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Sanctions Cut Off Venezuelan Crude Supply To U.S. Refiners

U.S. refiners will not be able to complete transactions for shipments of crude from Venezuela’s PDVSA for cargoes they had contracted before the U.S. Treasury slapped sweeping sanctions on the Venezuelan state oil firm, Bloomberg reports, quoting people familiar with the matter.

Last Monday, the U.S. imposed sanctions on PDVSA to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela. The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government,” Secretary of the Treasury Steven T. Mnuchin said.

The sanctions block all payments to PDVSA accounts, and buyers of Venezuelan crude are directed to deposit payments in a separate account, to which PDVSA doesn’t have access.

U.S. refiners have asked the Treasury for clarification regarding payments for already contracted shipments, and officials have told some companies that they are not exempt from the ‘separate account rule’ despite the fact that they have already contracted cargoes, two people familiar with the matter told Bloomberg.

This is an issue for U.S. refiners, because PDVSA now wants pre-payment for any cargo it will be sending to the U.S. However, U.S. persons are banned from dealing with PDVSA.

“As a result of today’s action, all property and interests in property of PdVSA subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them,” the Treasury said last Monday.

According to ship tracking data compiled by Bloomberg, two tankers contracted for Valero Energy and one Chevron tanker are sitting off Venezuela’s coast awaiting payment.

Analysts tell Bloomberg that refiners don’t have a clear idea of how they are going to proceed, while market sources tell Reuters that some U.S. Gulf Coast refiners have started to cut refining rates amid rising costs for crude with the Venezuelan sanctions and amid gasoline refining margins plunging to the lowest in almost a decade.

By Tsvetana Paraskova for Oilprice.com

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  • Lee James on February 04 2019 said:
    The U.S. sounds humanitarian with this statement: “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela. . . ." A deposit account inaccessible by the Maduro government has been set up.

    I believe the Maduro government will fall on its own without the help of the U.S.. Meanwhile, neighboring countries are today absorbing the fallout of what is happening in Venezuela. Maybe proceeds from Venezuelan oil sales could go to aid those countries?
  • Kevin Christensen on February 05 2019 said:
    Everybody on the planet knew at some point sanctions were coming, or oil production would continue to go down. Shame on them for not planning ahead of time...

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