DERIVATIVES

The Company uses derivative instruments to mitigate certain exposures to commodity price risk. The Company entered into the A&R Intermediation Agreements that contain purchase obligations for certain volumes of intermediates and refined products. The purchase obligations related to intermediates and refined products under these agreements are derivative instruments that have been designated as fair value hedges in order to hedge the commodity price volatility of certain refinery inventory. The fair value of these purchase obligation derivatives is based on market prices of the underlying intermediates and refined products. The level of activity for these derivatives is based on the level of operating inventories.

As of September 30, 2017, there were 3,306,154 barrels of intermediates and refined products (2,942,348 barrels at December 31, 2016) outstanding under these derivative instruments designated as fair value hedges. These volumes represent the notional value of the contract.

The Company also enters into economic hedges primarily consisting of commodity derivative contracts that are not designated as hedges and are used to manage price volatility in certain crude oil and feedstock inventories as well as crude oil, feedstock, and refined product sales or purchases. The objective in entering into economic hedges is consistent with the objectives discussed above for fair value hedges. As of September 30, 2017, there were 37,496,000 barrels of crude oil and 8,163,000 barrels of refined products (5,950,000 and 2,831,000, respectively, as of December 31, 2016), outstanding under short and long term commodity derivative contracts not designated as hedges representing the notional value of the contracts.

The following tables provide information about the fair values of these derivative instruments as of September 30, 2017 and December 31, 2016 and the line items in the condensed consolidated balance sheet in which the fair values are reflected.



Description	Balance Sheet Location	Fair Value Asset/(Liability)
Derivatives designated as hedging instruments:
September 30, 2017:
Derivatives included with the inventory intermediation agreement obligations	Accrued expenses	$	(20,601	)
December 31, 2016:
Derivatives included with the inventory intermediation agreement obligations	Accrued expenses	$	6,058

Derivatives not designated as hedging instruments:
September 30, 2017:
Commodity contracts	Accrued expenses	$	(5,016	)
December 31, 2016:
Commodity contracts	Accrued expenses	$	3,508

The following table provides information about the gains or losses recognized in income on these derivative instruments and the line items in the condensed consolidated statements of operations in which such gains and losses are reflected.



Description	Location of Gain or (Loss) Recognized in Income on Derivatives	Gain or (Loss) Recognized in Income on Derivatives
Derivatives designated as hedging instruments:
For the three months ended September 30, 2017:
Derivatives included with the inventory intermediation agreement obligations	Cost of products and other	$	(29,766	)
For the three months ended September 30, 2016:
Derivatives included with the inventory intermediation agreement obligations	Cost of products and other	$	(3,145	)
For the nine months ended September 30, 2017:
Derivatives included with the inventory intermediation agreement obligations	Cost of products and other	$	(26,659	)
For the nine months ended September 30, 2016:
Derivatives included with the inventory intermediation agreement obligations	Cost of products and other	$	(29,317	)

Derivatives not designated as hedging instruments:
For the three months ended September 30, 2017:
Commodity contracts	Cost of products and other	$	(17,291	)
For the three months ended September 30, 2016:
Commodity contracts	Cost of products and other	$	(15,559	)
For the nine months ended September 30, 2017:
Commodity contracts	Cost of products and other	$	(2,606	)
For the nine months ended September 30, 2016:
Commodity contracts	Cost of products and other	$	(54,646	)

Hedged items designated in fair value hedges:
For the three months ended September 30, 2017:
Intermediate and refined product inventory	Cost of products and other	$	29,766
For the three months ended September 30, 2016:
Intermediate and refined product inventory	Cost of products and other	$	3,145
For the nine months ended September 30, 2017:
Intermediate and refined product inventory	Cost of products and other	$	26,659
For the nine months ended September 30, 2016:
Intermediate and refined product inventory	Cost of products and other	$	29,317

The Company had no ineffectiveness related to the Company’s fair value hedges for the three and nine months ended September 30, 2017 or 2016.