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Feature: Venezuela sanctions leave some naphtha cargoes without destinations

Houston — The imposition of US sanctions against Venezuela has altered naphtha trade flow, with tankers booked to carry product there seen failing and others sailing laden seen rerouted as charterers seek new destinations.

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Venezuelan state oil company PDVSA typically procures heavy naphtha from the US Gulf Coast to help thin the country's heavy crude and enable transportation by pipeline from oil fields to markets, while at the same time selling natural gasoline and light virgin naphtha for use as gasoline blendstocks in the US.

With US sanctions preventing trade with PDVSA however, signs are already emerging that it will struggle to find alternative suppliers of diluent. Indian refiner Reliance, a regular supplier of US heavy naphtha to PDVSA, halted the discharge of a naphtha cargo docked at a Venezuelan port last week.

"The real question is where will this supply [to Venezuela] come from?" a USGC market source said. "Russia, China or condensate from Iran?"

European market sources said the impacts of souring trade relations between the two countries are also likely to bleed over into the European market, as New York Harbor will need to cover its natural gasoline short and the surplus heavy naphtha makes its way to European shores.

"I think that the Jose LVN they (Venezuela) export to New York Harbor likely won't be able to go to NYH anymore, and I don't think Europe will be able to take these either," said one European source. "It also seems fairly certain that the USGC heavy naphtha currently used for diluent won't be allowed to go there anymore and logically some of that heavy nap may find its way to the European or Eastern market."

US market sources said they expect to see an increase in US light naphtha cargoes sailing to Europe for West Africa gasoline blending and that heavy naphtha barrels previously intended for Venezuela were likely to find homes in the Far East. Should exports of heavy grades plug the Asian heavy naphtha short, suppliers in Europe who typically rely on Eastern reformate demand to clear their excess of domestically produced heavy naphtha, face the risk of reduced demand and a devaluated product.

"It's bearish Eastern cracks and bearish US Gulf Coast naphtha differentials," a second USGC market source said.


Activity in the Americas clean tanker market into and out of Venezuela slowed after the announcement of the sanctions against PDVSA, with multiple ships intended for discharge failing on subjects in the week following.

Reliance saw two of its cargoes fail on subjects, having previously booked the Polver Pacific for a US Atlantic Coast-Venezuela voyage at lump sum $465,000, with an intended load date of February 2, and the Ardmore Seafox for a US Gulf Coast-Venezuela voyage at lump sum $490,000, with an intended load date of February 2.

The Ardmore Seafox was booked once again by Reliance to lift a cargo of MTBE February 5 for a USGC-Caribbean voyage at an unknown rate.

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On Tuesday, another Reliance stem was heard to have failed on subjects for a St. Croix-Venezuela voyage at an unknown rate. The Valle Bianca was scheduled to load at St. Croix on February 9.

A Reliance trader did not respond to a request for comment Wednesday.

One cargo was successfully fixed with discharge into Venezuela last week, according to S&P Global Platts fixture logs, with Repsol having fixed the Torm Gerd for a Bahamas-Venezuela voyage at lump sum $600,000. The Torm Gerd called into port at Freeport, Bahamas, on February 4, according to Platts cFlow trade flow data.

Another tanker, the Alpine Eternity, was booked by Reliance at lump sum $390,000, to sail the USAC-Venezuela route on January 27.

The Elka Glory was booked by Citgo at lump sum $450,000 to sail from the USGC to Venezuela on February 1.

Another ship, the Hafnia Henriette, was booked by an unknown charter to carry product from the USAC to Venezuela and also failed on subjects.


The Horizon Aphrodite was booked by Citgo, the US refining and marketing unit of PDVSA, to sail the USGC-Caribbean route on January 17. Platts cFlow shows it was sailing to Venezuela. The ship was steaming at 2.1 knots after the sanctions were imposed and is now steaming at 0.4 knot off the Caribbean, fully laden.

Another floater, the DS Promoter, was booked by Vitol at lump sum $690,000 to carry product from the USGC to Venezuela on January 23. The tanker set sail from Houston on January 24 and is currently stationary at Aruba, laden, Platts cFlow data showed.

A third tanker, the BW Thames, heard to be booked by Vitol, loaded product in Pasadena late January. The showed was cruising off the coast of Aruba, steaming at 2 knots Monday, Platts cFlow data showed.

USGC market sources said the ship charterers were searching for a solution to bring their cargoes into the Venezuelan market, speculating that sanctions may be lifted within a month.

A Vitol trader declined comment Wednesday.

"Everything is on hold," a USGC market source said. "I believe PDVSA is trying to find a way to move diluent from Aruba to Venezuela - but no ship owners wants to work with them."

Clean tanker market participants have said that many shipowners do not want to call into port in Venezuela, concerned about safety and infrastructure. Shipping sources said that, because of this decrease in supply of available vessels, discharge and load in Venezuela would likely hold a premium over discharge and load in non-Venezuelan ports in the Caribbean.

"Last week a Bahamas-Venezuela [fixture] went at $600,000, and that was probably worth $400,000 for non-Venezuela [discharge]," a shipbroker said Tuesday.

On the Caribbean-upcoast clean tanker markets, tonnage availability for Venezuelan loads will be a key factor in determining a differential between Venezuelan and non-Venezuelan loads, according to shipping sources. The route has yet to be tested, though one charterer and one shipbroker indicated a possible rate for a Venezuela-US Atlantic Coast route at w215 Tuesday.

By comparison, the Caribbean-US Atlantic Coast route was indicated at w115 for non-Venezuelan loads Tuesday.

US Gulf Coast naphtha barge differentials have held steady despite the sanctions, with standard naphtha barges assessed at barge gasoline minus 6.50 cents/gal Tuesday and heavy naphtha barges maintaining a 2.25-cent premium to their standard grade counterparts.

Sources said the light naphtha market in New York Harbor has remained rangebound despite imports from Venezuela being cut off.

A market source said light virgin naphtha at New York Harbor was bid at the NYMEX February RBOB futures contract minus 20 cents/gal and offered at futures minus 18 cents/gal Tuesday.

"It's not a clear situation we are in," a USAC market source said. "It might take a while to see what happens."

--Sarah Raslan,

--Marieke Alsguth,

--Philip Reeder,

--Edited by Richard Rubin,