Deepening a rift amid sanctions on the OPEC-member country Venezuela, the fifth largest U.S. buyer of Venezuelan crude, PBF Energy, has halted direct purchases from state-run oil company PDVSA, reported the media citing four sources.
PDVSA owes bondholders $1.2 billion in debt payments due this month and further disagreements could spell new hardships for it even as PBF is the second buyer in as many months to go elsewhere or its oil. U.S. refiners are among its largest cash-paying customers for Venezuela and the country relies on oil for over 90 percent of export revenue.
In part barring new financial arrangements with PDVSA, the Trump administration imposed sanctions on Venezuela in August. Letters of credit, needed to assure some oil sales, have been refused by banks by those restrictions.
A PDVSA source who could not be identified because the information was not public said that last month, PBF notified PDVSA that it “is not going to take any more Venezuelan crude cargoes” from the state-run firm.
There had been a more than 40-day standoff over a previous shipment and the notification came after that impasse. Awaiting a letter of credit to complete the sale, a Venezuelan heavy oil cargo intended for PBF sat off Louisiana in July. The tanker discharged in August.
Whether the agreement is terminated could not be confirmed by either company.
According to Thomson Reuters trade flows data, oil has not directly been purchased by PBF from PDVSA since early September. The data however shows that in recent months, intermediaries have bene used by the refiner to buy Venezuelan crude.
Intermediaries assume the risk of any default in a transfer and traders and oil firms who purchase crude from PDVSA are currently working with Venezuela.
Imports of heavy oil from other nations, including Columbia have been increased by PBF.
To load crude for PBF, the tanker Gold Sun arrived in Venezuela’s Jose port this week. Further details about the shipment have not yet been disclosed by Reuters trade flow data.
According to the Reuters data, receiving almost 52,000 barrels per day (bpd) from different suppliers, PBF was the fifth U.S. largest importer of Venezuelan oil through September and the company typically buys at least two 500,000-barrel cargoes per month from PDVSA.
A supply contract for naphtha and natural gasoline to Brazilian petrochemical firm Braskem S.A. was also lost by PDVSA in September.
The situation worsened once its name appeared in a U.S. sanctions list even as falling output and oil-quality issues have contributed to PDVSA’s struggles to retain customers.
New long-term financing for the company, its subsidiaries and the Venezuelan government is banned by the sanctions imposed in August even as they do not stop U.S. entities from continuing trade relationships with PDVSA. Btu notifying the Department of Treasury about certain transactions are also required according to the new sanctions.
According to the trading sources, the heightened level of scrutiny has not been welcome by U.S. refiners.
According to officials including President Nicolas Maduro, since sanctions began, the South American country has been looking for new buyers for its barrels. Aiming to build a “currencies basket” to untangle banking operations and move off U.S. dollar-based sales, it recently started posting its crude prices in Chinese yuan.
(Adapted from CNBC)