US turns screws on Venezuela as Florida beckons
The election-minded US government is tightening its screws on Venezuela in a controversial strategy that appeals to hawkish Latino voters in Florida but divides their compatriots inside the impoverished country.
From diesel supply to an environmentally sensitive crude transshipment, President Donald Trump's administration is seeking to seal off Venezuelan president Nicolas Maduro's access to the oil market. The moves are expedient pre-election optics but will not spark regime change in Caracas, Venezuela watchers in Washington tell Argus.
As of this week, the US has effectively ended a sanctions exemption for diesel supplied by non-US companies under transactions that had been permitted on humanitarian grounds since the US imposed oil sanctions on Venezuela in early 2019.
India's Reliance Industries was a key diesel supplier in swap transactions for Venezuelan crude, while Spain's Repsol and Italy's Eni were lifting crude as payment from Venezuela's state-owned PdV for their natural gas production and historical debts, with diesel shipped back to balance their books.
"We are trying to stop the export of crude by the Maduro regime in Venezuela, and one of the ways we are trying to stop it is to prevent people from swapping various products for it, not just paying cash for it. So swapping debt, swapping diesel," US special envoy to Iran and Venezuela Elliott Abrams told reporters today.
Because the imported low-sulfur diesel is used for power generation, municipal water supply, agricultural activity, some food distribution and public transport, human rights groups — including UN High Commissioner for Human Rights Michelle Bachelet — had been urging the White House for months to maintain the exception.
That position was recently echoed by Miguel Pizarro, the Venezuelan opposition's UN envoy. Local Venezuelan farmers and businessmen, already hit by a severe gasoline shortage, have warned of dire consequences.
But other senior figures in the US-supported interim government led by Juan Guaido — including influential former political prisoner Leopoldo Lopez, now in self-imposed exile in Spain — support tougher measures to oust Maduro, whom they blame for the once-prosperous country's grave humanitarian crisis.
Aside from the loss of the imported diesel itself, detractors say the situation will open more avenues for opaque oil transactions. Crude exports are already tumbling and storage tanks full. And Repsol and Eni will have no sanctions-permitted mechanism to secure payment for their Venezuelan gas production. With only sporadic high-sulfur diesel production from PdV's crippled refineries, little onshore gas flow and only a partially functional network to distribute the gas, western Venezuela in particular will be pummeled by more blackouts and a loss of domestic gas supply.
Risky business
On the other side of Venezuela, the US is similarly resisting international calls to transfer 1.3mn bl of Venezuelan crude from the impaired Nabarima floating storage unit, which is at risk of causing a catastrophic oil spill in the Gulf of Paria.
Eni, which is PdV's minority partner in the Corocoro offshore field where the vessel has been moored for a decade, wants formal US assurances that the company and its contractors would not trigger sanctions by offloading the oil. Talks with the US State Department have been underway for weeks. Without a swift agreement, Eni's proposal will become obsolete, because PdV is already transferring the oil in a risky barge-based process guarded by the Venezuelan military.
The State Department's Bureau of Western Hemisphere Affairs said today that "Eni is under no sanctions risk to begin immediate emergency repairs to the vessel. We hope a resolution can be found soon."
No mention was made of authorizing an oil transfer.
Eni has said it is ready to carry out the safe transfer once it has approval from the US as well as PdV as the operator of the PetroSucre joint venture.
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Mexico economy showing 'timid growth': IMEF
Mexico economy showing 'timid growth': IMEF
Mexico City, 3 July (Argus) — Indicators of Mexico's non-manufacturing and manufacturing sectors suggested the economy recovered "some dynamism" in June, while maintaining the slow pace of growth of the second quarter, according to domestic financial association IMEF. "The trend suggested by the IMEF indicators suggest a moderate growth for the second quarter of the year," IMEF said. "The economy finds itself in an evident pause compared with the solid dynamism observed during 2022 and a large part of 2023." Manufacturing "stagnated" in the second quarter, it said. "It is very probable that economic activity will undergo additional slowdown in the second half of the year that will extend into 2025." IMEF's June manufacturing purchasing managers index (PMI) increased by 0.4 points to 49.5 points, still beneath the 50-point breakeven that shows contraction. This has been the third consecutive month of contraction. PMI adjusted to compensate for variations in company size was more positive, growing by 0.8 points to 51.2 in June, the group said. Manufacturing accounts for about a fifth of the Mexican economy. The non-manufacturing PMI, which covers the lion's share of the economy, rose by 0.6 points to 51 in June, marking a 29th month of expansion, IMEF said. Adjusted for company size, the headline services PMI rose by 0.9 to 5.18. Economic activity in Mexico continues to surprise downwards. After growth came in at an annual 1.6pc in the first quarter from a year earlier, the first data for April showed a monthly contraction of 0.6pc, IMEF said. Headwinds and tailwinds IMEF representatives highlighted growing market uncertainty following the Mexican election and ahead of the US presidential election in November. On the upside, said IMEF, Mexico should benefit from continued strength in the US economy, adding the incoming administration looks to bring down the current fiscal deficit, which is equal to 5.9pc of GDP. For which, it will not reach the government's 3pc target for the budget coming out in November, but progress is expected with next year's budget and moving forward. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Nigerian Dangote refinery seeks more US WTI crude
