Venezuelan oil supplies stalled due to rising shipping costs
Quick Look
- Supplies of Venezuelan oil shipping in October have stalled due to soaring shipping costs that have more than doubled barrel deliveries to the Gulf Coast.
- This has made Venezuelan oil more expensive than Canadian oil and threatens supply disruptions to US refineries ahead of the midterm elections.
- Vitol and Trafigura traders are abandoning trades due to the requirement of full upfront payment to US-controlled accounts.
AI-generated summary
Why It Matters
Since the end of August, the cost of shipping a barrel of oil to the Gulf Coast has more than doubled, reaching almost seven dollars. This reduced the discount on Venezuelan crude from $14 to seven dollars relative to Brent, making it at least five dollars more expensive than Canadian oil.
Deliveries of Venezuelan oil due in October have stalled due to soaring shipping costs, leading to a breakdown in negotiations between state-owned PDVSA and buyers, Bloomberg reported, citing people familiar with the matter.
"Sales of Venezuelan crude for October shipments have stalled after soaring shipping costs disrupted negotiations between the country's state oil company and buyers of its crude," the agency wrote.
Since the end of August, shipping a barrel of oil to the Gulf Coast has more than doubled in price - to almost seven dollars. Because of this, the discount on Venezuelan crude off the coast of the United States is compressed from 14 to seven dollars to the Brent brand, making it at least five dollars more expensive than Canadian oil, the publication notes.
The situation threatens supply disruptions for US refineries ahead of the midterm elections amid already high diesel prices. Compounding the situation is a drop in demand for heavy sour crude due to unexpected shutdowns at major U.S. refineries, including ExxonMobil's Joliet, Illinois, facility and Valero Energy's Port Arthur, Texas, plant, the agency reports.
At the same time, as the agency reports, Vitol and Trafigura traders attracted by Washington are not obliged to buy raw materials from PDVSA and are refusing to make deals for now. Complicating the situation is the requirement for full advance payment to US-controlled accounts before the tankers are shipped. If a compromise is not found, the oil will remain in storage or go to new buyers.
What to Watch
AI outlook — possibilities, not facts
If a compromise is not found, Venezuelan oil will remain in storage or find new buyers
Possible · Within weeks
Open Questions
- Will PDVSA and buyers find a compromise on payment terms?
- How long will the shutdowns for repairs at American refineries last?
- Will Venezuela redirect its supplies to other markets?
