Venezuela’s Crisis Deepens As Hurricane Approaches

Oil traders have started to divert fuel shipments from their original destination in Venezuela as Hurricane Maria approaches the Caribbean, Reuters vessel tracking data has shown. Yet the hurricane, which moves at speeds of up to 125 mph, is not the only reason Venezuela’s waters are quickly emptying of tankers. The state oil firm, PDVSA, cannot pay for the cargoes that have already been delivered.

But sitting potentially indefinitely in tumultuous waters is now no longer an option, and in a bid to place these before the hurricane reaches the Venezuelan coast, traders are rerouting the tankers towards other Latin American and Caribbean ports, to sell the fuel to paying clients. Since September 3, six vessels with a combined load of 1.8 million barrels of diesel and other oil derivatives have been moved from the Venezuelan coast. One of these had been floating in Venezuelan waters since early July and has now been directed to Trinidad. Another, loaded with fuel from Europe, set sail back to the continent, Reuters said.

Hurricane season has been most unkind this year. After Harvey, oil terminals in the Caribbean have been operating intermittently, as more hurricanes followed, notably Irma and Jose. The affected region, according to Reuters, imports some 2.5 million bpd of oil products, the bulk coming from the U.S. Gulf Coast. These imports will likely be disrupted further as Maria approaches.

Meanwhile, Venezuela faces a bigger problem than hurricanes. The country made good on its promise to drop the greenback when pricing its crude oil exports. It announced on Friday it will from now on price the shipments in Chinese yuan, though earlier reports suggested it might go for euros, or rubles, or rupees. China is, however, Venezuela’s biggest creditor and there is little danger of China siding with Washington, so the switch to yuan makes sense even though the new prices for Venezuela oil is simply a conversion from dollars into yuan.

By Irina Slav for Oilprice.com

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