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CNPC Backs Out Of Oil Purchases With Venezuela On Sanctions Scare

Russia and China have stuck with Venezuela during its most recent time of need, but at least one of their loyalties may soon come to an end, according to anonymous sources who spoke to Bloomberg on Friday.

CPNC’s PetroChina has canceled loading plans in August that would have seen 5 million barrels of Venezuelan oil, the sources said, as the United States continues to squeeze Venezuela to loosen Nicolas Maduro’s hold on the troubled Latin American Country.

Maduro has precious few allies left, and until recently, China has been a devoted one. China was one of PDVSA’s top buyers of crude oil, even after the initial rounds of sanctions took hold. But now things are changing, and the most recent screw-turning by the Trump administration has foreign oil companies doing business with PDVSA on edge. The new sanctions target companies—even foreign ones—doing business with PDVSA, threatening to seize their assets in the United States if they have any.

Without China’s backing and loans, Venezuela is left without many options. China has loaned Venezuela $50 billion over the past decade, Bloomberg reports, and has purchased 339,000 barrels per day of Venezuela’s crude.

It’s unclear exactly how painful Venezuela will find this—Venezuela’s oil production is already falling, according to today’s OPEC Monthly Oil Market Report which shows that oil production fell 32,000 bpd in July, reaching 742,000 bpd.

PetroChina’s cancellations are the first of its kind in more than a decade, but its distancing from Venezuela follows another similar action in January this year when PetroChina announced it was dropping PDVSA as a partner in a $10 billion oil refinery project in southern China, according to Reuters. It was thought at the time that this was more due to PDVSA’s financial unattractiveness rather than sanctions levied by the United States.

By Julianne Geiger for Oilprice.com

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  • Mamdouh Salameh on August 17 2019 said:
    If you are quoting anonymous sources, then I bet my last dolar that this is disinformation and, therefore, a lie.

    If China is doing its best to undermine US sanctions against both Iran and Venezuela, would CNPC, China’s largest oil company, stop buying Venezuelan crude? Such a claim doesn’t stand scrutiny.

    China has even recently defied the United States and went ahead with plans to help Venezuela repair its refineries and raise its crude oil production. This is not the action of a country scared of US sanctions.

    Both China and Russia are owed billions of dollars they extended as loans to the Venezuelan government against oil supplies and they, therefore, have vested interest in keeping Venezuela’s economy afloat and this includes buying Venezuelan crude oil and ensuring that Venezuela is paid despite the intrusive US sanctions against it.

    And with US sanctions against both Venezuela and Iran failing miserably, one would expect the chorus of disinformation to grow louder.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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