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Summary
- Vitol, Trafigura seek Merey crude at $18 to $20-a-barrel discount to Brent, sources say
- Jose port-US Gulf Aframax tanker charter cost rises to about $3.5 million, Signal Maritime says
(Reuters) – Global oil trading firms Vitol and Trafigura are pushing for steeper discounts on Venezuelan crude oil as rising freight rates shrink their margins, five sources familiar with the matter said.
The two merchant houses have been among the biggest winners in a race to control Venezuela’s crude flows since the US captured then-President Nicolas Maduro in January and began pushing to reactivate the country’s oil sector.
They now sell and ship more than half of the OPEC member’s exports, and the negotiations for cheaper prices highlight the challenges of operating in Venezuela’s volatile energy sector, which until recently was under severe US sanctions.
Sale prices for the nation’s flagship Merey heavy crude grade have recovered steadily this year from hefty discounts forced by the sanctions until the end of 2025.
Punishment clauses, such as imposing extra fees to load tankers in countries with security risks, have also disappeared from freight contracts as more traders and buyers entered the market. Large vessel owners have returned as well, helping bring prices closer to market standards.
That recovery is now under threat, as the cost to transport oil on tankers globally has hit record highs in recent weeks following the biggest wave of attacks on shipping since the US-Iran war began in late February.
State oil company PDVSA has recently agreed to prices of $12 to $13 a barrel below Brent with some joint venture partners, which in turn have been forced by market conditions to resell the crude to intermediaries at a $16 discount to the benchmark, one of the sources said.
The state company has recently tried to sell more oil directly to refineries without passing through intermediaries in a move to improve cash flow and profit.
Trafigura and Vitol are now bidding $18 to $20 below Brent for cargoes bound for the US or Europe, a level they say they need to cover rising freight costs, the sources said, leaving PDVSA and its partners under further pressure.
The formula price for Merey, or the maximum it can fetch if all market conditions are met, increased to $76.82 a barrel in August from $67.36 in July, Venezuela reported to OPEC. That was some $14 below Brent.
PDVSA, Vitol and Trafigura did not immediately respond to requests for a comment.
SURGING FREIGHT
Chartering an Aframax tanker, which can carry about 700,000 barrels of crude, from the Venezuelan port of Jose to the US Gulf Coast now costs about $3.5 million, or $5 per barrel, up from $1.35 million, or $1.90 per barrel, at the start of the year, according to Signal Maritime.
“Freight is a huge issue. Refiners don’t want it at the price it’s costing us,” a trading source said.
Venezuela’s oil exports remained almost unchanged in August at 1.17 million barrels per day as its terminals struggled to handle larger volumes.
Vitol and Trafigura managed to keep their export volumes stable at some 597,000 bpd, compared to 604,000 bpd in July.
However, the number of tankers lining up to load and their average waiting time have remained at the highest level since January in a potential roadblock for the US plan to quickly boost the South American country’s oil exports.
Reporting by Arathy Somasekhar, Marianna Parraga and Georgina McCartney in Houston, and Shariq Khan in New York; Editing by Nathan Crooks and Sonali Paul
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