Commodities

Venezuela Oil Sanctions Likely to Hit Some U.S. Refiners. Profit margins for turning heavy crude into gasoline and diesel have slumped to the lowest level in more than a year


StockMarketNews.Today



⇑⇓ Stock Market News ⇑⇓


By  | Jennifer A Dlouhy

Refiners in Texas and Louisiana would be hard hit by sanctions on Venezuelan crude under consideration at the White House, a move that would leave U.S. oil companies struggling to find alternative supplies.

President Donald Trump recognized Juan Guaido as the interim president of Venezuela on Wednesday in the most provocative move yet against the leftist regime of Nicolas Maduro. Maduro responded by breaking diplomatic relations with the U.S., giving American diplomats 72 hours to leave the country.



The Trump administration has drafted a slate of sanctions but hasn’t decided whether to deploy them, said people familiar with the matter. Earlier this month, White House officials warned U.S. refiners that sanctions were being considered, and advised them to seek alternative sources of heavy crude. Some U.S. refiners worried about sanctions experimented with alternatives last year before ultimately returning to Venezuelan crude.

venezuela oil

Today’s Stock Market News

The hardest-hit would be Citgo Petroleum Corp., the refining arm of Petroleos de Venezuela SA, or PDVSA, the state-run oil company. Citgo imported the most Venezuelan crude in the first 10 months of 2018, followed by Valero Energy Corp.


⇑⇓ Start Trading ⇓⇑ – CFD Service. 80.6% lose money


Royal Dutch Shell Plc and Phillips 66 haven’t processed Venezuelan crude in their U.S. refineries since the U.S. imposed financial sanctions against the country and PDVSA in August 2017. Marathon Petroleum Corp., Total SA and Motiva Enterprises LLC cut intake by more than a half during that period, and as Venezuelan oil production slumped to the lowest levels seen since the 1940s.

Oil companies have urged the Trump administration not to limit imports of Venezuelan oil, warning the action could disadvantage Gulf and East Coast refiners designed to handle the country’s heavy crude, while also causing gasoline prices to rise.



Shutting off Venezuela imports would exacerbate a drought of the heavy, high-sulfur oil that’s preferred by Gulf Coast refiners and normally sells at a discount to higher-quality crude. Prices are already surging, after OPEC and its allies cut supply and the Canadian province of Alberta forced producers to do the same to stem global and regional gluts. Mars Blend crude rose to a five-year high versus the U.S. benchmark Wednesday, according to data compiled by Bloomberg, while the profit margin for processing Mexican Maya oil sank to the lowest in four years.

Alternatives aren’t readily available. Mexico, whose production is mired in a prolonged slump, has already increased shipments to the U.S. Gulf, surpassing Venezuela last year as the region’s top supplier. Meanwhile, Ecuadorean and Colombian crude often heads to the U.S. West Coast, leaving American refiners competing with each other.

Refiners have told allies in the White House and on Capitol Hill that a unilateral crude oil ban will disadvantage U.S. refiners without advancing U.S. policy objectives in Venezuela, because India, Russia and China will continue buying the country’s oil, according to two people familiar with the discussions.


Trading Simulator. Free Demo.


Profit margins for turning heavy crude into gasoline and diesel have slumped to the lowest level in more than a year. If refiners can’t find affordable replacements for Venezuelan oil, they may be forced to reduce production rates, according to a person familiar with the matter. That could push up fuel prices, something that the U.S. president has been particularly sensitive to.

Advertisements

6 replies »

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.