Washington 'embargoes' Venezuela assets: Update 2

Spanish Market: Crude oil, Oil products
06/08/19

Adds comment from Guaido, Bolton.

The US has issued a blanket prohibition on the sale or transfer of Venezuelan government property in the US, including assets that belong to state-owned PdV.

An executive order by President Donald Trump, issued yesterday, blocks the transfer of any property or shares of property in the US held by the Venezuelan president Nicolas Maduro's government or anyone determined by the Treasury and State departments to be supporters of the Venezuelan government. The decision prohibits the sale of any interest in US independent refiner Citgo, Venezuela's most valuable overseas asset, after the country's creditors won a key US court victory in the pursuit of unpaid debts.

"Given this measure, Citgo and all of its assets are protected," Venezuela's National Assembly leader Juan Guaido said in a tweet. "In addition, any debt that the regime intends to incur with assets of the nation will be illegal. Anyone who wants to benefit from the crisis will be driven away."

The US and more than 50 western governments recognize Guaido as Venezuela's interim president. Yesterday's designation exempts the interim Guaido government and the National Assembly, as well as humanitarian aid.

Former Canadian mining firm Crystallex is pursuing shares of Citgo to satisfy a $1.4bn arbitration award against Venezuela. The Venezuelan opposition lobbied the US to block any such transfer following last week's ruling by the US Third Circuit Court of Appeals upholding Crystallex's efforts. The decision could lead to an auction of the controlling company's shares, a move that has rattled lenders and affirmed a path for companies seeking payment for more than $150bn in arbitration awards and other debt.

Crystallex did not have an immediate comment. Licenses exempting certain business — including those for PdV-owned US independent refiner Citgo and Chevron's minority stake in a Venezuelan synthetic crude joint venture with PdV — remain in place. Most licenses allowing for winding down business with Venezuelan government entities have expired. The new requirements extend prohibitions against financial transactions beyond the Office of Foreign Assets Control's (Ofac) specially designated nationals and blocked persons list (SDN).

Guaido has installed directors of Citgo and PdV, an action upheld by the Delaware Chancery Court late last week. But the opposition leader has not expanded his control inside Venezuela, and an attempt to depose President Nicolas Maduro's government fizzled out earlier this year.

Trump and his administration officials previewed the executive order as an economic "embargo" against Venezuela. Under that interpretation, Venezuela joins Iran and Cuba on a short list of countries the US has placed under an economic embargo that would discourage other countries from doing business with those nations.

But Trump's order does not impose secondary sanctions and is limited to Venezuelan government assets in the US, according to Doug Jacobson, partner in law firm Jacobson Burton Kelley.

Trump's order was issued ahead of today's conference on Venezuela in Lima, Peru, where governments that recognize Guaido as leader will discuss plans for Venezuela's political transition and economic recovery. The US and other donors are due to unveil extensive plans for restoring Venezuela's battered oil sector and economy once Maduro steps down and Guaido takes over as president.

"Maduro is hoping to wait out the international community and the people of Venezuela," US national security adviser John Bolton said at that conference. "We show here today that the international community remains steadfast in its commitment to increase the pressure and accelerate a peaceful transition to Venezuela's only legitimate government institution, the National Assembly."

But the prospect of a government transition in Venezuela remains remote as Maduro maintains control over the country. And the US administration has had to contend with the possibility that the Venezuelan assets under Guaido's control may have been lost to debt-holders.

The US imposed sanctions on Venezuela in January to cut off revenue to the Maduro government and support new elections. US crude imports from Venezuela, once the third-largest supplier of heavy, sour crude, fell to zero in May.

