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Erwin Seba and Marianna Parraga - U.S. oil refiners pare exposure to Venezuelan crude imports

 

MEXICO CITY
Petroleumworld 07 28 2017

U.S. refiners are shifting away from processing heavy crude, lessening the potential impact on their businesses and motorists of any supply disruptions from Venezuela as the Trump administration considers new sanctions on the country.

Refiners Valero Energy Corp and Marathon Petroleum Corp on Thursday said they plan to run more light and sweet crudes this quarter, continuing a trend away from heavy, sour crudes supplied by Venezuela and other OPEC producers.

Deliveries of Venezuelan crude to Citgo Petroleum, the U.S. refining arm of state-run Petroleos de Venezuela, slipped to about 70,000 barrels per day (bpd) last month from an average of some 200,000 bpd earlier this year. Phillips 66 , the fourth-largest importer of Venezuelan crude this year, received about half its expected supply in June.

U.S. imports of Venezuelan crude fell 32 percent in June to a 13-year low of 491,000 bpd, according to Reuters data. PDVSA's exports have declined this year as production and shipping problems cut its ability to meet commitments. [Graphic on Venezuela's oil statistics tmsnrt.rs/2eNIobE ]

On Wednesday, the Trump administration imposed sanctions on 13 current or former Venezuela officials to pressure its president to scrap plans for a Constituent Assembly, which would have power to rewrite the constitution. Additional financial or import sanctions that would choke off the country's access to U.S. dollars for its oil also are being weighed.

Valero, the largest importer of Venezuelan crude oil in June, plans to shift its U.S. refineries this quarter to run the maximum amount of light sweet crude possible, its officials said, as heavy oil becomes more expensive due to less availability of OPEC-supplied crudes. That has narrowed the discount versus lighter grades in recent months.

Gulf Coast refiners, which can process up to 9.6 million bpd, traditionally preferred heavy, sour crudes. But OPEC output cuts, less supplies coming from Latin American producers and growing supplies of shale oil have improved the economics of running lighter crudes.

Heavy oil producers Mexico and Colombia also have reduced shipments this year amid declining output. Venezuela, Mexico and Colombia combined trimmed production by almost 10 percent to 5.38 million bpd in the first five months of 2017 versus the same period of last year, according to official figures.

"Increased U.S. drilling activity and crude production have supported attractive domestic sweet crude discounts," said Valero Chief Executive Joe Gorder on an earnings call with investors.

Marathon, which gets most of its sour crude from Canada, said the grade would make up about 54 percent of its throughput this quarter, down from 59 percent a year ago. The company also cited a narrowing of price differentials between heavy and light crudes. It bought about 36,500 bpd of Venezuelan crude in April.

The U.S. Gulf Coast light crude benchmark is about $3 a barrel above the sour-crude benchmark, after narrowing this year. In January, light crude traded for as much as $4.37 a barrel above the sour benchmark.

The largest U.S. buyers of Venezuelan crude this year through June were Citgo, Valero, Chevron Corp, and Phillips 66. In all, U.S. imports of Venezuelan crude in the first six months this year totaled 655,000 bpd, or about 7.5 percent of all oil imports.



Story by Erwin Seba and Marianna Parraga; Additional reporting by Jarrett Renshaw. Writing by Gary McWilliams; Editing by Cynthia Osterman from Reuters.

reuters
.com
07 27 2017

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