October 25, 2017 / 8:25 PM / 2 months ago

Iraq emerges as early winner in U.S.-Venezuela oil dispute

NEW YORK/HOUSTON (Reuters) - PBF Energy has turned to Iraq to help replace Venezuelan barrels at its East Coast refineries after suspending direct purchases of heavy oil from Venezuela’s PDVSA amid U.S. sanctions, according to Thomson Reuters Eikon data.

PBF Energy Inc last month put on hold a 33,000-barrel-per-day supply contract with PDVSA for Morichal crude because U.S. financial sanctions on Venezuela announced in August affected its ability to obtain the letters of credit needed to complete imports from the OPEC-member country.

The dispute between state-run PDVSA and PBF, the fifth largest U.S. buyer of Venezuelan crude from contract and spot market deals, comes as Iraq bids for U.S. market share for its Basrah Heavy crude, which competes with many Latin American heavy grades.

Iraqi crude sales to the U.S. East Coast could reach a record 4.5 million barrels in October, with PBF Energy the main buyer, according to Reuters data. Purchases of Iraqi oil through East Coast ports averaged 1.8 million barrels a month from January 2016 until July of this year, according to the U.S. Energy Information Administration.

Venezuelan crude sales to East Coast refineries during the same period averaged roughly 1 million barrels a month, but dried up in August and have not returned, EIA and Reuters data show.

Overall, Venezuelan monthly oil exports to the United States have fallen sharply since June to 14-year lows amid sanctions and declining output.

“Iraqi crude is generally not under a lot of long term contracts, so it’s available,” Sarah Emerson, a managing principal at ESAI Energy LLC, said.

A PBF spokesman declined to comment for this story, citing a company policy to not discuss market-sensitive operations. PDVSA did not respond to a request for comment.

PBF’s refineries in Delaware City, Delaware, and Paulsboro, N.J., have cokers and run heavy crude.

PBF last received Venezuelan crude in early September for its Chalmette, Louisiana, refinery, which typically is the main buyer of Venezuelan oil in its system, according to the Reuters data.

At that time, it took two cargoes of Venezuelan oil, one from PDVSA and the other from trading firm Vitol. An Aframax tanker, Gold Sun, arrived in New Orleans this week from Venezuela’s Jose port, and is waiting to discharge to PBF, according to the data.

But the refiner has recently ramped up purchases of other Latin American heavy crudes, including Mexico’s Maya and Colombia’s Vasconia.

Reporting By Jarrett Renshaw in New York and Marianna Parraga in Houston; Editing by Andrew Hay

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