An estimated 7 million barrels of Venezuelan oil are tankers, floating with no destination. Tankers full of heavy oil left in the lurch as a result of US sanctions in respect of the supply from Venezuela. Sanctions ruin the tankers that transport oil around the world, the result of forcing down energy prices.
Last Monday, the U.S. imposed sanctions on state oil company of Venezuela Petroleos De Venezuela S. A. (PDVSA abbreviated), trying to deprive the regime of Nicolas Maduro of the money that he needs in order to cling to power.
The sanctions effectively froze all the assets of PDVSA in the United States and require that any money earned in the transactions between the company and American firms, were kept the accounts of the escrow, which will not be available until long as Maduro remains in power.
In addition to complicating oil exports from Venezuela, the sanctions also complicate and increase the cost to U.S. companies sending fuel products, known as the diluents in the opposite direction.
The goal was to strangle the “Golden goose” of Maduro, but the unintended consequence of this plan has led to the fact that oil tankers are sailing around the Caribbean, not knowing where they should go to try to unload their tanks.
To kill time in the Caribbean
According to the website vessel monitoring TankerTrackers.com about a dozen oil tankers idling off the coast of Venezuela or other places in the Caribbean and the Gulf of Mexico, about half of which is loaded with Venezuelan oil, which is suddenly nowhere to go.
Under normal conditions the vast majority of Venezuelan oil is intended for oil refineries on the Gulf coast of the United States. Given the fact that these customers actually blocked, heavy oil is difficult to find alternative customers.
The blends vary greatly in chemical composition and close to Venezuela are not many refineries that could process heavy mixture produced in the country. Most of the factories are located in USA, which are connected with the sanctions. Many Chinese and Indian refineries is also calibrated for the processing of this oil and, likely, with pleasure would buy it, but the cost of transportation across the Pacific ocean makes this prospect unattractive.
TankerTrackers States that large tankers would often spend several days loading and unloading in Venezuela – or anywhere else in the world. But the huge number of ships waiting for the end of the dispute, beyond the fact that many observers of the industry believe is normal.
The Reuters news Agency on Monday estimated that approximately seven million barrels of oil are currently in tankers in the Gulf of Mexico, while the court decides where they will go with his load and who would pay for it.
The sanctions are hurting and the side of the importer. For transportation it is necessary to mix the thick and heavy oil of Venezuela with diluents, and Venezuela imports almost all of these diluents from abroad. The supply of diluent is also now subject to sanctions.
Economist Rory Johnston from Scotland says that the strange shipping operations shows that the sanctions seem to have caught everyone by surprise.
“Theoretically, we should see how these tankers are redirected, but these vessels will not are going,” he said in an interview.
Under normal circumstances in the global oil market are more than enough buyers and sellers to find a new balance at any time when there is a violation at the scale of about 500 000 barrels of oil that Venezuela usually sends in the US every day. But the current situation is not normal.
“These tankers are not going anywhere [and] all the stops,’ said Johnston, “that means that the impact on the oil market will be more than we thought.”
The growth of the appetite for canadian heavy oil
This is especially true for Canada. The mixture of heavy oil of Venezuela is very similar to the type received from the canadian oil Sands, known as Western Canada Select. Thus, theoretically, all of these U.S. refineries are specially designed for heavy Venezuelan oil, should have more interest in canadian WCS.
The mandatory limit production announced by the Alberta government late last year has already led to higher prices for WCS before the introduction of sanctions against Venezuela, and the gap in prices between light and heavy oil in the Persian Gulf becomes even less.
“Theoretically, you’ll collect more and more of that heavy canadian oil by rail to the Gulf,” said Johnston, “but we’re not going to fill in all half a million barrels a day.”
While canadian producers are likely to receive some benefit from the sanctions and unrest, the idle fleet of oil tankers will have on the market all sorts of unintended consequences.
“Everything happens so fast that everything is more or less just paralysed … what about … where to go next,” said Johnston.
“Judging by the way everything was jammed, it’s not like someone had a plan in case of unforeseen circumstances.”
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