Venezuela skirts US sanctions by funneling oil sales via Russia

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Reuters

KEY POINTS
  • President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power.
  • The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia.
  • Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.
RT: Venezuela's President Nicolas Maduro 180302
Venezuela’s President Nicolas Maduro talks to the media after a meeting for signing an agreement on guarantees for the vote at the National Electoral Council (CNE) headquarters in Caracas, Venezuela March 2, 2018.
Marco Bello | Reuters

President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power, according to sources and documents reviewed by Reuters.

The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia as the United States tightens a financial noose around Maduro, who it describes as a dictator.

With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on state oil company PDVSA in January.

Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenues. Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela.

Since January, Maduro’s administration has been in talks with allies in Moscow about ways to circumvent a ban on clients paying PDVSA in dollars, the sources said. Russia has publicly said the U.S. sanctions are illegal and it would work with Venezuela to weather them.

Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.

The Russian energy giant pays PDVSA immediately at a discount to the sale price avoiding the usual 30-to-90 day timeframe for completing oil transactions and collects the full amount later from the buyer, according to the documents and sources.

“PDVSA is delivering its accounts receivable to Rosneft,” said a source at the Venezuelan state firm with knowledge of the deals, who spoke on condition of anonymity for fear of retaliation.

Major energy companies such as India’s Reliance Industries – PDVSA’s largest cash-paying client – have been asked to participate in the scheme by paying Rosneft for Venezuelan oil, the documents show.

Rosneft, which has heavily invested in Venezuela under President Vladimir Putin, did not immediately respond to a request for comment.

Venezuela’s oil ministry, its information ministry, which handles media for the government, and PDVSA did not respond to questions.

Asked about the transactions, a spokesperson for Reliance said it had made payments to Russia and Chinese companies for Venezuelan oil. The spokesperson said the payments were deducted from money owed by Venezuela to those countries, but did not provide further details.

“We are in active dialogue with the U.S. Department of State on our dealings on Venezuelan oil to remain compliant with U.S. sanctions,” the spokesperson said.

Oil prices slip amid ample US output, Brent drifts away from five-month high

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Reuters

KEY POINTS
  • Brent crude futures were at $71.42 a barrel at 0235 GMT, down 20 cents, or 0.3 percent, from their last close. Brent fell 0.1 percent on Wednesday, after earlier touching its highest since Nov. 8 at $72.27 a barrel.
  • U.S. West Texas Intermediate (WTI) crude futures were at $63.69 per barrel, down 7 cents, or 0.1 percent, from their previous settlement. WTI closed the last session down 0.5 percent.
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An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters

Oil prices dropped on Thursday as the impact of plentiful U.S. production offset a surprise decline in U.S. inventories, leaving international benchmark Brent retreating from a five-month high touched in the previous session.

Brent crude futures were at $71.42 a barrel at 0235 GMT, down 20 cents, or 0.3 percent, from their last close. Brent fell 0.1 percent on Wednesday, after earlier touching its highest since Nov. 8 at $72.27 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $63.69 per barrel, down 7 cents, or 0.1 percent, from their previous settlement. WTI closed the last session down 0.5 percent.

U.S. crude inventories fell by 1.4 million barrels in the week to April 12, compared with analyst expectations for an increase of 1.7 million barrels, Department of Energy (DoE) showed on Wednesday.

“A persistent rise in U.S. oil output, together with lingering demand-side concerns emerging from the U.S.-China trade dispute, is limiting price gains, ” Abhishek Kumar, Head of Analytics at Interfax Energy in London.

While official data on Wednesday showed China’s economy grew by 6.4 percent in the first quarter, defying expectations for a further slowdown, talks on a U.S.-China trade deal have yet to bear fruit.

While the U.S.-China trade war has rumbled on, prices have been supported this year by an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to limit their oil output by 1.2 million barrels per day.

Global supply has also been tightened further by U.S. sanctions on OPEC members Venezuela and Iran.

Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.

Surging U.S. production has filled some of the gap in supplies, although not all of the lost production can be immediately replaced by U.S. shale oil due to refinery configurations.

“The unexpected drawdown in U.S. commercial crude oil stocks was balanced by lower-than-expected withdrawals in the country’s gasoline and distillate inventories,” Kumar said.

Gasoline stocks fell by 1.2 million barrels, less than analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell 362,000 barrels, also not as much as forecasts for a 846,000-barrel drawdown, the EIA data showed.

Net U.S. crude imports fell last week by 659,000 barrels per day.

Oil slips to $71, hit by talk of higher OPEC+ production

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Reuters

KEY POINTS
  • Analysts expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase.
  • Oil fell Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed.
  • OPEC and its allies are due to meet in June to decide whether to continue the arrangement.
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Andrew Burton | Getty Images

Brent oil slipped to around $71 a barrel on Tuesday, pressured by expectations of higher U.S. inventories and concern about Russia’s willingness to stick with OPEC-led supply cuts.

Analysts on average expect U.S. crude stockpiles to have risen by 1.9 million barrels last week, the fourth straight increase. The first of this week’s stockpile reports is due at 2030 GMT from the American Petroleum Institute.

“We have already seen these inventories going higher in the last week’s print,” said Naeem Aslam, chief market analyst at TF Global Markets in London.

