Sanctions on Venezuela start to bite

Catogory : Market Report

VENEZUELAN tanker demand took a downward trajectory this month as Washington announced tough sanctions against Petroleos de Venezuela SA, known as PDVSA, mainly designed to halt US imports of Venezuelan crude.

The government stopped short of placing an outright ban, instead, US entities could theoretically continue purchases of Venezuelan crude until late April as long as payments are placed into a blocked account. Yet sanctions have already caused much chaos and confusion. Imports of clean products into Venezuela were halted for 11 days from the end of January, while Venezuelan crude exports to the US dropped considerably. The only shipment to Venezuela from US recorded for February so far is from the St Eustatius terminal, where state-owned oil and natural gas company PDVSA stores oil, from which 322,000 barrels of ethanol have been shipped.

In 2018, about 450,000 bpd was shipped to the US, although this is only a fraction of the 1.7m bpd exported in 1998 when President Chavez was on the verge of power, International Energy agency data shows. Much of the oil is used in PDVSA’s US refining system, run by its subsidiary Citgo — most of which is shipped by aframaxes.

The halt of the US-Venezuela trade has created a tonnage surplus in the region, with vessels building up offshore in the Gulf of Mexico waiting to offload in the US.

“The loss of Venezuela-US crude trade is a negative for regional aframax and suezmax demand, although this in part will be mitigated if trade from other Latin American countries rises as a result.