Market weighs ‘massive purchase’ of products by Venezuela’s PDVSA


Venezuela’s PDVSA has issued a flurry of new tenders for oil products in the last few days and although the volume being sought at the same time is unprecedented, market reaction has been inconclusive about it being a reflection of low runs at the country’s refineries.

“Never before have we seen this massive purchase of refined oil products, not in this volume,” a PDVSA source said.

S&P Global Platts has seen at least seven of PDVSA’s tenders. Four of them are considered occasional for the purchase of up to 900,000 barrels of 10 ppm sulfur ULSD, 300,000 barrels of 95 RON blendstock, 300,000 barrels of 91 RON blendstock and up to 600,000 barrels of catalytic naphtha. Delivery of the cargoes is scheduled for July 1-20.

The other three tenders are long-term purchases to be delivered from July to December. They are for 720,000 barrels of MTBE, up to 3 million barrels of heavy naphtha with the option to be increased to up to 6 million, and for up to 2 million barrels of vacuum gasoil.

The four occasional tenders were awarded this week with MS Internacional and Citizens among the winners, while the three long-term contracts will be awarded early next week.

There are another six tenders for oil products and crude that were issued recently, according to the PDVSA source. Market sources have said Venezuela issues tenders to sell crude and uses those revenues to acquire products.

Some market sources think the volumes being sought by the Venezuelan company are not irregular.

“They are buying this quantity once every 45 to 50 weeks,” a Latin American market participant said.

A trader familiar with Venezuela’s tenders added: “They have been buying this quantity all along; they just decided to tender them all at the same time.”


Another PDVSA source said the government could be trying to keep high inventories of crude and products in case opposition groups call for a general strike in July to protest against President Nicolas Maduro’s government.

Exports of petroleum products from the US to Venezuela totaled 2.04 million barrels in March, down from 2.61 million barrels in February and 2.91 million barrels in January, according to the Energy Information Administration.

For the first quarter of this year, US exports to the South American nation totaled 7.56 million barrels, a 63.6% increase from the same period in 2016, according to the data.

The sharp increase in exports this year coincides with a low usage rate in Venezuela’s five refineries caused by accidents and unit fires, unfinished maintenance and lack of crude to be processed.

The refineries have been operating this year at less than 50% of their capacity and one halted all activity in May.

According to the most recent technical reports, Venezuela’s 955,000 b/d Paraguana Refining Center was operating at 320,000 b/d, or 33.5% of capacity, on Wednesday. The complex includes the 645,000 b/d Amuay refinery and 310,000 b/d Cardon refinery, the biggest in Venezuela. Amuay was operating at 270,000 b/d, or 41.8% of capacity, while Cardon was operating at 50,000 b/d, or 16.1% of capacity.

El Palito refinery, which specializes in producing gasoline for domestic consumption and export, was operating at 40,000 b/d, or 28.6% of its 140,000 b/d capacity, according to refinery sources.

PDVSA shut its 187,000 b/d Puerto La Cruz refinery May 10 due to a problem with the atmospheric distillation unit. There is no estimate of when the unit will restart.

Curacao’s 335,000 b/d Isla refinery, operated by PDVSA under a lease agreement, was operating at 100,000 b/d, or 29.8% of capacity, on Wednesday, according to a source familiar with the situation. Isla’s 110,000 b/d crude distiller CD-3 has been shut since a May 21 fire and repair work is expected to end in mid-September, the source said.


A Gulf Coast shipping source with knowledge of Venezuela’s purchases said it was difficult to say to what extent the refinery issues could have influenced the number of recent tenders.

“They have to supply Cuba, El Salvador, Nicaragua and their local market; if refineries are on the ground, buying is their sole alternative,” he said.

A Northwest European gasoil cargo recently chartered by trading company Vitol was to load Wednesday in the Amsterdam-Rotterdam-Antwerp region carrying 30,000 mt to Cuba in what the shipping source said could be an arbitrage opportunity due to Venezuela’s refinery troubles and an alternative to “putting the barrels in the bunkers pool,” as the ARA region has seen dwindling demand for high sulfur products.

If the flurry of recent tender purchases were to mark the beginning of increased imports there could be consequences for other Latin American purchases, a market participant familiar with South American trading said.

“If there is so much demand, it is bound to affect diesel and gasoline prices. Premiums would be higher for other countries,” the source said.

However, that scenario is not considered likely to occur due to Venezuela’s difficulties in paying for cargoes.


According to a PDVSA source, two tankers with US light crude have been stationed since May 10 in Curacao waiting to be paid, while Paraguana Refining Center sources said there have been two tankers in its harbor with 300,000 barrels each of VGO also waiting to be paid since May.

“They are at their limit. There is no discharge until they receive payment,” the source said, adding that the waiting time means PDVSA has to pay a “fortune” in demurrage charges.

There was some caution from shipowners in light of two Aframax tankers on financial hold off the coast of Venezuela with PDVSA as the cargo receiver, according to an industry source.

The Vallesina has been anchored at Amuay Bay since April 14, according to cFlow, Platts trade flow software. The tanker is on charter to BP.

“PDVSA can’t pay bills and the [shipowner] is holding the cargo,” a source close to the market said, adding a financial lien was placed on the cargo due to payment issues.

The Texas Star was also on financial hold, according to a position list, and has been anchored off of Amuay Bay since May 19, according to cFlow.

A source said he presumed there was a similar issue with freight payment.

Source: Platts

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