Wave of Venezuelan oil stalled at sea

Market: Crude oil, Freight
10/06/20

Vessel tracking data shows a fleet of 44 international tankers on the water holding 40.5mn bl of Venezuelan oil as shipowners face growing risk of US sanctions for transporting cargoes to and from the country.

The tankers, which include 13 very large crude carriers (VLCCs), 12 Suezmaxes, 14 Aframaxes, two Panamaxes and two medium range (MR) tankers, are either on their way to Asian countries or idling, according to data from oil analytics firm Vortexa. Exceptions include the Sandino Panamax tanker on its way to Cuba, the Eser K Aframax in floating storage near the strait of Gibraltar, and the Delta Med Suezmax en route to Spain. Singapore, Malaysia, China and Indonesia are shown in that order as top destinations for the 44-tanker fleet. The tankers are owned and operated by a variety of international shipping companies.

Of the 44 tankers with Venezuelan oil, 17 have been idling for seven days or longer, according to the data, mostly near their presumed destinations in Asia and some near their loading point off the Venezuelan coast.

June dive

The stalled Venezuelan cargoes coincide with a backlog of production at home. According to internal Venezuelan crude production data seen by Argus, operations in the Opec country's Orinoco heavy oil belt is mostly shut in because storage tanks are full. The oil belt, which normally accounts for most of Venezuela's output with 16°API Merey grade, was only producing 109,000 b/d from its four divisions as of yesterday, according to the preliminary data issued by state-owned PdV.

The detailed report indicates that PdV's key joint ventures with foreign partners have all scaled back output because of the storage deficit. PdV's PetroPiar venture with Chevron was down by 65,000 b/d to 30,000 b/d. The PetroSinovensa venture with China's state-owned CNPC was down by 48,000 b/d to just 17,000 b/d, while the PetroMonagas venture with a Russian state-owned entity was down by 64,000 b/d to 19,000 b/d.

According to Argus estimates, Venezuela produced 550,000 b/d of crude in May, compared with 580,000 b/d in April and 750,000 b/d in May 2019. The new data suggests that the June average will sink even lower.

Risky waters

The US Treasury Department has been raising pressure on shipping market participants in a bid to enforce US sanctions against Venezuela and Iran. US officials are also keen to reinforce the perception of heightened risks in handling Venezuelan cargoes after a string of recent fuel deliveries from Iran to Venezuela that challenged Washington's portrayal of the success of its pressure tactics against Caracas and Tehran.

A 14 May advisory from the department's Office of Foreign Assets Control (Ofac) warned shippers against sanctions-evading measures such as turning off transponder data and illegal ship-to-ship transfers. On 2 June, Ofac imposed sanctions on four tankers, including one [chartered by US major Chevron]( https://direct.argusmedia.com/newsandanalysis/article/2112141) with a record of transporting Venezuelan crude.

Premium freight rates for Venezuela-bound or Venezuela-loading cargoes entice some shipowners to carry such cargoes in spite of the risk of running afoul of US sanctions.

Ofac last year inadvertently caused charter rates to spike by [blacklisting](https://direct.argusmedia.com/NewsAndAnalysis/Article/2061664 a portion of the fleet owned by Chinese shipping giant Cosco. US sanctions officials since then took more targeted actions against individual tankers and owners.

By Nicholas Watt and Patricia Garip

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