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26/12/24

Viewpoint: US naphtha market poised for change

Houston, 26 December (Argus) — US Gulf coast naphtha supplies accumulated in the last half of 2024 amid faltering demand, with gasoline blenders representing a higher profile buying sector, but a pending refinery closure is set to tighten the market. Demand for all naphtha grades was much weaker coming into December because of a bearish gasoline outlook and as elevated octane prices dampened naphtha demand. Poor refinery margins encouraged refiners to run minimally, cutting back on refiner demand as well. Gasoline blenders' demand for naphtha dominated in 2024, which highlighted stronger naphtha prices in visible trades. Prices for good quality, low sulphur N+A naphtha into the gasoline blend pool averaged about 10-15¢/USG above generic reformer feedstock naphtha. Naphtha sellers were also keen to export, which moved larger volumes without engaging in volatile domestic spot markets. US naphtha exports this year through mid-December were up by over 50pc to average 272,730 b/d from a year prior, according to Vortexa data. From November to mid-December, naphtha departures from the US were up on the year by 66pc to 312,800 b/d. Despite overall increased exports in 2024, weakened Asia Pacific and European naphtha markets in the latter half of December diminished arbitrage opportunities. Heavy virgin naphtha (HVN) differentials to Nymex RBOB hovered in the mid-to-stronger 30s¢/USG discounts in the first half of December, compared with upper Nymex RBOB -40s¢/USG observed in the same period last year. However, these higher differentials were attributed more to the lower Nymex RBOB pricing basis than market strength. Comparative cash prices hovered around 160¢/USG year on year, despite a 10¢/bl hike in differentials in 2024. Supply, demand changes in store A major supply change in the Gulf coast naphtha market should tighten the ample supply of naphtha by February. LyondellBasell is on schedule to begin a staggered shutdown of its 264,000 b/d refinery in Houston, Texas, in January. The last crude distillation unit (CDU) at the site is expected to shut by February. The refiner is a steady supplier of premium quality HVN with very low sulphur, which is typically sold into the gasoline blending market. Depending on production rates, LyondellBasell, also known as Houston Refining (HRC) in naphtha circles, can load 10-15 barges of the premium quality HVN a month. However, Gulf coast naphtha remains well-supplied. ExxonMobil's third CDU at its 609,000 b/d Beaumont, Texas, refinery started operations in 2023, adding more naphtha production to the region. Naphtha exports were also significant on the demand front in 2024, despite Gulf coast naphtha export opportunities to Venezuela being curbed again on 18 April. US sanctions on oil trades to Venezuela were eased in October 2023, but reimposed by April this year due to fresh political conflict. Naphtha exports to Venezuela are currently restricted to joint-venture partners such as Chevron and Reliance. Some participants hope the incoming administration of president-elect Donald Trump will re-address oil trading with Venezuela, keeping this an item to watch in 2025. US naphtha exports to Venezuela averaged 57,600 b/d in 2024, up from 11,100 b/d during 2023, according to Vortexa, on relaxation of Venezuela sanctions from October 2023 through May 2024. Meanwhile, naphtha exports out of the Gulf coast were still focused on shipments to South America, led by Brazil and Colombia. Exports to Brazil averaged 48,600 b/d in 2024, up by 68pc from 2023 while naphtha arrivals in Colombia averaged 36,600 b/d in 2024, up by 36pc from 2023. Colombia buys light naphtha from the US for use as diluent and sells full-range naphtha out of Mamonal port to the US. By Daphne Tan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Tariffs may curb US bunker demand

