A Suezmax tanker carrying about a million barrels of Venezuelan crude oil has been sitting near the Louisiana coast for a month now, awaiting a letter of credit to start unloading, according to sources who spoke to Reuters.
The Karvounis, chartered by Trafigura, carries crude for PBF Energy and the buyer has been trying for weeks to find a bank willing to issue a letter of credit – this is a standard procedure with oil cargos, ensuring that the amount due for the crude will be paid within 30 days of delivery. Only after a bank issues such a letter of credit to the benefit of the seller can offloading begin.
The problem in this case is that the seller is PDVSA and banks are wary of doing business with the Venezuelan state oil company amid a sanction drive in Washington and the rapid turning of Caracas into a pariah regime.
Reuters notes that although PBF Energy declined to confirm or deny the information and it remains unclear which banks have refused to issue a letter of credit, several lenders have started curbing their exposure to Venezuela. Closing accounts of government officials and refusing to provide correspondent services and trade Venezuelan government bonds have been among the exposure-curbing actions.
Credit Suisse has been one of the banks that have stopped providing services concerning certain Venezuelan bonds. The Swiss lender has also introduced a reputation risk review procedure for any operation involving the Caracas government and related entities.
Meanwhile, cash from oil sales is more important than ever for PDVSA. About 40 percent of its crude exports go to Russia and China as in-kind repayment for more than US$60 billion in loans, and the remained is sold to cash buyers, including U.S. refiners.
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.