Venezuela's PDVSA has started asking spot market buyers of its crude oil to pay in advance for the shipments after several recent payment defaults, Reuters has reported, citing several unnamed sources familiar with the situation.
The changes and negotiations over the advanced payments have caused some delays to vessels departing the country, contributing to a build-up of crude oil stocks that are overtaxing Venezuela's blending facilities-a necessary step in transforming the country's extra-heavy crude to something exportable.
According to the report, at least three tankers with Venezuela crude left the country without the buyers paying for them. As a result, PDVSA switched to advance payments in full last month.
This has, in turn, prompted middlemen to ask for discounts, according to the Reuters sources. In some cases, the discounts requested are $47 per barrel of Venezuela's flagship heavy crude blend Merey 16 to Brent crude. Earlier this year, the typical discount, at which Venezuelan crude sold, averaged $35-38 to Brent crude.
Venezuela has been struggling to sell its crude after the Trump administration imposed severe sanctions on the South American country several years ago. The Biden administration kept the Trump sanctions in place but earlier this year attempted a thaw in bilateral relations in a bid to secure heavy crude imports after it banned all oil imports from Russia.
Sanction relief began to be discernible in May, with Washington letting Chevron negotiate its Venezuelan oil license with PDVSA directly. Then, this month, the U.S. State Department gave the green light to two Europen companies-Italy's Eni and Spain's Repsol-to start shipping Venezuelan crude to Europe next month.
The volumes of Venezuelan oil that the two will be allowed to send to Europe will be modest, Reuters reported at the time, citing unnamed sources, and its resale outside Europe would be prohibited but the move is a sign of a change in attitudes in Washington. If sanctions are completely lifted, this could add some 400,000 bpd to global oil supply at a time when such additional supply is very much in demand.
By Charles Kennedy for Oilprice.com
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