Nigerian Dangote refinery seeks more US WTI crude
London, 3 July (Argus) — Nigeria's 650,000 b/d Dangote refinery has issued a tender seeking US crude WTI for delivery in August and September. The company is requesting 1mn bl or 2mn bl cargoes of the light sweet grade to be delivered on 1-10, 11-20 and 21-31 August, as well as 1-10 September. The tender closes on 4 July. It is Dangote's second WTI tender. The first sought 2mn bl/month over a 12-month period starting in July. Some traders said the initial tender was not awarded, but this has not been confirmed. The Dangote refinery started up at the end of 2023 and received its first crude cargo on 6 December. It aims to reach throughput of around 350,000 b/d in its first phase of operations. Argus tracking indicate it is almost at that level, having received close to 350,000 b/d in June , of which 140,000 b/d was WTI. Vortexa data show crude deliveries to the refinery have averaged just over 200,000 b/d so far this year, with WTI accounting for 27pc of the total. Dangote had expected to run mainly on Nigerian crude. But WTI is often more competitively priced despite additional costs to ship the grade. WTI was on average 35¢/bl cheaper on a delivered-Europe basis than Nigeria's flagship Qua Iboe on a fob basis during May-June. By Lina Bulyk Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Oman's Duqm refinery on track to run above capacity
Oman's Duqm refinery on track to run above capacity
Dubai, 3 July (Argus) — Oman's 230,000 b/d Duqm refinery is looking to operate at 10pc above nameplate capacity and is considering diversifying its product portfolio, according to its operator. Omani-Kuwaiti joint venture OQ8's chief executive David Bird told Argus the capacity expansion would be pursued in the near term, with some already opening up in coking and hydrocracker units. The 10pc crude capacity increase is "my COO's [key performance indicator] for this year and I think we all have very high confidence that we'll be able to sweat the assets further," Bird said. "We may even look at intermediate feedstocks and bring in VGOs and residues in order to load up these two conversion units." The $9bn refinery, which hit capacity in February, uses feedstock comprised of 65pc Kuwaiti crude and 35pc Omani crude. Bird said Duqm may add new products to its existing, middle distillates-focused, output of jet fuel, gasoil, naphtha and LPG. "We are looking at structuring, doing something with naphtha," he said. "We are evaluating either reformate or gasoline, which have already gone through feasibility and are now under stage-gate review to decide if we should pursue those investment decisions." Bird also pointed to possibilities in base oils, which he said will be needed "as long as things are moving." "The Middle East has a unique opportunity to capitalize on Group I and Group III base oils," he said, noting Duqm's proximity to growing demand markets in Africa. "If Duqm was to look at expanding capacity, which definitely would still be in middle-distillate oriented space, we would talk about another hydrocracker that might be orientated towards base oil," Bird said. Oman is also developing a petrochemical complex with Saudi Arabia's Sabic and Kuwaiti state-owned KPI, which will use some of the Duqm refinery's production as feedstock. Feasibility for the project has concluded and has been "intimately evaluated" along with a naphtha upgrade, and Bird described them as "very complimentary." Close eye on Europe Bird said that while there is a "huge thirst of our products right at our doorstep", Duqm cargoes are finding their way to destinations that were not previously envisaged. Around 45pc of Duqm's diesel goes to east Africa, but loadings for Europe have begun more recently. Duqm can make European grade winter-specification diesel and is on track to capitalise on demand during the switch from summer grade this year. "When it comes to winter-spec diesel, if the arbitrage opens we can supply that competitively versus anyone else," Bird said. "So we always have an eye on Europe but we're also going to make sure that we are active in markets that are closer to home." By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India’s Gail seeks swap for August-loading LNG
India’s Gail seeks swap for August-loading LNG
Singapore, 3 July (Argus) — Indian state-controlled gas distributor Gail is offering a LNG cargo loading in the US in August, in exchange for a cargo for delivery to India in the same month. Gail is offering a cargo loading on 9 August from the US' 33mn t/yr Sabine Pass terminal in exchange for a 15-18 August delivery to the 5mn t/yr Dhamra terminal, through a tender that will close on 4 July. The firm was last in the market to seek a swap just last month, for the exact same delivery windows. Gail already issued this tender twice in June, but may have been unsuccessful in awarding the tender both times. Gail remains focused on issuing destination swap tenders to optimise its contracted US volumes. But falling spot prices may compel the firm to emerge for outright spot purchases in time to come. Indian state-controlled firm Gujarat State Petroleum (GSPC) likely purchased a 20-31 August delivery to the 5mn t/yr Mundra terminal at around $11.60-11.70/mn Btu, through a tender that closed on 2 July, traders said. The requirement was likely to fulfil captive demand from its subsidiary city gas supplier Gujarat Gas, they added. This transaction level is markedly lower than the previous spot transaction to India just last week. Indian state-controlled refiner BPCL purchased a delivery either on 30 July or 7, 8, 9, 11 August at around low-$12s/mn Btu, through a tender that closed on 26 June. Spot demand from India will likely fall in the weeks and months to come as the monsoon season has began in the country. More rains will increase hydropower generation, weigh on the need for additional gas-fired power generation as well as lower temperatures and reduce cooling demand, traders said. The Argus -assessed price for deliveries to India and the Middle East was last at $11.89/mn Btu for the second half of August on 2 July, about 3¢/mn Btu higher than a week earlier, but 20¢/mn Btu lower than a recent peak on 27 June. By Rou Urn Lee Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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