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European buyers of the heavy crude produced by Venezuela’s PDVSA have put their purchases on hold in anticipation of sanctions against the government in Caracas to be announced by the European Union, Reuters reports, citing trading sources.
The European Parliament followed Washington’s example in recognizing national Assembly President Juan Guaido as interim president earlier this week, although the agreement to do so was not unanimous. Meanwhile, UK’s Foreign Secretary Jeremy Hunt has urged his European Union colleagues to introduce more sanctions against Venezuela in a bid to increase the pressure on President Maduro and force him out, like Washington hopes with the latest round of sanctions that specifically targeted PDVSA.
In Europe, PDVSA trades with Spain’s energy major Repsol, commodity traders Trafigura and Vitol, among others, and Swedish Nynas. Earlier this week, Reuters reported that PDVSA was seeking to renegotiate contracts with oil buyers in a bid to circumvent the new U.S. sanctions.
One source who spoke to Reuters said the Venezuelan company had asked customers to swap oil products, including fuels, for Venezuelan heavy crude instead of payments.
“We are trying to redo the contracts. It is not yet entirely clear how because customers are being individually called, but we are studying alternatives,” a source from the Venezuelan state company said.
Another tactic PDVSA is using, according to the sources, is asking commodity trading houses to act as intermediaries for its sales of crude to clients abroad, including U.S. refiners.
Despite falling production and exports, Venezuela is still exporting some 1.25 million bpd of crude, of which half a million barrels daily go to U.S. refiners. A the same time, the country imports some 200,000 bpd of refined products, Reuters Eikon data shows. These imports are essential for the functioning of Venezuela’s oil industry as a substantial portion of them are diluents needed to be added to Venezuela’s extra heavy crude to make it fit for export on tankers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.