OPIS Headlines

May 26, 2016
BNP Takes Look at U.S., Global Gasoline Markets

BNP Paribas has updated its summer outlook for gasoline in the U.S. and globally. Citing a variety of factors, BNP's Commodity Markets Strategy Group believes U.S. gasoline prices can go higher from where they are now.
Gasoline demand has been strong in the U.S. most of the year and is on pace to break existing 2007 demand records in excess of 9.2 million b/d. Additionally, gasoline exports from the U.S. have been supportive of prices that have been on the upswing despite high inventories. BNP acknowledges that high stocks have capped the spike in gasoline prices but believes inventories will start to work down, as evidenced by recent declines in supplies in the U.S. Gulf Coast.

Longer-term, BNP projects that gasoline demand in markets where the U.S. exports product will outpace indigenous refining capacity, offering greater export opportunities for U.S. producers.

For Europe, BNP is optimistic that refiners  will enjoy favorable gasoline crack spreads so long as the U.S. continues to provide an export market for Europe.
Recent refinery outages in the U.S. have forced producers to bring barrels from Europe. Looking ahead, BNP thinks the octane shortage in the U.S. resulting from increased use of shale-produced crude will keep U.S. eyes turned to Europe for some gasoline components.

Asia's gasoline outlook for refiners is brightened by an expectation that stocks will draw thanks to internal demand, exports and a second round of refinery turnarounds coming in July. BNP does express some concern that stock builds are taking place a bit ahead of the anticipated surge in demand.

All this leads BNP to recommend to its investors buying the RBOB/WTI crack position in August 2016, which is currently trading at $18.50/bbl.

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May 25, 2016
Mountaineer NGL Storage Concludes Successful Open Season for NGL Storage

Mountaineer NGL Storage LLC announced Tuesday it has concluded a successful non- binding open season for the company's natural gas storage project near Clarington, Ohio. Mountaineer said in a press release that the open season produced request for more than three times the amount of the initial planned capacity.

The Mountaineer Storage Project plans to offer up to 2 million bbl of initial storage capacity with more than 40,000 b/d of load-in and load-out. The project will store ethane, propane, butane and y-grade products for gas processors, producers and traders that are interested in the wet gas production from the Marcellus/Utica shales.

"We will begin the permitting process for LPG storage, including a 3-D seismic shoot over the property, drilling a test well and coring the salt to confirm its suitability for LPG storage," said David Hooker, managing director of Mountaineer NGL Storage. The project is placed to provide service to the network of pipelines, rail, truck and barge infrastructure that is being built to transport Marcellus and Utica natural gas liquids throughout the Northeast and Mid-Atlantic.

The Mountaineer NGL Storage Project is expected to break ground in early 2017 with a planned in-service date of early 2018.

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May 24, 2016
Georgia Biodiesel Plant Being Readied for Sale

A 1 million-gal/year biodiesel plant in Georgia is up for sale, according to the agent offering it, but may be offered piecemeal soon.

"We're still keeping it together as a complete plant right now," a representative of Solutions 4 Manufacturing (S4M) told OPIS, although he indicated that the piecemeal approach may not be far off.

"We are at the stage right now of thinking through that," he said, "and I think sometime within the next month we will break it apart and start selling it."

Although the annual nameplate capacity is 1 million gal, "when it was producing, it was actually producing at a much higher rate than that," said the representative.

"It was operating at a rate of almost 2 million gallons per year," he added, "but it was only running one shift per day for 10 hours."

S4M says the plant, idled in 2012, was designed to convert waste restaurant oils into biodiesel.

"It could utilize used cooking oil (yellow grease) from sources such as deep fat fryers, and trap grease (brown grease)," S4M said. "It could also utilize cleaner oils as well.

"The business plan was to use the lowest-cost feedstock available, clean it up and then run it through a transesterification process to produce biodiesel for sale downstream."

It can be sold as a complete plant to operate in place or to relocate, according to S4M.

It features feedstock storage of 27,000 gal and finished biodiesel storage of 31,500 gal.

The facility, located in Savannah, was designed by Raptor Technology. The plant was previously owned by Coastal Biodiesel.

Additional information is available at info@solutions4mfg.com.

