1. US crude exports: re-shaping Asia’s trade flows & pricing Shanghai Alejandro Barbajosa May 2017

2. Global crude re-balancing and trade flow implications
Stockpiles may keep rising even with extended OPEC cuts
Atlantic basin crude benchmark prices converge at USGC
US crude exports become key marginal barrel: Argus WTI
Dubai benchmark’s strength helps North American flows to Asia
Arbitrage to Asia only makes sense comparing delivered prices
Conclusion: USGC gains traction as global crude pricing hub

3. Crude prices finding support at $50/bl on OPEC cuts
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4. Iran crude exports top +2.1mn b/d, retain Asia focus
Source: Argus Global Markets
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5. Iran + Iraq now rivaling Saudis as OPEC superpowers
Source: Argus Fundamentals
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6. Iraq was 2nd largest supplier to China in September
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7. Atlantic Basin + ESPO outpacing Middle East into China
Source: Argus China Petroleum
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8. Atlantic basin crude benchmarks converge at USGC
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9. US crude exports beyond Canada soar after ban lifted
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10. Permian basin output rising strongly with higher prices
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11. Argus WTI Midland open interest doubled on exports
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12. WTI Midland open interest matches Dubai OI levels
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13. Argus WTI Houston priced at Magellan East Houston
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14. US crude exports likely to jump again with Bakken
Texas Bakken will change the Atlantic Basin market this year
Will deliver 250,000 b/d of light crude to Texas coast (Nederland) by June 2017
May reach 400,000 b/d by year end
Bakken has stable quality, it’s not a blended grade
Trump administration ordered permits to be issued first week of February
Pipeline is nearly complete – lacks only river crossing
THE IMPACT OF THIS PARTICULAR FLOW CANNOT BE UNDERESTIMATED
ON PRICE
ON ATLANTIC BASIN MARKETS
COULD GREATLY INCREASE THE VOLUME OF EXPORTS
HOW WILL IT BE PRICED?
WHAT IMPACT ON THE SWEET/SOUR SPREAD?
NEEDS TO BE TESTED IN REFINERIES AROUND THE WORLD
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15. US may import +600,000 b/d Canadian sour by 2020
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16. Strong Dubai: direct impact on US crude arb to Asia
US crude exporters convert WTI Midland prices to Dubai, adding freight costs, to determine competitiveness of WTI & Eagle Ford into Asia-Pacific
Dubai strength can have knock-on effect on Brent, making US crude more attractive than North Sea or west African for Asian refiners
Copyright © 2017 Argus Media Ltd. All rights reserved.

17. Arbitrage only makes sense comparing delivered prices
WTI arbitrage to Asia opens in relation to North Sea & west African light sweets and light Middle East grades like Murban, competitor with Forties
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18. Canadian WCS can beat similar-quality Iraqi Basrah H.
WCS arbitrage to Asia opens in relation to Middle Eastern heavy sour grades like Iraq’s Basrah Heavy
Long-haul freight economics make it easier for WCS to reach China than India, which benefits from short-haul Middle East crude
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19. Asian refiners can use Argus US delivered crude prices
Competing
Relative values from multiple source regions to Asia
Integrates export costs & freight rates
Based on transparent & liquid spot markets
Benchmarking
WTI Houston: global light sweet seaborne marker
WCS Houston: global heavy sour seaborne marker
Hedging
WTI futures liquidity
CME, ICE derivatives
Long-term reliability
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20. US crude pricing volumes surpassing 1.3mn b/d
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21. Market structure & liquidity favor USGC benchmarks
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22. USGC has potential to become global crude pricing hub
Light Sweet
Medium Sour
Heavy Sour
ALL OF THESE BENCHMARKS ARE ARGUS BENCHMARKS
ALL ARE UNDERGIRDED BY DEEP FINANCIAL FUTURES MARKETS
WHAT’S NOT TO LIKE?
IN TEXAS THIS IS OUR 3RD OR 4TH OIL BOOM/BUST
AND NO ONE GOT FOOLED THIS TIME
TEXAS HAS COME BACK FAR STRONGER THAN BEFORE THE PRICE COLLAPSE
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23. Copyright © 2017 Argus Media group. All rights reserved.

24. Alejandro Barbajosa VP crude & LPG, Middle East & Asia-Pacific Email:
Phone:
Office:
Web: Blog:
Singapore
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