Independence & Impartiality Platts An introduction Enabling the markets to perform with greater Transparency & Efficiency Since Platts An introduction New York Denver Washington Houston Buenos Aires London Moscow Dubai Beijing Tokyo Shanghai Hong Kong Singapore Evergreen Boston Hightstown Pittsburgh S o Paulo Lausanne Platts An introduction Cape Town Houston ARA (Amsterdam)

5 Rotterdam Antwerp) Singapore Benchmark Price Assessments Key spot markets A robust How data is analyzed to produce a final value What is being assessed How data is collected Platts Price Discovery Process Market on Close in Depth Methodology must define What is being assessed Methodology changes: Portland bunkers MH1500 SUBSCRIBER NOTE: Platts has reduced Portland Bunker volumes effective Feb 3 Houston ( Platts )--5 Feb2014/1215 pm EST/1715 GMT Platts has amended the volumes reflected in its Bunker fuel assessments for Portland, Oregon, to 200-800 mt effective February 3. Previously, volumes reflected in these assessments are 500-2,000 mt. This reduction in the sizes reflected follows feedback to a proposal note Platts published October 15, 2013.

6 The reduction in reflected volumes for both high sulfur bunkers and low sulfur bunkers follows feedback from market suppliers that typical sales and supply volumes generally are in the 200-800 mt range for each stem supplied. Research shows smaller Bunker volumes are sold in Portland compared with other US West Coast ports because of draft restrictions along the Columbia River. This update to volumes reflected affects the following high sulfur assessments: ex-wharf 380 CST Bunker fuel ( Platts market data code PBAAX00), ex-wharf 180 CST Bunker fuel (PUADJ00), delivered 380 CST Bunker fuel (AAGRO00) and delivered 180 CST Bunker fuel (AAGRL00). The following low sulfur assessments also will be affected: ex-wharf 1%S 380 CST Bunker fuel (AAWTB00), ex-wharf 1%S 180 CST Bunker fuel (AAWSZ00), delivered 1%S 380 CST Bunker fuel (AAWTA00) and delivered 1%S 180 CST Bunker fuel (AAWSY00).

7 Finally, the following Marine Gasoil assessments will be affected: delivered MGO (AAWYE00) and ex-wharf MDO (AAWYX00). These assessments appear in Platts Bunkerwire and on PGA pages 860 and 862. Please send any further questions and comments to and 20 Methodology changes: USAC Resid lot size MH1500 SUBSCRIBER NOTE: Platts changes USAC residual fuel oil cargo size Houston ( Platts )--1 Apr2014/1227 pm EDT/1627 GMT Following industry feedback, Platts has changed the cargo size considered for assessment of all residual fuel oil cargoes delivered in the US Atlantic Coast with effect from April 1, 2014. Platts initially proposed to amend the size of cargoes reflected in its assessments in a subscriber note published on June 7.

8 Under the change, cargo sizes used for the assessment have been reduced from 120,000 barrels to 50,000 barrels. This move brings Platts assessments more closely in line with current prevailing industry norms. Spot barge availability in the Atlantic Coast has evolved in recent years, as larger barges have typically moved to the US Gulf Coast, leaving smaller barges in the USAC markets. Platts continues to assess the market on a delivered basis. Please send any further comments to and For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.

9 21 Upcoming changes: Tighter 2015 specs Ships operating up to 200 nautical miles off of shores need to comply with in Bunker fuel by Jan 2015. All of Platts US and Canadian Bunker assessments will be affected. Given the swing market in Panama, with US fuel ships calling there frequently instead of the USGC, Panama needs to be included although Latin America in general does not fall under ECA. Proposal to launch parallel S assessments 22 Will new specs be a dirty or clean spec? Qualities IFO 380 CST (Generally follows RMG 380 CST) MGO Approximate Kinematic Viscosity At 50 degrees C, max 380 cst 40 degrees C, min CST Flash point 60 degrees C min 60 degrees C min Pour point (upper) winter quality 30 C maximum 6 degrees C summer quality 30 C maximum 0 degrees C Ash m/m maximum max Sulfur maximum Vanadium max 300 mg/kg - Aluminium plus silicon 80 mg/kg max - Cetane index minimum - 40 water max - Zinc - max 15 mg/kg Phosphorus - max 15 mg/kg Calcium - max 30 mg/kg 23 LA bunkers increase delivery dates?

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