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May 18, 2016
PBF Energy Completes Assembly of New Oil Trading Team for Torrance Refinery

All units at ExxonMobil's Torrance refinery will be fully operational soon as ExxonMobil prepares to hand over the Southern California facility to PBF Energy by the second quarter of this year.

In preparation for the much-anticipated refinery takeover, and plans to source crude, supply the local market and possibly trade oil products internationally, PBF has now completed assembling an experienced trading team at its new Long Beach office by adding more key pieces to the puzzle. Of the six traders in the new West Coast team, only two are transferred from PBF in New Jersey and the rest are hired from outside PBF.

Earlier this year, OPIS reported PBF Energy had opened an office in Long Beach to kick-start oil trading and wholesale operations for its Torrance refinery.
Paul Davis, senior vice president, Western Region Commercial Operations, had moved to Long Beach from PBF's headquarters in Parsippany, N.J., to spearhead the company's West Coast expansion.

PBF had wasted no time in building its West Coast supply and trading team in Long Beach, Calif., as it hired two industry veterans to kick off trading and marketing operations for its Torrance refinery in January.

Jeff Miles joined PBF on the West Coast, and he will look to kick-start West Coast oil products trading for PBF. Miles is the director of Clean Fuels at PBF.

Lynn Argianas joined PBF in April as director of Wholesale Marketing. Both Miles and Argianas are based in the new Long Beach office.

In addition to the Miles and Argianas, PBF has recently hired Joe Biscardi as senior director of Clean Fuels and Optimization, and Megan Banghart has joined the Long Beach office as director of U.S. West Coast Crudes and Feedstock.

Roland Rietz has assumed the role of director of LPG, Biofuels and Solids in the California team.

Some of these traders have already moved to Long Beach, and some are in transition to the West Coast. The trading team will be complemented with a few scheduling and operational staff at its Long Beach office.

The Long Beach office is expected to have a total of about 15 people, including traders, operational and administrative personnel. PBF will also hire wholesale personnel.

OPIS has reported that the West Coast market could be long on products when the Torrance refinery comes back to full rates later this year. This is due to a stronger products supply push from Montana and the Gulf Coast to the West. The Southwest market gets some supplies from the Gulf Coast via pipelines.

ExxonMobil typically is not involved in the U.S. products export market, and this is expected to change with the new owner at Torrance. ExxonMobil has run its refineries mostly as a stable outlet for its crude production.

None of the traders on the PBF's West Coast team is from ExxonMobil.

Flexibility Is Key

PBF, which has a diversified refining portfolio with refineries in all major U.S. markets from coast to coast, is expected to implement commercial trading at the Torrance refinery, offering optimization of supplies and flexibility to export products.

The entrance of PBF in the West Coast represents a new player with a new trading attitude. PBF is expected to add trading liquidity on the West Coast even though the refining asset remains the same. The new PBF trading team is assembled with commercial trading in mind.

Paul Davis, who is originally from Southern California, joined PBF in 2012 and has been the head of PBF's commercial operations related to crude oil and refinery feedstock sourcing since May 2013. Before joining PBF, Davis worked for
16 years at ExxonMobil. His resume includes stints at HETCO and Premcor. He has more than 29 years of experience in commercial operations in crude oil and refined products.

Prior to joining PBF, Jeff Miles worked at Chevron for more than 20 years. He played an important role in the West Coast products cash market. He worked as engineer at Chevron prior to taking on a trading role. He also worked for a few years at Vitol before returning to Chevron for a second stint.

Miles accepted an early-retirement package from Chevron in October 2015. Rick Plummer, who joined Chevron two years ago, took over the West Coast gasoline trading role.

Lynn Argianas was in charge of wholesale marketing at Mansfield in Houston before joining PBF. She has vast trading experience in U.S. oil products and crude markets.

Prior to joining Mansfield, Argianas worked at Cargill, Morgan Stanley and ConocoPhillips. At Morgan Stanley, she was in charge of marketing oil products from PBF's Delaware City refinery.

Besides wholesale marketing, Argianas is expected to back up Miles in West Coast products trading.

Megan Banghart is moving to the PBF office in New Jersey to Long Beach soon.
Prior to the new appointment of West Coast Crude and Feedstocks director, she has traded international and waterborne crude at PBF, and she is expected to continue to trade in those markets.

