A Venezuelan Tanker Is Stranded Off The Louisiana Coast

A tanker loaded with 1 million barrels of Venezuelan heavy crude has been stranded for over a month off the coast of Louisiana, not because it can't sail but as a result of Venezuela's imploding economy, and its inability to obtain a bank letter of credit to deliver its expensive cargo. It's the latest sign of the financial troubles plaguing state-run oil company PDVSA in the aftermath of the latest US sanctions against the Maduro regime, and evidence that banks are slashing exposure to Venezuela across the board as the Latin American nation spirals into chaos.

As Reuters reports, following the recently imposed US sanctions, a large number of banks have closed accounts linked to officials of the OPEC member and have refused to provide correspondent bank services or trade in government bonds. The stranded tanker is one direct casualty of this escalation.

The tanker Karvounis, a Suezmax carrying Venezuelan diluted crude oil, has been anchored at South West Pass off the coast of Louisiana for about a month, according to Marinetraffic data.

 

For the past 30 days, PBF Energy, the intended recipient of the cargo, has been trying unsuccessfully to find a bank willing to provide a letter of credit to discharge the oil, according to two trading and shipping sources.

The tanker was loaded with oil in late June at the Caribbean island of St. Eustatius where PDVSA rents storage tanks, and has been waiting for authorization to discharge since early July, according to Reuters. It is here that the delivery process was halted as crude sellers request letters of credit from customers that guarantee payment within 30 days after a cargo is delivered.

While the documents must be issued by a bank and received before the parties agree to discharge, this time this is impossible as the correspondent bank has decided to avoid interacting with PDVSA and running afoul of the latest US sanctions. It was not immediately clear which banks have denied letters of credit and if other U.S. refiners are affected.

In an ironic coincidence, these days the state energy company of Venezuela, PDVSA, is almost as much Venezuelan as it is Russian and Chinese. Chinese and Russian entities currently take about 40% of all PDVSA's exports as repayment for over $60 billion in loans to Venezuela and the company in the last decade, as we reported last year and as Reuters recently updated. This has left U.S. refiners among the few remaining cash buyers. Meanwhile, as a result of these ongoing historical barter deals exchanging oil for refined products and loans, PDVSA's cash flow has collapsed even as the company's creditors resort to increasingly more aggressive measures to collect: just this April, a Russian state company took a Venezuelan oil tanker hostage in hopes of recouping $30 million in unpaid debt.

The first indication that the financial noose is tightening on the Caracas regime came earlier this month when Credit Suisse barred operations involving certain Venezuelan bonds and is now requiring that business with President Nicolas Maduro's government and related entities undergo a reputation risk review. In a while publicized move, this past May Goldman Sachs purchased $2.8 billion of Venezuelan debt bonds at steep discount, a move criticized by the Venezuelan opposition and other banks.

While PDVSA owns the cargo, the actual tanker was chartered by Trafigura:

Since last year, the trading firm has been marketing an increasing volume of Venezuelan oil received from companies such as Russia's Rosneft, which lift and then resell PDVSA's barrels to monetize credits extended to Venezuela, according to traders and PDVSA's internal documents.

 

Some barrels are offered on the open market, others are supplied to typical PDVSA's customers including U.S refiners.

Meanwhile, even before this latest sanctions-induced L/C crisis, Venezuela's oil exports to the US were already in freefall: PDVSA and its JVs exported only 638,325bpd to the US in July, more than a fifth, or 22% less, than the same month of 2016, according to Reuters Trade Flows data.

As for the recipient, PBF received just three cargoes for a total of 1.58 million barrels last month, the lowest figure since February. Other U.S. refineries such as Phillips 66 did not receive any cargo. The US refiner and PDVSA have a long-term supply agreement for Venezuelan oil signed in 2015 when PBF bought the 189,000-bpd Chalmette refinery from PDVSA and ExxonMobil Corp.

Earlier in the month, PBF's Chalmette refinery received half a million barrels of Venezuelan crude on the tanker Ridgebury Sally B. This second delivery got stuck on tanker Karvounis.

It is likely that soon virtually all Venezuelan cargos bound for the US will share a similar "stranded" fate as one bank after another cease providing L/C backstops to the Venezuelan company, ultimately suffocating Maduro's regime which is in dire need of dollars to keep the army on its side and prevent a revolution. As for how high the price of oil rises as Venezuela's oil production is slowly taken offline, it remains to be seen. Three weeks ago, Barclays calculated that a "sharper and longer disruption" to Venezuela oil production could raise oil prices by at least $5-7/barrell. Such a disruption appears to now be forming.

Comments

francis scott … Thu, 08/17/2017 - 18:35 Permalink

I always thought the buyer had to provide the letter of credit to receive the merchandise, not the seller.Everything is so topsy turvy, I'm not even going to check your source.

LindseyNarrate… (not verified) Grandad Grumps Thu, 08/17/2017 - 18:42 Permalink

As usual, Mr. Grumps, you are precisely correct, but my comment, below yours, expounds significantly upon your post. Also, AS USUAL, (((they))) are behind the destruction of Venezuela's economy, but you already knew that, along with "almost" everyone else, here, I AM SURE. Lindsey

In reply to by Grandad Grumps

flyingcaveman Grandad Grumps Fri, 08/18/2017 - 01:36 Permalink

Maybe Venezuela is demanding gold for oil.  Of course banks don't have any gold but the one thing, the only thing, that banks DO have is credit.  What's the problem?  It's fucking oil, something everybody uses.  And that's why VeneZuela was declared a threat to our national security.  That's the only thing that can explain this.

