Overview
Trading houses that took advantage of the U.S. easing of oil sanctions in October by purchasing Venezuelan crude have now shifted their focus to supplying state-owned company PDVSA with motor fuels and diluents for its heavy oil production. This move comes as Venezuela prioritizes fuel imports to prevent a recurrence of the gasoline and diesel shortages that incited protests in recent years. The decision to lift most sanctions on Venezuela’s oil industry for a six-month period was aimed at allowing crude and gas exports to favored markets and facilitating fuel imports from a broad range of sources. These new supplies complement previous oil swaps negotiated by PDVSA with joint venture partners such as Chevron, Eni, and Repsol, as well as deals made with partners including Iran.
Background
With a presidential election scheduled for late 2024, Venezuela finds itself taking measures to address fuel scarcity concerns amidst growing unrest. Over the years, motorists in the country have faced intermittent shortages of gasoline and diesel, despite the government increasing subsidized prices. By prioritizing fuel imports, Venezuela aims to avoid a new wave of shortages that could further fuel public dissatisfaction. However, it is important to note that the import volume mentioned does not include the reduced imports of light oil and condensate from Iran during the latter half of this year.
Trading Activities
According to documents and tanker tracking data from LSEG, Swiss-based trader Vitol has scheduled the delivery of a significant volume of heavy naphtha as part of its ongoing negotiations with PDVSA. Some agreements also involve cargo swaps, allowing for greater flexibility in the trading process. In addition, Vitol chartered a tanker to collect a 1 million-barrel cargo of Venezuelan heavy crude in December. Another major trading firm, Trafigura, has also been active in purchasing Venezuelan crude and fuel oil from intermediary companies since October.
Please note: PDVSA and Venezuela’s oil ministry did not provide an immediate response to our request for comment.