Venezuela skirts US sanctions by funneling oil sales via Russia

CNBC

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

CNBC

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.
Reusable: Oil pump jack in North Dakota 150128
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 edges higher amid tightening global supply, gains capped by economic slowdown

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures were at $70.66 per barrel at 0158 GMT, up 5 cents from their last close.
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $64.10 per barrel, up 12 cents, or 0.2 percent, above their last settlement.
RT: Oil Iraq OPEC flames 161014
Flames emerge from a pipeline at the oil fields in Basra, southeast of Baghdad, Iraq, October 14, 2016.
Essam Al-Sudani | Reuters

Oil prices crept higher on Wednesday, supported by supply cuts by producer club OPEC and U.S. sanctions against oil exporters Iran and Venezuela, but restricted by expectations that an economic slowdown could soon dent fuel consumption.

International benchmark Brent futures were at $70.66 per barrel at 0158 GMT, up 5 cents from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $64.10 per barrel, up 12 cents, or 0.2 percent, above their last settlement.

Both benchmarks hit five-month highs on Tuesday, before easing on global growth worries. [nL3N21S064]

Overall, oil markets have been tightened this year by U.S. sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers, a group known as OPEC+.

As a result, Brent and WTI crude oil futures have risen by around 40 percent and 30 percent respectively since the start of the year.

“The global oil market is clearly moving back towards balance thanks to OPEC+ production cuts. OPEC production has fallen 1.98 million barrels per day (bpd) from October levels,” ING bank said in a note.

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices.

“Venezuelan oil output is estimated to have fallen from 1.19 million bpd in October to 890,000 bpd in March, while output from Iran has fallen from 3.33 million bpd to 2.71 million bpd due to sanctions. Declines from these two exempt countries account for almost 47 percent of the reduction seen from OPEC,” ING said.

Despite the OPEC-led cuts, not all regions are in tight supply.

Oil production in the United States has risen by more than 2 million barrels per day since early 2018, to a record 12.2 million bpd.

“WTI has not seen the same strength (as Brent)… given the relatively more bearish fundamentals in the U.S. market,” said ING bank.

“U.S. crude oil inventories remain stubbornly high,” it added.

U.S. crude stocks rose by 4.1 million barrels in the week to April 5, to 455.8 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.

On the demand side, there are concerns that an economic slowdown will soon hit fuel consumption.

The International Monetary Fund (IMF) warned on Tuesday that the global economy was slowing more than expected and that a sharp downturn may be looming.

In its third downgrade since October, the IMF said the global economy will likely grow 3.3 percent this year, the slowest expansion since 2016. The forecast cut 0.2 percentage point from the IMF’s outlook in January.

Oil at five-month highs amid OPEC-led supply cuts, US sanctions

CNBC

Reuters

KEY POINTS
  • International benchmark Brent futures were at $70.72 per barrel at 0225 GMT on Monday, up 38 cents, or 0.5 percent from their last close.
  • U.S. West Texas Intermediate (WTI) crude were up 37 cents, or 0.6 percent, at $63.45 per barrel.
Reusable Oil Texas
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Oil prices rose to their highest level since Nov. 2018 on Monday, driven up by OPEC’s ongoing supply cuts, U.S. sanctions against Iran and Venezuela and strong U.S. jobs data.

International benchmark Brent futures were at $70.72 per barrel at 0225 GMT on Monday, up 38 cents, or 0.5 percent from their last close.

U.S. West Texas Intermediate (WTI) crude were up 37 cents, or 0.6 percent, at $63.45 per barrel.

Brent and WTI both hit their highest levels since November last year at $70.76 and $63.48 per barrel, respectively, early on Monday.

“Brent prices increased more than 30 percent year-to-date as OPEC+ continued to cut supply for 4 months in a row and optimism over U.S.-Chinatrade talks helped to buoy the demand outlook, ” U.S. bank J.P.Morgan said in a note released over the weekend.

The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia, known as OPEC+, have pledged to withhold around 1.2 million barrels per day (bpd) of supply this year to prop up prices.