In reply to by Grandad Grumps

Benjamin123 flyingcaveman Fri, 08/18/2017 - 02:22 Permalink

Why would they want any gold? They need neither gold nor money, but everything you can buy with them. They might as well refill that tanker with cooking oil as payment and have it sail back to Puerto Cabello.Gold is a storage of value, you only store a surplus and it means nothing when living hand to mouth.The whole argument about pricing merchandise in dollars or gold is stupid for every producer without a surplus. It is only relevant for countries with large surpluses, like China, Norway, Qatar, Germany and Saudi Arabia, that have to sit on a mountain of wealth and think about how to store it in the long term.

In reply to by flyingcaveman

LindseyNarrate… (not verified) Thu, 08/17/2017 - 18:39 Permalink

For-the-record, what is happening to and in Venezuela is a literal war-of-economics, in-stead of a "hot-war", but is DEVASTATING, regardless, to the people, which should be unacceptable to all of you whom are intellectually-honest. http://www.democracynow.org/2004/11/9/confessions_of_an_economic_hit_man ..."John Perkins describes himself as a former economic hit man–a highly paid professional who cheated countries around the globe out of trillions of dollars. 20 years ago Perkins began writing a book with the working title, "Conscience of an Economic Hit Men." Perkins writes, "The book was to be dedicated to the presidents of two countries, men who had been his clients whom I respected and thought of as kindred spirits–Jaime Roldós, president of Ecuador, and Omar Torrijos, president of Panama. Both had just died in fiery crashes. Their deaths were not accidental. They were assassinated because they opposed that fraternity of corporate, government, and banking heads whose goal is global empire. We Economic Hit Men failed to bring Roldós and Torrijos around, and the other type of hit men, the CIA-sanctioned jackals who were always right behind us, stepped in. John Perkins goes on to write: "I was persuaded to stop writing that book. I started it four more times during the next twenty years. On each occasion, my decision to begin again was influenced by current world events: the U.S. invasion of Panama in 1980, the first Gulf War, Somalia, and the rise of Osama bin Laden. However, threats or bribes always convinced me to stop."... FACTS ARE FACTS, people, and while I do not, necessarily, like the government of Venezuela, I, ALSO, abhor the INTENTIONAL SABOTAGE, AND DESTRUCTION, OF MYRIAD-OF-PEOPLE-AND-THINGS WITHIN THE NATION, BY (((the malefactors))), whom have taken-over our nations of "The West". Lindsey    

vato poco LindseyNarrate… (not verified) Thu, 08/17/2017 - 19:46 Permalink

oh, sell your bullshit to someone who's buying it, excessively dramatic signature boy.it's not the Jooooz or the Banksters or the EEEEEbil Rothschilds or them awful awful economic hitmen (LOL) that have ruined & bankrupted a country with more proven oil reserves than Saudi Arabia, fuckwit. yeah, they may have contributed a little to the overall fuckeduppedness, but since all Venezuela has to do to make $ is pump & drill more at some of the world's lowest production costs - and yet somehow, they cannot - maybe, just MAYBE the problem lies elsewhere. like in the fact that socialist/commie gangsters control and are and have been sytematically looting the country for the last 20 years. might THAT be it, ya think?

In reply to by LindseyNarrate… (not verified)

LindseyNarrate… (not verified) vato poco Thu, 08/17/2017 - 22:21 Permalink

I am absolutely appalled at the willful-ignorance, even HERE, at Mr. Durden's site, of the TRUTH AS IT IS. Do you people, honestly believing this BULLSHIT, have any shame, at all, as human-beings? Honestly...DO YOU? The (((mother-fuckers))) whom HERO Chavez through-the-fuck-out-of his nation were the oligarchs COMPLETELY RAPING AND PILLAGING ANYTHING AND EVERYTHING ON WHICH (((they))) COULD GET THEIR HANDS!!!!!!!!!!!!!!!!  What is happening, and has been done to, Venezuela is VENGEANCE for Hero Chavez saving his nation from ending-up like EVERY OTHER FUCKING SHIT-HOLD IN SOUTH AMERICA; however, sadly, due to sanctions, literal CIA operatives fomenting a revolution and street-violence, etc., the catastrophe that Hero Chavez tried to end, once-and-for-all, was simply DELAYED. If you people can not understand FACTS AS THEY ARE, and are EASILY-PROVEN, then you mother-fuckers are, honestly-to-Christ, as bad as (((the mother-fuckers))) destroying the entirety of our planet, and you better fucking believe that I mean every single word that I say, and write. Lindsey

In reply to by vato poco

vato poco LindseyNarrate… (not verified) Fri, 08/18/2017 - 03:15 Permalink

huh. well, lindsey ol chap, along with your drooling-idiot-weak-ass-blame-the-weather-on-the-joooooz "argument", it's clear you need to be a bit *more* breathless. strident. hysterical like a teenage girl.try using more CAPS. cram in even more (parentheses!!!) and EXCLAMATION POINTS!!!!!!!  see if that'll help, you raving lunatic dumbshit (magnificent 100-trumpet fanfare) Vato

In reply to by LindseyNarrate… (not verified)

are we there yet Thu, 08/17/2017 - 18:44 Permalink

Cargo shipping risk insurance goes up as well. Maduro has been putting nothing back into oil exploration or oil field maintenance. All trending metrics are bad for Venezuela.

Juliette Thu, 08/17/2017 - 19:10 Permalink

This is just stupid. I will take the tanker and its oil payload any day, no questions asked and no letters of shit required. Another question; Why is Venezuela trying to sell that oil to the USA while it is clear that the USA doesnt want it? There are dozens of other countries in the world who would happily buy it. Oh, and why doesnt the buyer just pay in cash? Like wiring it over to Venezuela or using Bitcoin or gold or whatever ... lack of creativity, anyone? Why a "Latter of Credit"? If you want to pay in 30 days anyway, you can pay now as well.