26/12/24

Viewpoint: Tariffs may curb US bunker demand

New York, 26 December (Argus) — US president-elect Donald Trump's plans to enact new tariffs, especially those targeting Mexico and Canada, may curb demand for US bunker fuel and ripple across international markets. The proposed 25pc tariffs on imports from Mexico and Canada could affect all products coming into the US from those countries, including the significant volumes of residual fuel oil from Mexico and Canada that US Gulf coast and east coast buyers import. This could lift prices of residual fuel oil sold for bunkering in US Gulf coast and east coast ports, prompting some ship owners calling there to instead fuel outside the US in more price-competitive ports. Depending on their routes, ship owners could shift some of their bunker demand to Singapore, Rotterdam, Fujairah and Panama. Mexico alone supplied 74pc of the residual fuel oil imported to the US Gulf coast and and 29pc to the east coast in the first nine months of the year, according to US Energy Information Administration (EIA) data ( see table ). Meanwhile, Canada supplied 7pc and 16pc of the fuel oil imported to the US Gulf and east coasts, respectively. The US east coast imported 46,730 b/d of residual fuel oil and produced 35,000 b/d in the first nine months of the year ( see chart ). By comparison, the US Gulf coast imported 48,909 b/d and produced 161,667 b/d. Prices of Canadian and Mexican residual fuel oil exports to the US are typically benchmarked against US Gulf and east coast residual fuel oil prices. Should Trump implement the 25pc tariffs, companies bringing Canadian and Mexican residual fuel oil to the US could bid lower to try to offset their tariff costs. Lower bids from US buyers could redirect some of the Mexican and Canadian residual fuel oil exports to buyers in northwest Europe, Panama and Singapore. Or if Canadian and Mexican producers are not able to find lucrative clients outside of North America, they may have to settle for lower profit margins for their residual fuel oil exports to the US. On the US west coast, Trump's campaign promise to impose tariffs of up to 60pc on imports from China has already prompted some shippers to front-load container cargoes. Potential additional tariffs could slow container ship traffic from China to the US' busiest container ship ports — Los Angeles and Long Beach in California. There is a lot of uncertainty around the extent of Trump's tariff plans, as some analysts view his threats as aimed at generating leverage for negotiations. But provided that they are put into place, the Mexico and Canada tariffs could push US east and Gulf coast importers to purchase more residual fuel oil from other countries like Algeria, Colombia, Iraq, Kuwait, Nigeria, Peru and Saudi Arabia. An increase in Chinese tariffs could prompt US west coast importers to shift their purchases to other southeast Asian countries such as Vietnam, Indonesia, Malaysia and Thailand. But once the dust settles from the geographical reshuffling, new trading networks may have been established, and the US bunker market could settle into a new normal. By Stefka Wechsler US Gulf and east coasts residual fuel oil imports, Jan-Sep 2024 '000 b/d East coast % of all countries Gulf coast % of all countries Mexico 13.6 29% 36.1 74% Canada 7.4 16% 3.3 7% All countries 46.7 100% 48.9 100% — EIA US Gulf and east coast FO imports, Jan-Sep ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US jet fuel demand to trail passenger growth