Joe Biscardi has joined PBF from Hartree Partners (formerly HETCO). At Hartree, he was involved mostly in paper or derivatives trading for oil.

Prior to joining PBF, Roland Rietz had worked at AMCI, Northern Tier Energy and Valero. He has traded ethanol, biodiesel, natural gas, Renewable Identification Numbers (RINs), vacuum gasoil and benzene/sulfur credits.

Raring to Go

PBF will begin its trading and wholesale business on the West Coast as soon as it officially takes over the Torrance refinery.

OPIS had reported that PBF Energy will start its West Coast oil products wholesale business mostly on a clean slate.

PBF will inherit some branded and unbranded fuel supply contracts in the Los Angeles area from ExxonMobil, but those represent only a minimal volume as ExxonMobil had canceled most of its unbranded-fuel supply contracts in that market late last year and sold off a majority of its branded contracts to Couche-Tard. The clean slate in the rack market is perceived as an advantage for PBF, which would able to optimize its downstream supply chain, with flexibility to export, buy and sell fuel in Southern California and without being chained to "bad rack contracts."

Prior to canceling its unbranded contracts, ExxonMobil had mostly relied on marketing its fuel production from the Torrance refinery in Southern California.
This rigid marketing strategy sometimes could hurt the L.A. refining margin if that market is oversupplied.

ExxonMobil has rack buyers on both same-day price and previous-day price contracts, and most buyers hold both types of contracts to maximize profit, depending on day-to-day price changes. A rack buyer could lift more supplies from its previous-day price contract if there was a significant overnight price spike. However, this rack play is limited by supply allocations based on individual contracts.

Currently, PBF also sells fuel on both previous-day and same-day prices in other markets. It is unclear so far whether PBF would offer the same option to buyers in Los Angeles.

Become a better fuel buyer without ever leaving your desk – sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started.

May 16, 2016
More Oil and Gas Firms Fall Victim to Low Oil Prices

And the hits just keep on coming ...

It was just this past Friday that OPIS reported that two more U.S. oil and gas producing companies had filed for Chapter 11 bankruptcy protection, and today there are two more to add to the list of victims that have succumbed to low oil and gas prices, and one giving that option serious consideration.

The latest additions boost the number of American defaults in the oil and gas sector to more than 75 in the last 17 months and involve more than an estimated $34.3 billion in estimated cumulative secured and unsecured debt. The recent uptick in oil prices has done little to stem the tide of failure for so many highly leveraged firms.

Oklahoma-based oil and gas producer Chaparral Energy voluntarily filed for Chapter 11 bankruptcy on May 9, seeking to restructure its balance sheet and reduce its debt by approximately $1.2 billion, according to a press release. The company said it will continue to meet its obligations and maintain its long- standing relationships with its employees, owners, vendors and the communities in which it operates.

Midcontinent oil and gas producer Sandridge Energy (also based in Oklahoma) today filed for protection under the U.S. Chapter 11 bankruptcy code, and like several other producers in the same position has the backing of many of its major creditors for a pre-arranged restructuring plan that would convert its debt (about $3.7 billion) into equity. Sandridge will focus its oil and gas exploration and production activities in Oklahoma and Colorado, according to the company's press release.

Under the rules of Chapter 11 bankruptcy, once a company files for protection, management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court. Both Chaparral and Sandridge said its day-to-day operations would continue throughout the restructuring process.

And EXCO Resources Inc., a Dallas-based natural gas and oil development and production company, on Monday said it had formed a special committee to assess the company's operating and financial situations and evaluate various strategic alternatives including in-court or out-of-court restructurings (in other words, bankruptcy). The committee will examine the possibility of also converting its debt into equity, the company's press release said. 

Investment bank Goldman Sachs on Monday said once oil prices move back above $50/bbl, non-OPEC production should start to ramp back up. It will take a sustained price of $60/bbl for shale activity to pick up.

Are we on the way there? Today NYMEX West Texas Intermediate crude for June delivery settled $1.51/bbl today, at $47.72/bbl and ICE Brent for July delivery closed out $1.14/bbl higher, at $48.97/bbl. It's possible.

Become a better fuel buyer without ever leaving your desk – sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started.