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Exclusive: Venezuelan petrochemicals arrive in U.S. despite Washington trade curbs

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Exclusive: Venezuelan petrochemicals arrive in U.S. despite Washington trade curbs
© Reuters. FILE PHOTO: An oilfield worker walks next to drilling rigs at an oil well operated by Venezuela’s state oil company PDVSA, in the oil rich Orinoco belt, April 16, 2015. REUTERS/Carlos Garcia Rawlins

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By Marianna Parraga and Deisy Buitrago

HOUSTON/CARACAS (Reuters) – Venezuelan petrochemicals produced by joint ventures between state-run chemical firm Pequiven and foreign partners have arrived in the United States, despite Washington’s efforts to limit trade with the OPEC oil and gas producer.

At least two cargoes of methanol, a widely used industrial product whose prices have soared this year, have discharged at Houston area ports since October amid a rapid expansion of the South American country’s global sales of petrochemicals and oil byproducts, according to tanker tracking and U.S. customs data.

The shipments represent a new and unreported effort by Venezuela to boost revenues despite U.S. sanctions on its oil industry that cut vital crude exports to the lowest in 77 years.

U.S. sanctions were designed to oust President Nicolas Maduro, whose last election Washington views as a sham. Maduro insists the 2018 vote was free and fair.

Mitsubishi Corp resumed exports of methanol to the United States in 2021 from its Venezuelan joint venture Metor after a suspension of a couple years, a Mitsubishi spokesperson told Reuters. Metor’s shareholders include Petroquimica de Venezuela, or Pequiven.

Venezuela’s main oil port of Jose was listed as the point of origin on U.S. customs records of one of the two methanol shipments, but both sailed directly from Venezuela, Refinitiv Eikon tracking data showed.

Names of the buyers and sellers for the two methanol cargoes that arrived in Houston were redacted on the U.S. customs data, which were provided to Reuters by consultancy IHSMarkit.

The U.S. Treasury Department and the U.S. Customs and Border Protection agency declined to comment on the shipments.

Pequiven, which did not reply to Reuters requests for comment, said on Twitter (NYSE:) in July that Metor was exporting methanol to Europe, South America and Asia.

WIDENING SANCTIONS

A U.S. executive order in 2019 subjected the Venezuelan oil industry to sanctions and this was used to blacklist state oil company PDVSA and its subsidiaries. A subsequent order broadened sanctions to cover companies owned or controlled by the government. State-run Pequiven and Venezuela’s petrochemical operations were not specifically named.

“Metor itself should not be subject to sanctions,” said Daniel Pilarski, a partner at New York-based law firm Watson Farley & Williams LLP who specializes in cross-border transactions and U.S. trade sanctions.

“However, if Pequiven were the ultimate originator of the methanol, then there could be a risk that any shipment to the United States would be treated as the indirect receipt of goods from Pequiven, which would be a violation, even if Pequiven never received payment,” Pilarski said.

Companies exporting Venezuelan methanol to the United States could obtain a license from the U.S. Treasury to permit the trade or take other steps to ensure Pequiven was not treated as the indirect seller, he said.

Methanol, produced in Venezuela from , can be found in everyday products including gasoline, paints, carpeting and plastics. U.S. imports have outweighed exports in recent years, according to IHSMarkit.

On Oct. 7-11, tanker PVT Aurora discharged about 16,900 metric tonnes of Venezuelan methanol in Texas. A portion of the cargo was handled by Intercontinental Terminals Company’s (ITC) Deer Park chemicals terminal, according to Refinitiv Eikon data.

An ITC spokeswoman did not reply to requests for comment.

The Vietnam-flagged vessel traveled from the Jose port, which serves PDVSA and Pequiven.

RAMPING UP EXPORTS

A second 20,000-tonne cargo of Venezuelan methanol followed a similar route in November on tanker Sakura Advance, which discharged some of its cargo in Houston on Nov. 11-13 and another parcel at South Louisiana Port days later, according to the Eikon data.

Italy’s Eni also produces methanol in Venezuela via Supermetanol, its 50:50 venture with Pequiven.

“Eni’s affiliate holds a stake in a methanol plant located in Venezuela and deals with the marketing of its equity production in respect of all applicable laws and regulations related to economic and financial sanctions, trade embargoes and similar laws,” an Eni spokesperson said.

Pequiven and PDVSA have ramped up exports of petrochemicals and oil byproducts that are not as valuable as crude and until recently had not been a priority, an analysis of internal data from the two companies showed.

U.S. sanctions and warnings to traditional buyers of Venezuelan crudes sharply cut PDVSA’s exports in recent years.

But shipments of petrochemicals and oil byproducts have climbed, including exports of methanol, sulfur pastilles, urea, natural gasoline, light virgin naphtha and petroleum coke, according to the data. This was confirmed by three people familiar with the matter, who declined to be identified as they were not authorized to speak publicly.

Low prices offered to buyers for the petrochemicals from Venezuela have boosted exports, generating income that has partially been used by some of Pequiven’s joint ventures to reopen and revamp production units, the people said.

A more reliable supply of natural gas by PDVSA to Pequiven’s complexes also helped boost petrochemical output.

“The plants are in recovery process as proceeds from sales have allowed,” one of the people said. “Even the United States is opening its doors to Venezuelan methanol.”

From January to October, PDVSA and Pequiven exported about 1.75 million tonnes of petrochemicals and byproducts, putting the trade on track this year to double the 1.03 million tonnes exported for the whole of 2020, according to the internal data.