Energy consultancy FGE said OPEC-led supply cuts meant “excess inventories are disappearing and the market looks healthy,” adding that “the market is poised for prices to rise to $75 per barrel or higher” for Brent.

Traders said strong U.S. jobs data from Friday also helped lift Asian markets early on Monday.

Oil prices have further been driven up by U.S. sanctions against OPEC-members Iran and Venezuela.

“Sanctions can cut 500,000 bpd of Venezuelan exports. Add that to a cut in Iran waivers and prices can rise substantially,” FGE said.

There remain, however, some factors that could bring prices down later this year.

Russia is a reluctant participant in its agreement with OPEC to withhold output, and Russian oil production may increase again if a deal with the producer club is not extended once it expires before July 1, Energy Minister Alexander Novak said on Friday.

Russian oil output reached a record high of 556 million tonnes, or 11.16 million barrels per day (bpd), last year.

In the United States, crude oil production reached a record 12.2 million bpd in late March.

U.S. crude exports have also risen, breaking through 3 million bpd for the first time earlier this year.

“With the new Permian pipelines (from July), we can see a boost of 500,000 to 600,000 bpd in U.S. exports,” FGE said.

There also still remain concerns about the health of the global economy, especially should China and the United States fail to resolve their trade dispute soon.

“Global (trade) demand has weakened, and existing tariffs on Chinese goods shipments to the U.S. are providing an additional drag,” credit rating agency Moody’s said on Monday, although it added that Chinese monetary stimulus measures would likely support growth over 2019.

Brent approaches $70 as oil prices rise for fourth day

CNBC

Reuters

KEY POINTS
  • Brent futures rose 35 cents, or 0.5 percent, to $69.72 a barrel by 0207 GMT, after earlier reaching $69.87, the highest since Nov. 12 and within touching distance of $70.
  • U.S. West Texas Intermediate crude rose 22 cents, or 0.4 percent, to $62.80 cents a barrel, earlier rising to $62.90, the highest since Nov. 7.
RT: Oil tankers Qi Lin Zuo of China and Sti-Matador
Oil tankers Qi Lin Zuo of China and Sti-Matador.
Lucas Jackson | Reuters

Oil prices rose for a fourth day on Wednesday, with support from OPEC-led supply cuts and U.S. sanctions overshadowing an industry report showing an unexpected rise in U.S. inventories last week.

Brent futures rose 35 cents, or 0.5 percent, to $69.72 a barrel by 0207 GMT, after earlier reaching $69.87, the highest since Nov. 12 and within touching distance of $70.

U.S. West Texas Intermediate crude rose 22 cents, or 0.4 percent, to $62.80 cents a barrel, earlier rising to $62.90, the highest since Nov. 7.

“The production cuts by OPEC plus are providing a nice backdrop here for higher prices and until we see U.S. production reassert itself, the easier move is higher for oil,” said Edward Moya, senior market analyst at OANDA.

Supply from the Organization of the Petroleum Exporting countries hit a four-year low in March, a Reuters survey found earlier this week.

Oil production from Russia, which has joined OPEC in agreeing to supply cuts to prop up prices, fell to 11.3 million barrels per day (bpd) last month, but missed the country’s target under the deal.

Three of eight countries granted waivers by Washington to import oil from Iran have cut the imports to zero, a U.S. official said on Tuesday, adding that improved global oil market conditions would help reduce Iranian crude exports further.

Vice President Mike Pence said on Tuesday the United States would continue to pressure Venezuela’s oil industry and those who support it with economic sanctions, citing world oil prices as low enough to allow for the measures.

Venezuela’s state-run energy company, PDVSA, kept oil exports near 1 million barrels per day in March despite U.S. sanctions and power outages that crippled its main export terminal, according to PDVSA documents and Refinitiv Eikon data, Reuters reported later in the day.

U.S. crude stocks rose unexpectedly last week, while gasoline and distillate inventories drew, industry group the American Petroleum Institute said late on Tuesday.

Official numbers from the U.S. Department of Energy (DoE) are due out later on Wednesday.

“As long as we don’t see a major build with the DoE crude oil inventories, we could see a clean move higher,” Moya said.