26/12/24

Viewpoint: US jet fuel demand to trail passenger growth

Houston, 26 December (Argus) — The upward trajectory of US jet fuel demand is likely to continue lagging the pace of rising passenger numbers because of recent capacity gains for multiple US airlines and the slow but steady improvement of aircraft fuel efficiency. More than 2.35mn travelers were screened weekly at US airports this year through the end of November, according to the US Transportation Security Administration (TSA) — a 6.2pc increase from the same 11-month period in 2019, before the Covid-19 pandemic curtailed domestic and international flights. Passenger screenings have exceeded 2019 levels consistently since the summer of 2023. Yet US jet fuel products supplied — a proxy for demand — remains stubbornly below pre-Covid-19 levels, despite the rise in traffic. Weekly jet fuel products supplied this year through 13 December was 1.66mn b/d, down by 6.5pc from daily demand in full-year 2019, according to US Energy Information Administration (EIA) data. This slower recovery in jet demand relative to rising passenger numbers may be driven by several factors, including airlines carrying more passengers than in the past, as well as steady improvements in aircraft fuel efficiency. More seats, more flyers Many US airlines have increased flying capacity, as measured by available seat miles (ASMs), since pre-pandemic levels, while load factor — the percentage of seats filled by passengers — has been stable to lower compared with 2019. United Airlines' 2024 third quarter ASMs were up by 14pc at 81.54bn compared with the same three months in 2019. United's load factor was down by 0.8 percentage points to 85.3pc in the same period. Rival US carriers American Airlines and Southwest Airlines similarly posted capacity increases of 14pc and 15pc, respectively, compared with the third quarter of 2019. American's load factor was unchanged at 86.6pc, while Southwest saw a decline of 2.3pc to 81.2pc. Airlines have also made fuel efficiency improvements in recent years. This is in part from the retirement of many older airplane models during the lean years of the pandemic, combined with delivery of newer, more efficient models in more recent years. Southwest Airlines' third quarter fuel efficiency improved by 1.5pc year-over-year, the company said in October. Southwest improved its fuel efficiency with the delivery of nine Boeing MAX 8 aircraft in the third quarter while retiring 15 older planes. The MAX 8's and MAX 9s have average fuel efficiencies of 96 and 101 seat miles per USG (sm/USG), respectively. That would make them 23pc and 30pc more efficient than older planes they may have replaced, such as the Boeing 737-800, with a 78 sm/USG. Other airlines are also refreshing their fleets with newer, more fuel-efficient planes. American Airline's mainline fleet at the end of the third quarter grew by 2.2pc from a year earlier to 971 aircraft. It took in 600 new aircraft from 2013 to 2023, including 31 new planes in 2023. United Airline's third-quarter fleet was similarly 3.4pc larger than a year earlier. But there are limits to this growing efficiency. Globally the average age of airline fleets has risen to 14.8 years, according data from the International Air Transport Association (Iata) — up from 13.6 years in 1990-2024. This is due largely to the steep dropoff in new plane deliveries as aircraft manufacturers struggled with supply chain issues and high costs from the pandemic. Boeing, a chief provider of planes for many US airlines, had a spate of production disruptions in 2024, including a multi-week strike this past fall, that slowed the delivery of newer aircraft. But even a trickle of newer models would gradually affect fuel efficiency, potentially continuing to hold gains in fuel consumption below the rate of passenger growth. By Jared Ainsworth Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: MEH-Midland spread to remain wider in 2025

26/12/24

Viewpoint: MEH-Midland spread to remain wider in 2025

Houston, 26 December (Argus) — WTI Houston's premium to WTI in Midland, Texas, is set to hold at 50¢/bl or wider in 2025, boosted by swelling volumes headed toward the Gulf coast as Houston grows in importance as a center for price discovery. The locational spread between WTI Houston and Midland rose steadily throughout 2024, averaging 49¢/bl year-to-date and widening as high as $1.41/bl during the June trade month as the 1.5mn b/d Wink-to-Webster pipeline was taken offline for repairs. In 2023, the spread averaged 21¢/bl. Trading activity for WTI at Oneok's Magellan East Houston (MEH) terminal — both in the physical and financial markets — climbed to all-time highs in 2024. Reported trade month volumes for WTI Houston swelled to 1.26mn b/d during the December trade cycle, a high for the year, and just 0.8pc below its previous record. On 16 December, WTI Houston trade closed the day at 153,000 b/d for the January trade cycle, the highest single-day trade volume in the history of Argus assessments of the grade. In financial markets, WTI Houston trade activity broke records in 2024, with open interest on CME's WTI Houston futures contract climbing to an all-time high of 412,519 lots — each 1,000 bl — on 21 November. MEH demand up despite export slowdown Trading activity broke records even as US crude exports slowed in the latter half of 2024 on Chinese economic woes that dampened Asian demand. New Chinese stimulus initiatives, namely relaxed fiscal and monetary policy , are meant to reverse that trend, but it remains to be seen if the efforts will work. Further challenges weighing on the US export market are a strengthening dollar combined with a high degree of uncertainty surrounding president-elect Donald Trump's proposed tariff plans, which feature ratcheting-up trade tensions with China even more. Multiple projects to add Permian takeaway capacity at the Texas Gulf coast are in various stages of planning, which could eventually open the window for ever-larger WTI export volumes, and further support WTI Houston against Midland. But industry participants have grown skeptical of the need for new export terminals or other projects. Midstream companies showed little enthusiasm for pitching new coast-bound pipelines from the Permian basin in their end-of-year investor reports . Key firms previously sought more takeaway capacity before the Covid-19 pandemic, when WTI Houston premiums to WTI in Midland consistently topped $1/bl, which would help recoup pipeline construction costs. As it stands, the roughly 3mn b/d total available pipeline capacity from the Permian basin to the Houston area is likely to remain static in coming years. This status quo for onshore infrastructure will help prop open the Houston-Midland WTI premium for the coming year, even if export demand fails to picks up in 2025. By Gordon Pollock WTI Houston-WTI Midland spread Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US tariffs may push more Canadian crude east

