US sanctions on PdV to tighten fuel oil market

US sanctions on Venezuelan state-owned PdV could tighten the residual fuel oil market and prop up US resid imports from Russia, Canada and Mexico.

Venezuela was the third biggest exporter of resid to the US from January through October 2018, behind Russia and Canada, according to the US Energy Information Administration (EIA).

Washington imposed sanctions on PdV in an effort to force President Nicolas Maduro to step down in favor of the speaker of the opposition-controlled national assembly, Juan Guaido. The US, Canada and most of Latin America recognize Guaidó as the legitimate president of Venezuela.

US companies can continue to receive Venezuelan oil until 28 April as long as they place payments in escrow accounts rather than sending them to entities controlled by Maduro's administration.

Venezuelan residual fuel oil exports to the US more than doubled in the first 10 months of 2018 to 45,303 b/d, compared with 16,600 b/d during the same period in 2017, according to the EIA. The bulk of the Venezuelan resid was imported by Valero and Glencore to Houston and by Phillips 66 and Maersk to Newark, New Jersey, for blending to be sold for bunkering. Venezuela's residual fuel sulphur content averaged 1.97pc.

US residual fuel oil imports from Mexico declined by 44pc to 34,307 b/d in the first 10 months of 2018 compared with the same period in 2017 because of lower utilization at Mexican refineries. Mexico's refineries processed 611,956 b/d of crude in 2018, down from 766,983 b/d of crude in 2017. Mexican residual fuel oil sulphur content averaged at 3.59pc. Motiva, Vitol and PMI shipped fewer Mexican barrels to Texas.

Russian resid imports to the US rose by 12pc in the first 10 months of 2018 to 130,185 b/d. Most of the Russian resid was imported by Valero to Gramercy, Louisiana, by ExxonMobil to Houston, and by BP to Bellingham, Washington.

Canadian fuel oil exports to the US were up by 44pc to 51,033 b/d. Most of the Canadian fuel oil was imported by Shell, Aegean and Maersk to Newark, by Glencore to New York and by Texpar Energy to Tacoma, Washington.