“The rising inventory data has raised many questions for investors – no one wants to see the oil glut again.”

Brent crude, the global benchmark, was down 12 cents at $71.06 a barrel at 0801 GMT. U.S. West Texas Intermediate (WTI) crude gained 6 cents to $63.46.

While OPEC-led supply cuts have boosted Brent by more than 30 percent this year, gains have been limited by worries that slowing economic growth could weaken demand for fuel.

Oil also fell on Monday after comments from Russia raised concern the OPEC-led supply-cutting pact may not be renewed. Russia and the producer group may decide to boost output to fight for market share with the United States, TASS news agency ited Finance Minister Anton Siluanov as saying.

The Organization of the Petroleum Exporting Countries and other producers including Russia, an alliance known as OPEC+, have been cutting output since Jan. 1. They decide in June whether to continue the arrangement.

“There is a growing concern that Russia will not agree on extending production cuts and we could see them officially abandon it in the coming months,” said Edward Moya, senior market analyst at OANDA.

Oil edges lower as supply concerns check losses

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Reuters

KEY POINTS
  • Oil prices edged lower on Monday after international benchmark Brent hit a fresh five-month high in the previous session, but concerns over global supplies provided a floor to losses.
  • Brent crude oil futures were at $71.40 a barrel at 0015 GMT, down 15 cents, or 0.2 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude futures were at $63.60 per barrel, down 29 cents, or 0.5 percent, from their last settlement. WTI rose 0.5 percent on Friday.
RT: Oil refinery Libya 131218
Ismail Zitouny | Reuters

Oil prices edged lower on Monday after international benchmark Brent hit a fresh five-month high in the previous session, but concerns over global supplies provided a floor to losses.

Brent crude oil futures were at $71.40 a barrel at 0015 GMT, down 15 cents, or 0.2 percent, from their last close. Brent closed up 1 percent on Friday when prices hit a high of $71.87 a barrel, the highest since Nov. 12.

U.S. West Texas Intermediate (WTI) crude futures were at $63.60 per barrel, down 29 cents, or 0.5 percent, from their last settlement. WTI rose 0.5 percent on Friday.

The head of Libya’s National Oil Corp warned on Friday that renewed fighting could wipe out crude production in the country.

“Supply side issues remained a concern for the market. Libyan rebel leader Khalifa Haftar moved forces closer to Tripoli,” ANZ Bank said in a research note.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies meet in June to decide whether to continue withholding supply. OPEC, Russia and other producers, an alliance known as OPEC+, are reducing output by 1.2 million bpd from Jan. 1 for six months.

OPEC’s de facto leader, Saudi Arabia, is considered keen to keep cutting, but sources within the group said it could raise output from July if disruptions continue elsewhere.

Russia’s Finance Minister Anton Siluanov was quoted by the TASS news agency as saying on Saturday that Russia and OPEC may decide to boost production to fight for market share with the United States but this would push oil prices as low as $40 per barrel.

Oil prices fall on surging US crude supply, economic slowdown

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Reuters

KEY POINTS
  • International benchmark Brent futures were at $71.44 per barrel at 0424 GMT, down 29 cents, or 0.4 percent, from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $64.28 per barrel, down 33 cents, or 0.5 percent, from their previous settlement.
RT: Oil Russia Bashneft company 150128
Sergei Karpukhin | Reuters

Oil prices fell on Thursday, pressured as U.S. crude stockpiles surged to their highest levels in almost 17 months amid record production and as economic concerns cast doubt over growth in demand for fuel.

International benchmark Brent futures were at $71.44 per barrel at 0424 GMT, down 29 cents, or 0.4 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $64.28 per barrel, down 33 cents, or 0.5 percent, from their previous settlement.

U.S. crude inventories rose 7 million barrels to 456.6 million barrels in the last week, their highest since November 2017, the Energy Information Administration said on Wednesday.

U.S. crude oil production remained at a record 12.2 million barrels per day (bpd), making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

There are also concerns that an economic slowdown will soon dent fuel consumption after the International Monetary Fund this week downgraded its global growth forecast to the lowest in a decade.

Despite the surge in U.S. supply and the economic concerns, global oil markets remain tight amid supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), U.S. sanctions on oil exporters Iran and Venezuela, and escalating fighting in Libya.

”(Oil markets will remain tight) as long as Saudi Arabia continues to back the production cut deal as aggressively as it has done so far,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Brent and WTI have risen by around 30 and 40 percent respectively since the start of the year.

“Pressure to global supplies continues to mount because of sanctions-linked problems in Iran and Venezuela and rising geopolitical risk in Libya,” said Stephen Innes, head of trading at SPI Asset Management.

Beyond the short-term outlook for oil markets, a lot of attention is on the future of demand amid the rise of alternative fuels for transport.

“We believe global demand has another 10 million barrels bpd of growth, with over half from China,” Bernstein Energy said in a note on Thursday.

Current oil demand stands around 100 million bpd.

Bernstein said it expected oil demand to peak around 2030, but added that “we expect a long plateau rather than a sharp decline” in consumption after that.

“While no industry lasts forever, the age of oil is far from over,” Bernstein said.