02-02-2019

US sanctions on Venezuelan oil industry pushes Houston ex-wharf IFO 380 to monthly high

US sanctions on exports of crude and crude products from Venezuela were seen priced into Houston IFO 380, bunker sources said.

“I think Houston is finally reacting to the Venezuela news,” a trader source said.

Houston IFO 380 pricing hit a monthly high of $386/mt Wednesday, marking a 17.5% climb from the monthly low of $318.50/mt on January 2. The market rebounded higher on congestion and tight availability from weather disruptions.

Market feedback attributed the increases partly to confusion about what the sanctions meant to the exports from the country.

PDVSA produces fuel oil and downstream bunker fuel.

At least one trader questioned the two-month grace period on cargoes.

Sources were also concerned how the order would affect fuel oil already in the US storage.

US Executive Order 13850 allows a “wind down” period for all operations or existing contracts to be completed between January 28 and March 29, 2019, involving PDVSA and the US entities.

The order also regulates the transfer of funds between PDVSA and US financial institutions.

A second trader source said fuel oil availability to the US Gulf was going to be tough.

Still market sentiment was that the impact would be shortlived as other sources of fuel oil would be found to fill in the gap, including from neighboring Mexico.

“I think prices will probably firm up at first, as is already happening and then could calm down some if inventories don’t drop much and domestic production keeps pace,” a third source said.

Pricing indications for marine fuel in Venezuelan ports were quoted at $362.62/mt for RMG 380, RME 180 at $410.40/mt and MGO at $616.81/mt. Per company distributed email to buyers, PDVSA offers ex-pipe and barge basis marine fuel in several ports with varying delivery fees. Pricing has remained stable since at least the beginning of 2019 per posted prices.

The PDVSA press office did not immediately return a call seeking comment Thursday.
Source: Platts

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