26/12/24

Viewpoint: US tariffs may push more Canadian crude east

Singapore, 26 December (Argus) — Canada may divert crude supplies from the US to Asia-Pacific via the Trans Mountain Expansion (TMX) pipeline in 2025, should president-elect Donald Trump impose tariffs on Canadian imports. Trump has declared that he will implement a 25pc tax on all imports originating from Canada after he is sworn into office on 20 January. This will effectively add around $16/bl to the cost of sending Canadian crude to the US, based on current prices, and impel US refiners to cut their purchases. The US imported 4.57mn b/d of Canadian crude in September, according to data from the EIA. Canadian crude producers are expected to turn to Asian refiners in their search for new export outlets. This is especially after Asian refiners gained easier access to such cargoes following the start-up of the 590,000 b/d TMX pipeline in May. The new route significantly shortens the journey to ship crude from Canada to Asia. It takes about 17 days for a voyage from Vancouver to China, compared with 54 days from the US Gulf coast to the same destination. China has become the main outlet for Asia-bound shipments from Vancouver, accounting for about 87pc of the 200,000 b/d exported over June-November, according to data from oil analytics firms Vortexa and Kpler (see chart). But even if the full capacity of the TMX pipeline is utilised to export crude to Asia from Vancouver, it will still only represent a fraction of current Canadian crude exports to the US. Vancouver sent just 154,000 b/d via the TMX pipeline to US west coast refiners over June-November, Vortexa and Kpler data show. Meanwhile, latest EIA figures show more than 2.63mn b/d of Canadian crude was piped into the US midcontinent in September, while US Gulf coast refiners imported 469,000 b/d. This means Canadian crude prices will likely come under downward pressure from higher costs for its key US market, should Trump's proposed tariffs come to pass. This will further incentivise additional buying from Chinese customers, as well as other refiners based elsewhere in Asia-Pacific. India, South Korea, Japan, and Brunei have already imported small volumes of Canadian TMX crude in 2024. A question of acidity But other Asian refiners have so far been reluctant to step up their heavy sour TMX crude imports because of concerns over the high acidity content. China has been mainly taking Access Western Blend (AWB), which has a total acid number (TAN) as high as 1.6mg KOH/g. Acid from high-TAN crude collects in the residue at the bottom of refinery distillation columns where it can corrode units, which deters many refineries from processing such grades. But Chinese refiners have been able to dilute the acidity level by blending their AWB cargoes with light sweet Russian ESPO Blend, allowing them to save costs compared to buying medium sour crude from the Mideast Gulf. Cold Lake, the other grade coming out of the TMX pipeline, has a lower TAN and is currently popular with refiners on the US west coast. But higher costs from potential tariffs could prompt Cold Lake exports to be redirected from the US to buyers in South Korea, Japan, and Brunei — which had all bought the grade previously. Canadian crude appears to have so far displaced medium sour grades in Asia-Pacific, and this trend is expected to continue should TMX crude flows to the region climb higher in 2025. More Canadian crude heading to Asia may displace and free up more Mideast Gulf medium sour supplies to buyers in other regions, including US refiners looking for replacements to their Canadian crude imports. This will also limit the flows of other arbitrage grades like US medium sour Mars crude to Asia-Pacific, which has already seen exports to Asia dwindle in 2024. Opec+ is also due to begin unwinding voluntary production cuts in April 2025, which means Canadian producers will likely have to lower prices sufficiently to attract buyers from further afield. By Fabian Ng TMX exports from Vancouver (b/d) Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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