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Review of Fuel Market

Short term looks like we are still looking for a top before we see a correction

down to $53 levels

43.08

11/6 2 YR. high

WTI has traded in a $12.16 range up until the end of Oct when we have seen higher highs in the past 7 sessions. Spread as of 11/6 is $14.00

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Market Forecast

Most sources seem to concur that the market will soften over the next year, possibly 2.

(e.g., $44-25/bbl) in 2018, 2019. Is this believable? Yes. Does anyone know for sure what will happen? No.

ESPECIALLY with prices being up shale producers will pump as much as they can.

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Current Open Positions & Total Hedged

Total MT hedged y-t-d:

USG 3%- 5,850mt

USG LSMGO- 5,700mt

RDM 3.5%- 22,800mt

RDM 0.1%- 525MT

Sing 380- 8,650mt

Total MT= 43,525mt 99,590mt stemmed -roughly 44% hedged

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Bunker Hedging - Credit Lines

Glencore MTM as of 11/7/17 -($36,173.89)

PBC credit line $1 million (500 MT open)

NBC credit line $1million

Physical bunker fuel credit line 1 million- split 50/50 btw offices�Trading tenure- 6 months (reduced from 12 months)

Counterparty Glencore Ltd. with PCG by Glencore Ltd. for $10mil

�GRM/Bunker Holding *MTM as of 11/6/17 $526,866.00

PBC credit line at <10,000MT net open exposure $500,000* (3,700 MT open)

10,000-20,000MT exposure $1,000,000 >20,000MT exposure $1,700,000

(because minimum transfer amount is $300,000- no margin call until credit line + $300,000 is reached)

Trading tenure- based on liquidity- possibly as far as 2.5 years

Counterparty is GRM with PCG by Bunker Holding for $1.5mil

continued next page…

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RWE Trading Services GmbH Credit Line

Chris and Gianni reviewing the PCG from PLS and the ISDA from RWE.

Under German law RWE Trading Services is implicitly and fully guaranteed by RWE Supply & Trading GmbH, which is similarly guaranteed by RWE AG.

The agreements under German law are known as “Control and Profit/Loss Transfer Agreements” or CPTAs.�

They haven’t done business with a Bermuda-based company so they would like to begin covering Nordic Bulk with a 1mil credit line and once they complete their due-diligence on Bermuda (several months) and establish trading frame work in Bermuda they can copy terms across from NBC to BOSCO.

2 million credit line offered- to be split 50/50 with Nordic

They have offered to cover our margins- threshold TBD

Bunker Hedging - Credit Lines cont.

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Bunker Hedging – Cleared Exchange Trades

After almost 1 year, the ADM “KYC” paperwork has finally been completed-

Counterparty is Clearing House/Exchange

Approved Cleared Trade Brokers- FIS, CSC Commodities

Currently have $200K initial margin tolerance- with $50K variation margin.

Initial Margin payment is required within 24 hrs of time of trade –

IM ranges from $2K-$15K per 500-1000MT (lot size) depending on date/product

All bunker hedging and FFA margins �and funds are looked at net.

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Exchange Trade Products & Accounts- Registered with CME, Nasdaq & ICE

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Global Cap of 0.5% sulfur limit fuel for fuel will go into effect in Jan. 1, 2020

Based on recent conversations Andrew has had with oil companies it looks like the “fuel of choice with be LSMGO” and not so much an IFO hybrid.

What are our 2020+ COA options?

Cover with WTI or BRT swaps which will remain liquid?
Cover with LSMGO now while curve is soft
Cover with 3.5% and transfer to LSMGO (no)�Will there be enough liquidity outside of shipping industry?
Put everything in 2019 and rollout hedges as needed

Worldwide the cost to the shipping industry may be an incremental $50 billion per year

Update: MARPOL in 2020

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