Shipments of methanol this year ranged between 20,000 and 60,000 metric tonnes per month, mostly bound for the Netherlands, Spain, Japan and China, according to the data and the three people.

Prices for Venezuelan methanol differ based on destination. They fetched $130 to $140 per tonne for November-December delivery, one of the people said. That is below U.S. spot prices, which range from $450 to $690 per tonne. Experts say prices vary widely depending on quality and delivery terms, such as freight rates.

By comparison, a tonne of benchmark Venezuelan Merey crude for November delivery had a market price of about $395.

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Caracas and Chevron will soon sign a series of contracts on crude oil production in Venezuela

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crude oil production in Venezuela

Caracas and Chevron will sign a series of contracts after Washington allowed the company to start crude oil production in Venezuela, local oil minister Tarek El Aissami said Tuesday.

According to the EFE news agency, the minister was informed of a “productive working meeting” with Chevron Venezuela head Javier La Rosa. “In the coming hours we will sign contracts to spur the development of joint ventures and oil production,” the minister said. What exactly will be in those contracts has not yet been disclosed.

The U.S. Treasury Department said earlier in November that it had allowed Chevron Corp (NYSE:CVX). To resume resource extraction activities in Venezuela on a limited scale. If it is possible to influence the world oil market in this way, the situation on the stock market, including Boeing stock price predictions, will also improve.

Note that the cost of oil production in Venezuela compared with world prices is very low. According to the document, the company is allowed to extract, transport and supply to the United States oil or oil products produced by joint ventures (JV) Chevron (the license does not allow delivery to any other countries), as well as to carry out any related maintenance and repair on the joint venture assets. Also, Chevron was granted the right to purchase and import into Venezuela goods or resources related to the above activities, including diluents, condensates, oil or natural gas products.

We previously reported that oil prices are rising on the supply and demand outlook.

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Why is oil getting more expensive? Price rises on supply and demand outlook

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why is oil getting more expensive

Global oil prices moved higher Thursday afternoon, trading data showed. Why is oil getting more expensive? Investors continue to assess the prospects for the balance of supply and demand in the market, including the OPEC+ deal.

Why have oil prices gone up so much? The price of January futures on Brent grew 0.83% to $87.69 per barrel, while February futures on WTI grew 0.87% to $81.25. Oil was getting cheaper by 0.5% in the morning.

Why have oil prices gone up so much?

Investors continue to watch the outlook for oil supply and demand. Thus, investors are waiting for the OPEC+ meeting, which is scheduled for Sunday, December 4. Traders assess whether the parameters of the oil agreement will be changed. Because the situation remains tense, even the stock market is falling. The trend can even be seen in Walt Disney stock price predictions.

Traders also fear a possible recession amid global central bank policy to raise rates due to high inflation as well as China’s measures to combat the coronavirus. The economic outlook could affect oil demand.

“The OPEC+ decision remains uncertain, but an extension of current production cuts is likely. The group will need to better understand China’s real measures on COVID before doing anything else with production levels,” Vanir Global Markets Pte. managing director James Whistler told Bloomberg. James Whistler.

Earlier, we reported that Bloomberg learned about the EU’s discussion of a $60 price ceiling on Russian oil.

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G7 countries back the price cap on Russian oil. Bloomberg found out about the discussion in the EU of the $60 price cap on Russian oil

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g7 countries back price cap on russian oil

EU member states are discussing a $60 price cap on Russian oil, Bloomberg reported, citing knowledgeable sources. G7 countries back the price cap on Russian oil.

The EU had planned to announce a price cap on Russian oil on November 23, but negotiations within the bloc were delayed. In four days, on December 5, the embargo on fuel imports to the European Union by sea will come into force. but the decision has not yet been taken and coordinated with the G7 countries, which are not members of the EU. Within the European Union, Poland, Lithuania and Estonia require lowering the bar much lower, and Greece, Cyprus and Malta, which have a very developed shipping industry, on the contrary, insist on softer conditions. Explained Bloomberg. 

It is still unclear whether both groups are willing to go to the limit of $60 a barrel, but most – agree, subject to other requirements, say agency sources. Negotiations are ongoing. The decision requires the approval of all EU members and the agreement of the decision with the G7. According to one of Bloomberg’s sources, $60 a barrel falls within a suitable range for the G7.

What does the price cap on Russian oil mean?

What does the price cap on Russian oil mean? $60 a barrel is even a bit more than what Russian oil costs on the market now, Bloomberg said. The purpose of the cap is to limit Russia’s income from selling oil while keeping it on the world’s market. And EU sanctions, if the ceiling price is not set, will prohibit maritime transport of Russian oil to third countries and insurance of these shipments. 

For the scheme to work, the ceiling must be attractive enough for Russia to continue trading; otherwise Moscow could threaten to reduce production, and this would lead to a spike in global oil prices. Bloomberg explained.

The day before the EU embargo goes into effect, OPEC+, in which Russia also sits, will meet. On November 29, sources told Bloomberg that the format of the meeting was suddenly changed to an online meeting instead of a face-to-face meeting. The sources at Bloomberg did not explain what this was about. But we note that the tension in the market is already affecting even Google stock price predictions

At the last meeting on October 5, which was the first face-to-face meeting since the beginning of the pandemic, OPEC+ went for the sharpest production reduction since 2020 – by 2 million barrels per day. 10 traders out of 17 surveyed by Bloomberg expected that new production cuts could follow at the new meeting as well.

Earlier we reported that oil prices are falling amid protests in China.

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