Background and Relevance of the Players Involved
Valero and Phillips 66, two prominent American refineries located along the Gulf Coast, have recently entered into agreements to purchase Venezuelan oil. This development marks a significant step in the US-Caracas accord, which aims to export up to 50 million barrels of Venezuelan crude.
Valero and Phillips 66 have previously purchased Venezuelan oil through PDVSA’s partner, Chevron. However, these recent transactions represent the first direct purchases from US commercial entities authorized this month to trade Venezuelan crude. The two companies, Vitol and Trafigura, were the first to receive US government licenses for such commercial activities following Nicolás Maduro’s removal from power earlier this year.
Details of the Transactions
Valero and Phillips 66 acquired their respective cargos from the trading house Vitol, according to sources. The oil was purchased at a discount ranging from $8.50 to $9.50 per barrel relative to the Brent benchmark.
The delivery of this Venezuelan crude is scheduled for the US Gulf Coast, with shipping costs estimated between $2.5 and $3.5 per barrel, depending on the tanker size. This leaves a profit margin of $2 to $4 per barrel for the reselling of Venezuelan crude, as reported by industry sources.
Merey Crude Offers and Market Interest
The iconic Venezuelan heavy crude, Merey, was offered to US refineries last week with a discount of $6 to $7.50 per barrel below the Brent reference. However, the limited interest in these offers led to a reduction in the discount.
Similarly, Vitol and Trafigura extended offers to Indian refineries at a discount of $8 to $8.50 per barrel below the Brent benchmark, yet these too have garnered minimal interest.
Prior to the imposition of sanctions in 2019, several major US Gulf Coast refineries were purchasing and processing up to 800,000 barrels daily of Venezuelan heavy crude, as per US government data.
Key Questions and Answers
- Who are the key players involved in this agreement? Valero, Phillips 66, Vitol, and Trafigura are the primary entities engaged in this US-Venezuela oil trade accord.
- What is the purpose of this agreement? The accord aims to export up to 50 million barrels of Venezuelan crude under the new US government authorization for commercial entities to trade Venezuelan oil.
- Why are shipping costs and discount significant? Shipping costs and discounts directly impact the profitability of these transactions for the involved commercial entities.
- What was the initial interest in Merey crude offers? The initial interest in Merey crude offers was limited, leading to a reduction in the offered discount.
- How much Venezuelan crude was previously imported by US refineries? Before sanctions were imposed in 2019, major US Gulf Coast refineries imported up to 800,000 barrels daily of Venezuelan heavy crude.
